May 29, 2020 | InBrief

The new imperative for banks to build loyalty post-crisis

Banks have an opportunity to act as trusted partners to form long-lasting relationships with clients seeking immediate help from the pandemic

COVID-19 upended the American economy as commerce halted and stay-at-home orders took effect. Bank clients now face significant and immediate challenges ranging from plummeting revenues, cashflow shortfalls, and liquidity constraints. In fact, 43% of small businesses believe they have less than six months before permanently shutting down. Banks can help manage this economic upheaval by strengthening client engagement focused on immediate and anticipated near-term needs. 

Long-lasting relationships are forged in times of crisis. Banks must reveal their value as trusted partners by helping clients address urgent concerns, offer support, and provide the financial relief necessary to stabilize and sustain in the post-crisis economy.  

Understand your customers’ needs in this new economy

Business models vary among bank clients. Some are positioned with diverse revenue streams propelling income statements and solid, cash-rich balance sheets. Most, however, are capitalized with insufficient resources to withstand the devastating impact caused by the complete shutdown of commerce in the US economy. Many bank clients have a limited diversity of revenue streams. This combination has left a large population of clients with little choice but to seek help from their bank. 

Banks can balance servicing a high volume of client requests while capitalizing on interaction opportunities across the client base. To do so:

  • Think differently. This recession is unprecedented, meaning rules and assumptions used to create segmentation strategies–often solely based on risk rating models–may be less predictive and effective. 
  • Establish relevant filters from the views of both the bank and client. These filters will better predict the next six months of operational performance. In addition to traditional credit-risk measures, consider industry, ability to leverage digital capabilities, profitability of relationship, geo-location, and number of recent bank interactions when developing filters. 
  • Segment and assess pandemic impacts based on client’s needs (e.g., cashflow and reserves) in conjunction with bank requirements (e.g., credit risks).  

Constantly communicate with customers

Banks must deploy strategic, rhythmic client outreach plans and stress loyalty messaging. Communications should reveal customized support based on the client’s segment and be tailored to the unique circumstances of each segment. Banks must also optimize delivery channels with synchronized messaging aligned with the bank’s pandemic-specific support programs. With intense volume of calls flowing in, responses from all channels must be consistent, transparent, and targeted such that inquiries are routed and prioritized based on needs of both the client and bank. Additionally, banks should orchestrate proactive client touchpoints as a way to triage the response to the pandemic. These outreach efforts should span all channels of communication and assess a wide range of topics.   

Resolve urgent customer issues through engagement and partnership

Given the prolonged projection of financial hardship, banks must engage and partner with clients to create innovative solutions. The level and approach of engagement should be prioritized according to the segmentation models, impact urgency, and alignment of bank resources and its mission statement.   

Banks ultimately have the power to realign certain cashflow requirements of clients. They must consider the opportunity of building loyalty and retaining profitable long-term clients by engaging with their clients to synchronize clients’ cash inflows to bank payments on a temporary basis. Pulling the payment and deferral levers may provide just enough financial relief for clients to survive and return successfully to what’s next.  

Proactively service customer needs to cultivate loyalty

For businesses and clients hoping to stabilize in the COVID-19 economy, how a bank services its clients will have a direct correlation on client engagement, loyalty, and ultimately retention and growth.   

For those clients who participated in the SBA PPP Stimulus Program, there is a provision for loan forgiveness. Prepare now for the anticipated loan servicing volumes seeking forgiveness to provide a better, enhanced client experience. Redeploy staff in order to proactively service clients and provide exceptional client service when incoming requests are received. Consider redeploying staff strategically to process expected, heightened levels of credit servicing requests from clients. 

Bank clients will likely remain financially challenged for the foreseeable future. Client interactions in the near term will prove a bank’s ability to provide value and support in the long term. The actions taken by banks now will establish the tone for future relationships and position them for growth. Think strategically before acting. This moment of creativity related to servicing your clients’ urgent immediate needs will position your clients for financial stability and future success and the bank for long-lasting relationships. 

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