Have you heard of relationship banking?
It’s when a bank tries to target your multiple needs through a variety of products and services. In other words, this is a strategy that aims to build long-term relationships with clients.In today’s competitive banking industry, financial institutions have to work hard to earn and keep your business.
One strategy adopted involves offering clients “relationship banking,” which is a tactic that aims to develop long-term customer loyalty with multiple products and services.
It involves a proactive approach to understanding and assisting customers, rather than trying to sell products.If you have a relationship with your bank, chances are they will work with you to make sure your needs are met. Here’s what you need to know about relationship banking.
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Definition and Examples of Relationship Banking
Relationship banking is a banking strategy that is geared towards the financial well-being and the long-term relationship between a customer and a bank.
Through a multistep process, banks try to help you learn how to develop better habits with money and how to improve upon or maintain your financial situation.
For many depositors, the first time they hear about relationship banking is when they are looking for a new checking account. With relationship banking, banks work to ensure you’re always choosing the bank that best meets your needs instead of lying in bed at night wondering which bank to trust with your money.
Most modern banking systems are designed to meet a customer’s immediate needs and use push selling techniques. With relationship banking, you can tailor every product to your specific needs and provision accordingly. Their banking solutions are designed with you in mind.
They help your family prepare for the future with their educational offerings, such as financial literacy programs and parent education seminars; and also help you stay on top of all of your bills and payments by providing deposit and investment accounts and loan products for everyone in your household. In essence, relationship banking could add value to every aspect of your life.
The goal of the bank is to make its customers view it as a one-stop-shop to prompt them to approach it for every financial need — whether it’s an investment, a deposit account, a loan, or a safety deposit box.
Waived fees and interest-rate discounts are some of the ways bank relationships are built with customers. There are also other perks involved when customers open multiple accounts at the finance institution.
For instance, you can receive special “relationship pricing” from certain relationship banks if you have a deposit account. On mortgage, it can include a closing-cost credit or an interest-rate discount.
Other banks may offer you higher “relationship rates” and other rewards as relationship banking are geared to strengthen customer relationships and increase profitability over a considerable period of time.
How Does Relationship Banking Work?
Relationship banking, or relationship management, is used to describe any number of strategies that banks use to create customer loyalty so that you keep all of your accounts with one institution.
Banks spend major exercises trying to find out exactly what their customers are looking for. They understand that the more you trust them, the more you are likely to approach them for financial solutions. With multiple accounts in a single financial institution, your mind with always be with them for support and service.
Relationship banking requires you to follow certain requirements, but also earns exclusive perks depending on your bank and situation. Relationship banking is all about convenience and tailored service.
Without relationship banking, banks would be out of the business of attracting new customers and retaining the loyalty of longtime ones. Relationship banking allows financial institutions to offer benefits to their clients through strategic account placement and product enrollments—a win-win for both lender and borrower.
Within a private banking context, relationship banking means that every client has their own personal banker who is available to meet with them 24/7. They can also provide personalized advice on any financial issue.
Another way banks strengthen their relationship with you is by offering intuitive apps and platforms that integrate all your accounts and make banking with them easier.
Relationship Banking Example
You create a checking account with a bank. After some time, your bank informs you of a feature that helps you save money and also rounds up purchases you made with extra money stored out in a savings account. You thereby, had to leverage this feature by opening a savings account.
You might later use the investing platform your bank has, to make instant transfers from your checking account. You may also consider opening an IRA account to make your financial accounts placed in a single place.
With relationship banking, your bank provides for you in every stage of your life which include getting auto loans and mortgages.
When the focus is directed at you instead of one product delivered, a bank is practicing relationship banking with an intent to create brand loyalty.
Benefits of Relationship Banking
1. You’ll get access to “relationship” perks from banking. Better interest rates, lower fees, and special discounts. One way banks incentivize you to open multiple accounts. Opening multiple checking and savings accounts can help you take advantage of special benefits, and remember that having more than one checking account can make it easier to stay organized.
2. The more accounts you have with a Bank, the more information they can gather about your needs and preferences, and the better serve you.
Their relationship banking platform helps you keep more accounts which gives them the ability to provide you with more personalized services. Thus, creating your own ideal banking experience, they are able to tailor a product that fits your needs and create a personalized banking experience that is just for you.
3. One of the first things that comes to the mind of the new customer visiting a bank is the staff. The good impression helps to retain business and improve customer loyalty. Banks can help create this by making their employees more productive using mobile devices and applications.
Good examples of these rewards include increased productivity as well as productivity increases through spreadsheets/surveys/etc, which allow you to keep track of performance when online.
When you bank with Relationship Bank, you pay less interest and get tailored financial advice. A Relationship Bank account manager is here to listen to your goals and design a plan that will help you achieve them.
Downsides of Relationship Banking
1. If you have multiple accounts and a long relationship with your bank, you may not be looking for better deals elsewhere. Relationship banking benefits can range from red-carpet treatment at the bank’s branches to additional account services and fee waivers. However, there may be other opportunities you’ll be missing out on in other banks.
2. It can result in predatory cross-selling because of pressure. One common concern with banks these days is the pressure that salespeople are put under to meet aggressive quotas for new accounts. As an independent not-for-profit bank, we believe you should have real choices when it comes to which bank you choose for your business and personal banking.
That’s why we’re making it easier for you to have a relationship with us. There’s no minimum balance required and there are no fees or deposits to make. The pushy tactics could result in awkward result with customers.
Relationship Banking vs. Transactional Banking
Relationship banking involves your institution taking the time to build a relationship with you.
Rather than thinking of all the ways your bank can charge you for something or alert you to a decision, many banks are now leaning toward a customized, multi-faceted service for each of its customers. Focusing on building long-term relationships eliminates adding pressure to customers who might get a feeling that they are being targeted by robo-calls and junk mailers and having their interests sold to someone else.
Transactional banking may often leave you more unsatisfied than happy. If you combine your transactional banking concerns about compliance and security with relationship banking, you’ll likely have a terrific customer-first experience that has become the foundation of your financial future.
Relationship banking requires your customers to come to you for a solution, whether that’s through online banking, email or phone. This creates a stronger bond with your customers by fostering even stronger trust. Furthermore, offering online account access allows customers to do things like pay their bills and transfer their cash if something happens to their physical wallet at home.
With transactional banking, customer’s main focus is what products they can buy rather than the way their money is handled. Bankers get paid primarily for finding new customers and for keeping existing customers.
Transactional banks tend to attract customers who already have a lot of banking relationships and don’t want or need anything new. By definition, they are more focused on one-off services or products that appeal to people’s self-interests.
Transactional banking feels like a race to the bottom for customers. Relationship banking is different. In a relationship banking model, you build long lasting relationships that last a lifetime.
Relationship banking is a strategy in which banks analyze their customers’ needs, then cross-sell them different products and services. Relationship banking helps a bank increase customer loyalty, reduce expenses related to gathering information, and foster long-term profits.
Customers can benefit from relationship banking because it results in a more personalized banking experience based on their wants and needs.
However, most banks are more transactional these days. Where you visit a teller to get money or deposit your paycheck. But that’s not what relationship banking is all about. Relationship banking is based on building long-term, mutually beneficial partnerships with customers. Not only do they want the bank to be your go-to destination for all financial needs, but they’re also constantly improving their products and services for the best customer experience possible.