Banks spend a lot of time and effort in understanding why corporates choose to bank with them rather than a competitor. Although retail bank customers switch banks more readily than corporates, the loyalty of corporates has also dropped significantly in the last decade. However, the reasons why corporates choose their banks are not the same as retail customers.
Here are the top six reasons that I believe influence corporate customers to choose their banks.
- Price: Up until 2011 corporates chose their bank primarily based on the ‘Ease of Transaction’ and ‘Reputation’. Now corporates are shopping around for a bank that can provide the services they need at a price they find fair and competitive. Price is now the #1 influence on corporates’ choice of bank.
- Service: The decision to choose a new bank or stay with the current bank when looking for additional products is primarily driven by whether the bank is perceived to be more focused on customer service than on profits. Clearly, banks that are not providing a noticeably better customer experience & services are more likely to lose corporate customers.
- Product: Banks need to move away from a ‘one size fits all’ approach while offering any product in the market. In addition to Omni-channel banking, corporates are looking out for products which are suited to their industry and tailored to their specific business needs.
- Brand Image: The reputation of a bank is key to the market’s confidence in the stability of its operations and therefore the security of a corporate’s money. While today the importance of reputation is diluted to some extent by strong regulation and better control by central banks, the role of brand is still significant. Some corporates will not compromise on the brand image of their bank even for lower prices.
- Industry Knowledge and Business Understanding: Until recently, very few corporates were bothered about how much their banks knew about their specific business. Increasingly, however, corporates prefer to partner with a bank that can ‘speak their language’ and understands their business better. Today, this is one of the key differentiators in attracting new corporates.
- Analytics: Basic reporting and descriptive analytics were always a need of corporates. However, now corporates are looking out for advanced predictive and prescriptive analytics to generate powerful insights to take decisions to make significant impact to their business.
While the Corporate Banking market remains attractive, it is likely to change significantly in the coming years due to increasingly sophisticated demands of corporate customers, regulatory changes and ever-growing competition. Banks can do multiple things to attract new customers and retain their existing customers just by changing their approach from ‘Inside-Out’ to ‘Outside-In’. In the ‘Outside-in’ approach one has to find ‘what would the customer like’ rather than ‘what we think the customer would like’ and track customer preferences dynamically. Only those banks which move fast to leverage the benefits of new technology and continuously innovate their products and services will emerge as leaders. Facing up to this challenge and embracing change positively and intelligently will be the key drivers of future success.
Alok Agrawal is a Vice President, Global Transaction Banking at Nucleus Software Exports Ltd. He has over two decades of experience as a business leader coupled with Techno-Functional skills in the banking domain. He enjoys meeting customers to understand their business & IT needs and works with them to overcome their challenges.