Methods to Create Effective Customer Journeys for Your Bank

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In recent years, there has been an increase in the number of job positions for chief customer experience officers across financial institutions (FI) of all sizes. Those roles were created to help an FI focus outwardly and represent the customers’ points of view. Stated differently, people filling those roles ask the “why” question while most FIs tend to focus only on the “how.”

Marrying the How and the Why
A recent example of an unrealized opportunity to rewrite the customer journey involved branch-initiated loan applications. The process required a customer to come into a branch, sign a piece of paper which was then scanned and sent to the back office for processing. After processing, it was stamped “complete” and sent along for further scanning and indexing.

The staff was asked to improve the process, and they recommended switching the ink used to stamp “complete” from oil-based ink to water-based. By doing so, the ink did not bleed through the document, which was causing it to be scanned as two images. While the process was indeed improved incrementally, the FI did not go far enough, missing an opportunity to fundamentally improve the whole customer journey and realize more benefits for both customers and employees.

Customer journey maps marry the “how” and the “why” into one document. The how is expressed as a simple workflow document, showing the touchpoints of any process. Once the current process is documented, the why questions begin. Why do FIs need a wet signature on this document? Why do the customers need to scan their drivers’ licenses? Why should a customer have to stop into a branch to complete the application?

While having a CCEO is a great start, the most successful FIs focus on creating multiple customer experience advocates, all of whom use customer journey maps to document the hows and ask the whys. FIs that position multiple customer experience advocates across the institution have more desirable outcomes than those that have one person. The trick is getting started.

While there are many tools available to assist in generating customer journey maps, PRI suggests that FIs can be quite effective with a simple white board and some post-it notes.

Don’t become burdened with unfamiliar tools until you’ve built a few maps. Involve staff from all areas, especially those areas that are customer-facing. Create a dashboard or a scorecard and keep track of the improvements. And celebrate successes as you go.

Creating a journey map places the customer at the beginning of the process and requires the FI to think like a customer. For example, customers often find it unacceptable to wait 10 days for their debit card to arrive in the mail after opening a new account. Rather than justifying the process by explaining it, the FI can create a journey map with a goal in mind that helps them reach the next level of service. Asking why at every step along the journey is far more critical than asking how.

How to get started:

  • Choose a process known to create customer frustration.
  • Establish a goal for the customer journey map exercise.
  • Put on the “customer hat” or even experience the journey as a customer yourself.
  • Document all touchpoints.
  • Review each touchpoint and ask why it works the way it does.
  • Research best practice models.
  • Attack the touchpoints, seeking to remove friction and working toward the goal of better customer service.

Customer journey mapping has been proven to be highly beneficial to financial institutions and their bottom line. FIs should teach customer experience advocates to create effective customer journey maps for all significant touchpoints.

The process does not have to be formal. It can be simple. Marrying the how and the why will allow the FI to take advantage of the many benefits and opportunities inherent in customer journey mapping.

Redefining Primary Relationships

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Ask 100 bankers to define what it means to be the primary financial institution for a consumer, and you’ll likely get 100 different answers. Ask 100 consultants to bankers what being the primary FI entails, and you’ll probably get 100 more answers.

Ask 100 consumers how they define which FI is their primary one, and you’re apt to get just a few answers. The most frequent answers will be: where my paycheck is deposited, or what I use to pay my bills.

At StrategyCorps, we talk to a lot of bankers about being the primary FI for a customer or member. We call this primacy. We talk about what they’re doing to lockdown primary relationships to keep from losing them, and what’s being done with non-primary customers to win them over and make them financially productive.

With few exceptions, most community and regional banks do not have a quantitative measurement or definition of primacy. It’s still very much rooted in a banker’s intuition or past experience, rather than a data-driven approach to determine precisely which customers are primary and which aren’t.

The Math
In our 20-plus years studying and analyzing retail checking relationships, products and pricing strategies, we have developed a database of well over 1 billion data performance points from hundreds of financial institutions.

We have found through this analytical approach a metric that holds true with nearly every FI we analyze, regardless of size or operating area location. Here it is: If the banking activity of a customer on a householded basis isn’t generating annually at least $350 in revenue, that household doesn’t consider your organization their primary FI.

Like clockwork, we find that when household revenue is less than $350, the banking relationship effectively nosedives. This typically is the case for 35% of all consumer checking accounts.

More specifically, we find this 35% of total checking account relationships represent slightly less than 2.1% of total relationship dollars and generate only 3.7% of revenue.

Address the Gap
Those customers are not engaged in a mutually beneficial relationship with their FI. They aren’t doing enough banking activities to generate enough revenue to cover the cost to manage and maintain their relationship. Many of those customers are primarily engaged at another FI and need a more compelling reason to bank with your FI than is currently being provided.

A major advantage of knowing specifically who does not consider your bank a primary FI is that you can develop product, pricing, communication and business development campaigns to move them closer to generating at least $350 in revenue. If you don’t, those 35% of relationships will continue to drag down financial performance. And this financial drag can be sizeable — conservatively speaking about $204 a year per relationship.

Do the math: If you have 20,000 checking relationships, 7,000 will be non-primary with a deficit of $204 per relationship. This equates to an annual loss of $1.43 million.

Build Profitability
Another major advantage of knowing precisely the amount of primary relationships at your institution is that knowledge provides great insight for a game plan to lock the relationship down even further with enhanced product offers, preferred pricing, elevated levels of customer service or, in some cases, a thank you. Doing one or more of those things diminishes the chances they’ll consider an offer from a competitor.

In today’s ultra-competitive marketplace, smart bankers realize a data-based definition of primacy in their retail checking base is necessary to make timely decisions. Banks that do so can better protect and grow primary relationships, and fix and grow the non-primary ones. By doing both, they optimize the performance and growth of their retail checking base and don’t leave the financial performance of their checking accounts to guesswork.

3 Common Insurance Gaps at Banks

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Banks must take risk management seriously – and part of managing risk is properly insuring property and casualty risk. Below are the three critical, yet commonly overlooked, areas that institutions should be aware of in addressing their property and casualty insurance program.

1. Think Deeply About the Bank’s Entire Risk Profile
Banks are a complicated risk entity without a cookie-cutter insurance blueprint. The bank business model makes banks a natural target for criminal acts, while daily operations leaves the bank exposed to a host of liability claims. We have also recently seen an increase in regulatory scrutiny related to banks, especially banks’ cyber exposure. Another factor working against the bank is the lack of set standards, guidance and/or oversight of their insurance program. These factors combined make banks particularly complicated to insure competently.

It is imperative that banks consider the entirety of their risks in ensuring they have appropriate coverage and limits. Risk factors to consider include ownership structure, recent financial performance, geographic location, loss history, makeup of the board and management, business model and growth projections. When these factors are considered together, a bank can more completely insure its risks as many of the core coverage lines (and policy forms) are unique only to commercial banks.

2. Cyber Exposure Needs to Be Addressed Under Three Separate Policies
When most banks hear cyber insurance, they think of their cyber liability policy. Most carriers consider this computer systems fraud and it is intended to respond to electronic claims when the bank’s funds are lost or stolen. A typical non-bank cyber liability policy will also include a crime component for electronic losses like fraudulent instruction and electronic funds transfer fraud.

However, there are additional coverages specifically available to banks for cyber loss. The second is the bank’s FI Bond. This is a broader policy and can carry much higher limits. Other coverages under the FI Bond include computer systems fraud such as hacker and virus destruction, as well as voice initiated transfer fraud. There is also an option to insure “social engineering” claims through the bond FI policy.

The third policy that may apply in a cyber loss is the bankers professional liability (BPL). If a bank does not carry social engineering on their bond and a customer’s account is hacked through its own system (opposed to the bank’s) the FI bond likely will not cover the customer’s stolen money. A BPL may provide coverage for depositor’s liability in this case.
Bank should make sure that all three of these policies have adequate limits, do not have overlapping coverage, and also do not leave any gaps in coverage.

3. The Areas of Greatest Exposure
Although cyber and D&O are often the first two areas of insurance a bank focuses, we believe more attention should be paid to the bankers professional liability policy. In the most basic sense, BPL covers the bank for losses arising from any service the bank provides to a customer, aside from lending activity. It’s often colloquially called Bankers E&O and is essentially broad form negligence coverage.
Conversely, lender liability is intended to cover that which BPL excludes: wrongful acts arising from a loan or lending activity. It is important that banks have lender liability included within the BPL.

There are two main reasons BPL/lender liability are important:
1. The most frequent claim for banks falls under the BPL/lender liability. In 2021, 51% of bank liability claims fell under BPL or lender liability. Cyber liability and D&O claims constituted 8% and 12% of claims, respectively.
2. Since they are usually insured under the same insuring agreement, they also usually share one limit. A borrower suit that turns into a paid claim would also erode the BPL limit.

Most peer group average BPL and lender liability limits are relatively low; it’s recommended that banks keep their limit at or slightly above average, at a minimum.

Given the complex factors above, how can you know if your bank is protected? Consider the following questions:

  • Are my financial institution and its officers protected from all the types of risk that could hurt us?
  • Do I have a partner I trust to complement my unique business and offer integrated solutions that offer the right amount of coverage?
  • How much time, productivity and fees does it cost the bank to have relationships with multiple brokers and advisors?

Insurance is complex. Threats to the security of your financial organization are ubiquitous. You should have an expert to help you navigate the process and build a tailored solution for your institution.