Durbin, Dodd, and Frank; Why Senators Won’t Be Vacationing In New York, Charlotte, or San Francisco
As a result of Congress’s financial reform efforts, two storm clouds of increasing costs are looming on the retail banking horizon. First is the cost of cleaning up “too big to fail.” Specifically, the FDIC’s Sheila Blair says new “living will” programs required by the Dodd-Frank bill may require “significant and potentially costly restructuring.”
The other is increased costs from churn that likely will result from the loss of the consumer’s favorite service – free checking.
Free checking, the here-to-fore best marketing tool for customer acquisition looks to be doomed by the proposal to cap debit card fees. The ABA is reporting that a survey of bankers indicates two of three banks will remove free checking. The LA Times reported the beginning of the end in early of February. A couple of banks have been denying they will remove their popular entry-level product, but the ABA didn’t say elimination was the only option. Some 81% will increase current fees and / or remove their debit card reward program. Almost half said they were considering debit card transaction fees. Impacting demand deposit accounts and free checking services will create even more churn, the question will be how much and who will be affected.
In addition to the inherent costs in replacing customers, churn also creates a serious problem for cross-selling. Since it’s easier and cheaper to market to existing customers , it’s vital to limiting churn as much as possible. Key to this is knowing who you hold on to and who you let walk. To make this decision, a bank needs to see the customer from more than one angle.
A single view of customer will make sure you see the auto loan and the two mortgages that the other sides of the house want to protect. Adding wealth data and advanced behavioral analytics will make sure you are taking the actions that lead the customer to consolidate their assets at your institution.
Retail banks are going to be challenged to take the next best action for a the portion of their customer base that is content in keeping their money spread across many institutions. Make sure your next step is your best step.
The goals of Equifax’s churn prevention strategies are protecting your customer acquisition strategy and maximizing customer value over the long haul. Click here to read more.
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