Want to Keep Corporate Clients? Offer Cash Management
Even borrowers with an itch to switch remain with a bank when bound with more than just a business checking account, the vendor's survey found.
Here's a tip on how to lock in small-business customers, even when they become disenchanted with your lending decisions: Get them hooked on your cash-management system.
Harbinger Computer Services, an Atlanta company, recently surveyed customers of banks that use its InTouch Cash Manager program.
The findings: Even borrowers with an itch to change banks tend to stay when they are bound to their bank with more than just a business checking account.
InTouch is a microcomputer-based cash management system that banks buy and then market under their own name. It is the leading such system sold by an outside vendor and competes primarily with cash-management systems developed by banks in-house.
30% Respond to Survey
Some 30% of InTouch banks' customers responded to a survey in May, which found what the computer company expected - that noncredit financial services produce account consolidations, strengthen relationships, and actually retain customers.
Big corporate bankers are reaching the same conclusion. At a meeting of bank analysts earlier this year, Citicorp's top corporate bank executive said his sector's most reliable source of profits came from cash-management programs.
Once a customers are locked in, Michael Callen said, it's hard for them to break away.
The InTouch survey found numerous examples. A California customer said it had sought additional credit from other banks.
But their failure to offer a cash management and information package along with a loan led the customer to maintain its single relationship with its existing bank.
A New Jersey customer said it would be more convenient to bank with a local institution but ended up staying with his New York City-based bank.
"If we found a similarly effective PC program with a New Jersey bank, we would change," he wrote. "However, no one has such a system."
Harbinger says 61% of its customers held multiple accounts at other financial institutions before signing on to its cash-management system.
About one-third consolidated those accounts at a lead institution once it offered a system for balance reporting, funds transfer and other transactions between accounts.
"This kind of service cuts across a broad range of customers," said David Morrissett, manager of noncredit services at First of America Bank Corp. "Small companies use it for check writing and for its accounting features, larger ones like the access to the ACH and its transfers to the 26 banks in our system."
First of America, a Michigan bank with $19 billion of assets, serves customers throughtout Michigan, Indiana, and Illinois.
Though the bank had long-term relationships with customers before installing InTouch in 1988 and upgrading its marketing of the product in 1990, Mr. Morrissett said he believes noncredit products further cement such relationships.
Ms. Franzoni, a freelance banking reporter, is based in Springfield, Mo.