Do you want fries with that?
This common quip is a great example of the concept of cross-selling in its simplest form: When consumers buy one product, try to sell them another.
Much like fast-food restaurants, financial institutions are seeking new areas of growth, as well as deeper relationships with their customers. And the relatively untapped unbanked market offers a unique opportunity to create long-lasting, loyal customers.
About 10 million American households, spending more than $1 trillion a year, fall into the unbanked or underbanked categories. In an increasingly competitive financial landscape, it is imperative for banks to have an initial strategy to reach these people, as well as a long-term goal of turning this traditionally bank-adverse group into mainstream customers.
Enterprise cross-selling is an effective way for financial services companies serving nontraditional borrowers to minimize risk and further develop relationships by providing a more complete and accurate assessment of borrowers.
Cross-selling is a relatively simple concept, but surprisingly, it is still one that many banks have not aggressively embraced. Offering the right product to the right person at the right time is always the primary goal in banking, no matter what the audience. Enterprise cross-selling strategies should rely on automation, enabling your institution to offer a variety of products across multiple lines of business through numerous channels — deepening customer relationships without increasing exposure to risk.
Technology available today can automate the information-gathering and decisioning processes using your institution's established credit policies. This is a critical component to any cross-selling strategy, but it is even more crucial when working with the unbanked. The strategies and communication methods used with traditional customers not only can be unsuccessful in reaching the unbanked, but also could alienate potential long-term customers.
One of the biggest challenges when trying to serve consumers with limited credit histories is offering products that are applicable to their unique needs. This requires aggressive portfolio management and being able to respond rapidly as circumstances change. Having an in-depth understanding of customers will enable your bank to maximize each and every contact. Decisioning can and must be automated and, most importantly, based on solid, consistent credit policy.
Prepaid card programs are one of the most effective methods for reaching the unbanked.
Although many institutions are devising a strategy for tapping this market, it is crucial to think beyond the initial touch point and consider how your company is going to maintain a long-lasting, in-depth relationship with the customer. Once the relationship is established, a sophisticated enterprise cross-selling strategy rooted in solid credit policy should be in place to ensure long-term success.
Lenders are increasingly turning to nontraditional credit scoring to expand their pool of creditworthy applicants. The challenge is to accomplish this goal without increasing the risk of exposure or spending a fortune. This requires integrating multiple data sources and using advanced business rules to implement policies, scheduled portfolio reviews, and continuous monitoring of aggregate customer behavior.
As with traditional cross-selling strategies, reaching the unbanked market requires a synergistic approach to business, coordinating across department lines to increase sales, strengthen relationships, and fulfill the customer's needs.
Studies have repeatedly shown that financial institutions need to tend to the customer's needs before trying to sell them something.
The challenge is to maintain the human factor, with technology remaining invisible. Automation should bolster the trust of the customer instead of negating it. When combined with a motivated staff that is well trained to reach this unique demographic, technology ensures that each personal interaction becomes an opportunity to extend a customer's confidence in the institution's ability to serve the customer as an individual.
Internal politics can often be a detriment to an unbanked cross-selling program. In theory, everyone agrees to grow nontraditional customer relationships, but overcoming the "silo" attitudes among departments may be easier said than done.
Innovative approaches to automation and targeted customer service will be the key components to a successful enterprise cross-selling strategy that adheres to your credit policy while clearly taking a much more specialized approach to attracting and retaining unbanked or underbanked consumers.
