Bullseye Banking
Sydney Morning Herald
Saturday August 14, 1999
The woman behind the counter at Which Bank was processing the credit card payment. She looked up and smiled. "Can we help you with anything else while you're here? A higher credit limit? A term deposit?"
"No thanks."
"What about a personal loan? Would you like to buy a new car? What about a business loan?"
"I'm fine, thanks."
"Are you sure? What about ..."
"I'm fine. Truly. Thank you."
And out the door before she can draw breath again - perhaps to ask whether fries and a Coke would be in order.
Most bank customers are now well familiar with the above scenario as banks have driven home to their staff the need to cross-sell. You can't blame the hapless counter staff. After all, they have weekly referral quotas to meet. But somewhere along the way, you start to wonder whether you have ceased to be a customer and have instead become a target.
Enter the world of "relationship" banking. With the ANZ's launch last month of its Premier Select banking package (reviewed in last week's Wednesday Money section), all of the big four banks now have relationship packages for their customers.
But not just for any old customers. You have to qualify for the packages with eligibility being determined by your income, profession or the level of business you have with said bank.
ANZ, for example, requires you to have at least $150,000 in borrowings, a transaction account and a gold credit card with the bank.
CBA requires you to be a member of certain professional associations, while NAB and Westpac both target "professionals" but are open to others as well - so long as your income exceeds $75,000 and you have $75,000 in business with NAB or $125,000 with Westpac.
The economic rationale makes sense. If you can identify and segregate your more profitable customers, you can offer them special deals so that they put more of their business with you - and you end up making more profit from them.
Better still if you can charge them a fee for this service - as occurs with several of the relationship packages. (There is a separate but equally important issue here, of what happens to the less profitable customers in this new order.)
Relationship packages are a direct result of the success of non-bank home lenders this decade. After years of offering look-alike products, the banks were shocked to see many of their better customers taking up the challenge of "Aussie" John Symond and his peers and taking their home loans elsewhere.
The term "cherry-picker" gained currency - used somewhat disparagingly by banks to describe customers who shopped around for the best deal. With non-banks talking of expanding into credit cards and other areas, the onus was on the banks to nip this cherry-picking trend in the bud.
Packages take the emphasis off the pricing of individual products and focus attention on the range of services available. Yes, there are discounts. But these are not huge on individual products. You benefit from packages only if you do substantial levels of business with the bank and take advantage of the full range of products available.
It's an area where the non-banks can't compete and it has proven fairly successful in getting customers to bring the bulk of their business back into the fold. Which is not to say package customers are being conned. Many welcome the chance to consolidate all their banking business in one place and can save money by doing so - although you need to do your sums to work out whether it is an attractive option for you.
But they do tend to lock you into a single provider. And as anyone who has changed a bank account well knows, changing providers can often be more of a hassle than it is worth.
What the banks have realised is that it is not just "Aussie" John and his mates who will be competing for their business in the next millennium. Technology is expanding at such a rapid rate that we may well see the Microsofts, Quickens and Telstras offering computer-based money management before too long.
These players don't have huge networks of bank branches. But what they are developing is a powerful database on their customers which will be able to record everything from spending preferences to net worth. Better still, they are increasingly reaching into our homes where the "banks" of the future will be able to sell us everything from home loans to investment products at the click of a mouse.
Financial planners are getting in on the act, too. At present the "wrap accounts" being developed by financial planners and fund managers are merely a shadow of what they have the potential to be. In their current form, wrap accounts are simply umbrellas under which investors can consolidate their investments so that they receive a single set of reports and so on.
But 10 years hence, if they are to sustain a place in the market, wrap accounts will develop into more broad-reaching services that effectively cover all of your personal finances - from borrowings to bank accounts to shares, insurance and super funds.
In short, there will be a whole host of providers offering versions of one-stop banking services. Some will be competing with the banks. Others will distribute bank products - often under their own names - effectively turning banks into wholesalers of financial products. An early example is the Ezy Banking alliance between the Commonwealth Bank and Woolworths.
For all of them, the key to success will be cross-selling and tying you into as many products as possible.
Yes, we will be targets. So we'd better start learning to make it work to our benefit.
© 1999 Sydney Morning Herald
Share This