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Five Keys to Successful Relationship Banking in a Digital Era

Revamping organizational structures to reflect a customer profitability mindset will result in programs and offers that best serve the customers.

Banking has changed profoundly over the last decade. Even before COVID-19 halted the world of face-to-face contact and interpersonal connections, banks were already facing a dramatic shift in the way consumers conducted their banking. No longer did customers desire to walk into a physical bank and speak with a teller, preferring instead to use an ATM, deposit checks with an app, or bank entirely online from home. Meanwhile, banks were adapting as well — sometimes successfully, sometimes not — with innovations such as using virtual assistants for collections and Peer-to-Peer (P2P) payment systems that allowed people to send or request money via an app like PayPal or Venmo.

But what about relationship banking — personalized banking focused on developing and customizing products and services to meet individual customer needs — in this fast-changing financial environment? Can it still work in a digital world, or is it a dinosaur headed toward extinction?

The short answer is yes, relationship banking can still be successful, but it requires creative thinking and a strategic transformation. Relationship banking works because it’s mutually beneficial for both the customer and the bank. On one hand, customers want to be recognized for the relationship that they have with their primary institution, and they appreciate receiving offers that are customized for their respective needs. This leads to a positive customer experience and repeat business. At the same time, banks reap the benefit of an effective relationship strategy through higher revenue, a longer pipeline of transaction volume and increased services, and increased retention. A successful relationship banking approach can result in product deepening, increased volume, increased brand loyalty, and higher customer retention.

But to make a relationship-based approach work in the digital age, banks must retool their strategy to ensure that it includes five key traits. The new strategy should be:

1.
DATA-DRIVEN

2.
PROACTIVE AND EVOLVING

3.
SYSTEM-ENABLED

4.
INCENTIVIVIZING FUTURE BEHAVIOR

Let’s examine each in more detail.

5.
CUSTOMER PROFITABILITY MINDSET

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