October 3, 2013
Banks are under historical threats from non-financial institutions such as Paypal and Walmart. This includes the areas that banks have felt most secure in – business banking – Walmart is unleashing SBA loans and Paypal has hired an executive vice president of business banking and has launched loans to businesses.
Banks beware! This industry is at an inflection point, and will change rapidly over the next several years. Many banks will find themselves in similar a situation to what happened to Borders Books when Amazon was launched if they don’t change the way they think about the sales process. The branch is still the bank’s storefront and it will continue to be so during this disruptive time for all products beyond basic banking. This means the branch will need to compete directly with the up and comers.
Attitudes within banking institutions still treat the branch as a cost center because they lack precise measurement and management tools. Historically, the branch has been thought of as something of value but not necessarily as a measurable profit center. Banks do not manage the sales process like other industries. In fact, very few banks have a structured sales process or the tools to measure sales and profitability in the branch. This would not be tolerated in any other industry. In other industries, the sales process is a tightly managed where there is a structured process, measurement and accountability at all levels of the organization. I would be as bold to say that most profitable companies are organized around their sales process. Why doesn’t this exist in banking?
Let’s look at what you can do to turn the branch from a cost center into a profit center.
- Gain insight to what you are selling today – You may already know what types of accounts your relationship managers are opening today. This is good baseline information to begin measuring your sales team.
- Gain insight to what you could be selling – Gaining insight to what could have been sold is much more difficult than tracking what was sold. First you need to understand which products are available for each customer. 84% of prospects, both consumer and business, are eligible for bank’s most profitable products and on average prospects qualify for 5.5 qualified products. However, the average branch only opens 1.2 products per customer. Why? That is a significant gap.
- Give Relationship Managers training and tools – Right now, the front line at bank branches probably don’t even know which products are the most profitable at the bank. With more than 100 products, is it even reasonable for the relationship managers to know each product inside and out when they are in constant flux given the nature of the market? The branch needs tools to help them qualify and recommend products to their customers.
- Make the branch accountable – With process, tools, training and measurement in place, the branch can now be accountable for generating interest vs. fee income as well as hitting sales targets within their region.
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