Is Cross-Selling Dead? The Return of Relationship Banking

Is Cross-Selling Dead? The Return of Relationship Banking
"Financial institutions do not need to eradicate cross-selling in order to comply with OCC standards, but they may need to redefine it through a customer-focused lens."

Financial institutions rely on cross-selling as a significant source of growth and income, and recent worldwide investigations into banks' sales and customer service practices have become the source of much deliberation and uncertainty.

High-profile cases have caused governments on both sides of the pond to probe deeper into banking practices in the name of customer protection. This includes the announcement that the OCC will be auditing 44 banks and credit unions throughout the country. Due to the ubiquity of cross-selling and other techniques named in the recent case, many organizations may be asking themselves, "What does this mean for us? How can we mitigate risk? Have we met proper cross-selling regulations to date? What changes can we make that won't cost us our business? How do we realign our sales model?"

Though a very complex issue, the answer in some ways is a simple one: Financial institutions must flip the focus back to the customer. Instead of just selling products, banks need to consider what the best action is for each customer.

"Recent statistics show that financial organizations have been steadily straying from this focus. According to Pega's Moment of Truth survey, 68 percent of banks believe they understand their customers as individuals extremely well, but only 41 percent of bank customers believe the same, and another 16 percent feel banks hardly understand them at all.

For banks to remain healthy and growing, they must first bridge this divide. When banks operate with customer-focused mindsets, they can increase customer lifetime value, enhance customer satisfaction, drive loyalty, and mitigate risk, all while ensuring government compliance. Financial Institutions trying to avoid negative impact from customer mistrust and lost opportunity should take steps to build a culture of customer centricity and establish sales processes that prioritize customer needs.

Step one: Redefine 'cross-selling' within your organization

Because cross-selling practices were identified in a U.S. financial case, the process is under scrutiny from the OCC and customers alike. Still, the sale of additional services, products, and accounts is a load-bearing wall in the financial sector, without which the business models of many banks would undoubtedly crumble.

Financial institutions do not need to eradicate cross-selling in order to comply with OCC standards, but they may need to redefine it through a customer-focused lens. Product push sales should be elevated to personalized offers that enhance the customer experience and bolster the bank/customer relationship.

Cross-selling should be about meeting the needs of the customer and not about selling specific products or meeting sales targets. Banks should be empowering their teams with a holistic view of the customer, a system of intelligent guidance, and culture of always taking the next best action.

Step two: Be more transparent with government and customers

For customers, transparency is linked to trustworthiness, and banks that leave customers in the dark risk getting left behind. Organizations aiming to refocus on their clients should keep institutional regulations and procedures at the forefront of all B2C communications. Agents should be able to clearly explain the purpose and benefits of the products they are selling and provide straightforward, honest answers to any outstanding customer questions.

In addition to enhancing bank/customer interactions, financial institutions should ensure documentation trails for all service and sales transactions. Dissatisfaction arises when customers are not able to see when and why they added an account or purchased a new insurance plan. The risk and effort associated with regulator audits is also minimized when thorough records are kept, as banks can clearly showcase compliance.

Step three: Increase and invest in digital channels

Like most historically-established and paper-laden industries, banking is becoming increasingly digital. While many banks have been slow to fully embrace the sector's digitalization, the shift has been immensely popular among customers, to whom it restores convenience and choice of channel.

As such, expanding digital offerings and investing in top-notch systems is a crucial step banks must take to place the focus back on their customers. Financial institutions must provide streamlined, seamlessly integrated, omni-channel digital solutions in order to establish trust, guide customer journeys, and distinguish themselves in a rapidly evolving marketplace. Giving customers the ability to switch between channels without having to restate credentials or questions is a vital part of building a customer-driven banking experience.

So, is cross-selling dead? No – but, for many banks, it needs to be restructured for a modern, customer-focused marketplace. Banks should make customer satisfaction their first priority when making sales, documenting sales, and establishing digital banking processes. When financial institutions put customers first, they make offers that fulfill real needs and increase transparency, naturally mitigating risk and enabling compliance they build trust and hence loyalty.


To learn more about building a Customer Engagement Hub, join Pega and Gartner for a webinar on Dec 10.

To learn more about Pega's leadership in financial services industry, visit our industry page.

To hear about how one of our customers is leading the charge in customer personalization, watch this video from PegaWORLD 2015.