How retail banks can improve customer retention with CRM


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The Accenture study shows that banking customers are actively considering alternative offerings from other banks. According to the research, in the last three years, 58 percent of customers have had more than two financial services providers. These statistics display a distinct shift in customer behavior and impose more obligations on banks investing in customer retention strategies.
As customers have become more demanding and are constantly searching for better alternatives, retail banks have to drive their focus towards effective customer retention strategies.

Triggers of customer churn

What can make customers switch to another bank? Reasons are many.
For example, customers may be disappointed with poor customer service. This is a frequent case when banks only think about customer support as another expenditure item. A poor onboarding process is another trigger, caused by misbalance between the moment customers purchased a new product or service and the moment they got real value from it. While the onboarding process is only the tip of the iceberg indicating the initial customer ‘success’ with banking products and services, the lack of ongoing benefits from those acquisitions can also lead customers away. If a bank stops helping customers to get value from their products on the ongoing basis, competitors can easily lure them with more attractive offerings.

Alarming beacons of customer churn

Typically, customers don’t make a snap decision to switch to another bank, churning only after a series of poor experiences. While this destructive process is still under way, banks can detect plenty of telltale signs of the upcoming customer churn:

1) a dramatic decrease in the assets in a customer’s accounts
2) a prop-off in payments and transactions through all channels including tellers, online and mobile banking
3) cancellation of automatic outgoing financial operations
4) indirect indicators, such as the decrease in newsletter and marketing e-mail open rates.

Churn-predicting modeling

In order to protect its customer base from competitors, a retail bank can use churn-predicting models to identify alarming patterns in customer behavior beforehand and take remediate actions. Based on the customer activity history, predictive models can detect high-risk customers and target them with a new promotion or a discount.
The first step in churn-predicting modelling is to create advanced knowledge of a bank’s customer base to understand customer behavior patterns. In this case, the primary goal for any bank is to get to know customers better than competitors do. This task is going to be impossible without a strong foundation – customer data. Detailed and informative customer profiles in banking CRM will help retail banks to define those triggers that caused customer switch.

Gathering data for churn prediction

The more relevant data banks include in their predictive models, the more accurate focus group they will get. Some common examples of useful customer data can include transaction history (e.g., the date of the last transaction, preferable payment method or the frequency and value of transactions), personal information (e.g., zip code, gender, occupation, income, etc.) or data on customer interactions (e.g., service requests, time and effectiveness of complaint resolutions).
In some cases, retail banks may need additional data from customers to know more about their wants, needs and expectations. In this case, banks can track customer feedback, for example, by using Net Promoter System that tracks customer experience right after interaction with a bank.

CRM and proactive approach to customer retention

To get the most of all this priceless information, banks should search for a tool that will allow them to easily store, format, query and make any other manipulations with this data to start looking for trends leading to customer churn.

Incorporating customer behavior analytics, a banking CRM can successfully manage all these tasks allowing employees to view, effectively manage and report on recent customer activities. What’s even more important, using CRM in banking can help employees to implement a proactive customer approach, which implies establishing timely and systematic communication with customers before they get unsatisfied and decide to switch. For this purpose, retail banks can use CRM workflows that allow taking a number of sequential actions to prevent customer churn.

Active retention with CRM multi-step approach

CRM consulting specialists can support retail banks in defining all the essential steps to create an effective churn predictive model and adopt a proactive approach in customer retention. As a rule, banks need to group their customer database into several segments depending on certain parameters, such as the number of products owned or customer account activity. Thus, banks can define their most valuable customers to make them the center of anti-churn activities. The next step is to identify high-risk customers by asking a number of leading questions. For example, how long it has been since the last transaction, or since banking representatives had a meaningful conversation with a customer, or how long it took to resolve a customer support issue. The answers can help banks define those bottlenecks that can potentially lead to customer churn and consequently develop a plan with a number of systematic tasks to eliminate these obstacles. These actions may include making attractive offers or tracking all event milestones such as membership renewal dates to suggest customers a number of incentives to foster further engagement with the bank.

Trust data, not intuition

The best way to improve banking customer retention is similar to solving a challenge of staff turnover: it’s always better to create a great place to work preventively than try to retain employees who are about to leave the company. The same applies to customer retention where constant nurturing and monitoring of customer database in bank CRM can anticipate plenty of challenges. Still, in case there’s a sizeable increase in customer churn, it’s never too late to apply for a customer retention consultancy and implement banking CRM workflows to solve the issue.

Denis Zhinko
Head of CRM and Collaboration Department at ScienceSoft with 12+ years in software consulting with the multi-platform focus on Microsoft Dynamics CRM and Salesforce. Denis has managed projects on CRM, CXM, Portals, System Integration and Connectivity for businesses in Healthcare, Retail, Telecom and Banking, including CRM solutions for 7+ mln bank clients and 5+ mln media subscribers. In his spare time, Denis is a keen motorcyclist, tennis player and volunteer.


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