Top 5 Financial Institution Growth Strategies and Trends
Grow Your Focus
Financial institution growth is possible only when both revenue and profit has increased. Profitable growth is critical for long-term success, which is why growth should be based on value instead of price. To implement such a strategy, the focus should be on both a revenue increase as well as any applicable cost reductions.
One example of focus growth is in the approach to branch locations. In the past, branches were seen as a collection point for financial errands that often need to take place. But thanks to the increase in available technology, the branch can become as full-featured as the main office location.
This turns the branch into a financial destination, which also helps with the cost of cardholder acquisition resulting in a financial institution’s growth.
Expand the Relationship with the Cardholder
Cardholders are willing to consolidate their financial needs at their primary institution. According to a BAI Research report, over 55% of the owners of small and medium-sized businesses would be happy to put their personal and business financial relationships at the same institution.
Despite the evidence that business owners are willing to consolidate their finances, the penetration of this in the financial markets is low. Evidence seems to indicate that the cardholder is not being targeted by the institutions for the purpose of consolidation.
One tactic to increase the consolidation of accounts is to expand the cardholder relationship to make them aware of the advantages of having all of their financial relationships with one institution. When used with product bundling strategies and focused sales tactics, the expansion of the relationship can boost your financial institution’s growth in a very positive manner by consolidation growth within its key cardholders.
Broaden Your Product
One way to stimulate growth of a financial institution is by diversifying your product offerings. Many institutions are now discovering the opportunities this provides. Community financial institutions, traditionally dependent on deposit fees, are starting to recognize the profit potential of debit and credit card operations.
Several financial institutions have dropped the term ‘bank’ from their brand name to focus on a more integrated approach to their financial services. This new name allows the institutions to focus more on the thriving wealth management and insurance subsidiaries while still maintaining their core business product.
Consumer financial relationship consolidation is an essential component of a community or regional financial institution’s growth. Through such growth and the required diversification to keep the consolidated cardholder happy, smaller institutions are able to become the only institution that people need. This stops consumers from taking their more profitable financial business needs to competing larger institutions.
Become More Efficient
Financial institutions can stimulate growth by becoming more efficient in their core competencies. Cardholder acquisition is historically an expensive process, and by improving this, financial institutions can attain new cardholders and experience growth for the same net cost as before.
The analysis of the data the institution has already collected can be an important tool in becoming more efficient. The data can be a gateway to better understanding the consumer, allowing acquisition funds to be focused on the habits of potential new cardholders.Financial institutions can stimulate growth by becoming more efficient in their core competencies. Cardholder acquisition is historically an expensive process, and by improving this, financial institutions can attain new cardholders and experience growth for the same net cost as before.
The analysis of the data the institution has already collected can be an important tool in becoming more efficient. The data can be a gateway to better understanding the consumer, allowing acquisition funds to be focused on the habits of potential new cardholders.
Improve Fundamental Product Economics
A financial institution’s growth doesn't always need to come from new products and programs. Sometimes improving the product economics for existing services can have a very substantial impact on the bottom line. One of the most effective tools for improving product economics comes from the data that the institution already has.
Analysis of current data coupled with the right market research can work to define the best course of action for improvement. For example, trending information can help predict the best deposit account pricing for a fluctuating market, leading to increased profits.
Sometimes the best course of events is to encourage more profitable consumer behavior. Many self-service operations are now being used to increase overall cardholder satisfaction as it improves the basic product economics.
Moving the consumer away from using branch locations for only basic financial services reduces the need for the expensive yet limited branch system of banking. Doing this minimizes the cost-to-serve as it improves product economics.
A financial institution’s growth is dependent on implementing the right strategies for your institution. By growing the focus of the institution and broadening the financial products, current careholders will bring in more of their business as the financial institution attracts new consumers. Becoming more efficient and improving fundamental economics assures that the institution will remain profitable as it experiences growth. Financial institution growth does not need to be a complicated process.
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