Exploring the added challenges merging banks face

No matter the business or industry, there’s plenty to worry about when orchestrating a merger or acquisition. Inevitably, in the middle of consolidating and integrating organizations’ financials, personnel and other tangible assets, factors such as culture and the customer experience often slip down on the list of transaction to-dos. That can be a real problem for financial institutions because a good customer experience is often their most important competitive advantage – one that keeps current clients loyal and attracts new ones.

A couple of factors contribute to this hurdle. First, a number of regulations block merging organizations from accessing each other’s data prior to “Legal Day One.” Second, given the internal nature of most banks’ customer experience programs, merging institutions are left with a number of gaps that prevent them from targeting the right audiences.

With bank merger and acquisition (M&A) activity up around 12% year-over year according to Bloomberg data, merging institutions need to overcome this problem lest they end up devaluing one of the advantages of coming together – a larger combined customer base.

Day One Limits

Banks large and small are equally prone to letting the customer experience slip off the radar during an integration. For smaller institutions working with limited resources, all eyes are turned to monitoring the M&A process. Larger banks, particularly those that do multiple deals each year, are better able compartmentalize M&A activities but still become bogged down by the mountain of new customer information flooding into their systems. Either way, appropriate preservation of the customer experience is threatened.

One big problem is that banks are limited in the customer data they’re allowed to share prior to Legal Day One of a merger. Robbed of the ability to analyze and understand current and incoming customers, merging banks are left with massive blind spots. For example, they cannot accurately pinpoint and rank which customers should receive certain loyalty strategies or promotions. These stringent data-sharing permissions force combining banks to prepare in silos. Each entity is left to worry about retaining its own customer base, rather than collaborate on a strategy for the soon-to-be united audience. 

Beyond that, banks also err on the side of improper planning for the post-close consolidation of customer information. They are prone to mapping new products and channels to the customers they believe will be most receptive to them. This is a precarious approach for merging institutions and can derail customers' adjustment to the new brand. Banks that don't adopt more customer-centric planning methods (e.g., mapping audience behaviors to products instead of vice versa) risk delivering a broken customer experience.

Maintaining a bank's customer experience is a process that starts long before Legal Day One of a merger or acquisition and continues long after it passes. So, what’s the key to getting it right? 

Don't go it alone. The first step in this journey is getting the right help. Despite regulatory limitations, merging banks can and should engage a trusted third party advisor to conduct pre-close due diligence. This includes running customer impact assessments for both entities, evaluating the most valuable customers to retain and those who are most likely to defect during the transition. From there, this outside analysis should be used to inform a number of customer retention initiatives, targeted at different audience members based on profitability and risk of leaving.

Listen to your data, then act on it. Even if merging institutions take the right steps to evaluate customer data and target areas of improvement, they’re still on the hook for recreating and managing customer experience going forward. This is where banks must use their available data and analytics to connect current and potential customers with products that best meet their unique needs. By taking this customer-first strategy, banks allow themselves to stay agile as consumer preferences and technologies evolve.

Never stop learning. As we’ve seen in a number of other industries, social and mobile technology is quickly changing the way individuals interact with businesses. Proactive banks that keep tabs on timely consumer behavior and demands will have a clear advantage when it comes to creating relevant, desirable customer experiences. Banks can also benefit by thinking outside the box, finding ways to promote customer loyalty and satisfaction beyond the typical in-person or online transaction. 

The ultimate goal of a merger or acquisition is typically to create a stronger organization out of two previously independent entities. For banks, achieving that goal means maintaining the customer experience through an integration and elevating it afterward.

To read this article as it originally appeared on BAI, please click here.