Responding to the Cross-Selling Crisis

By Scott Andrick

Take a customer-centric, transparent approach to meeting customer needs.

The decision by the Office of Comptroller of the Currency (OCC) to more closely examine sales practices at 44 major U.S. banks and credit unions has put many of these institutions in a tailspin. As a result of the audits, U.S. banks and credit unions are collectively holding their breath for potential changes in rules and regulations that govern how banks offer products and track sales practices. Financial institutions are re-examining and realigning their sales and compensation models. Due to the ubiquity of cross-selling in the industry, banks need to ensure they have the right practices in place to continue to do business in this way.

“Cross-selling” has become a tainted phrase, but when done right, it is a necessary driver of growth and profitability. Without the sale of additional services, products, and accounts in the financial sector, the business models of many banks would undoubtedly need to be re-engineered. The way forward for banks is a customer-centric, transparent approach that removes a “selling for the sake of selling” mentality and ensures they keep regulatory compliance—and most importantly customers—at the forefront.

Shift from cross-selling to meeting customer needs.

While waiting for the public results of this audit, banks are asking themselves how they should alter their strategies while maintaining a profitable business, and whether the practice of cross-selling itself should be considered dead.

The answer? No—but with a caveat. Financial institutions do not need to eradicate cross-selling in order to comply with industry regulations such as UDAAP (Unfair, Deceptive, or Abusive Acts or Practices from Dodd-Frank). That said, to prosper, they should switch their focus from pure selling to understanding each customer and what makes sense for them as individuals.

But they have work to do to get there. A recent survey revealed that 68% of banks believe they understand their customers extremely well, but only 41% of bank customers believe the same, and another 16% feel banks hardly understand them at all.

To bridge this gap, banks need to flip the script back to the customer and define selling through a customer-focused lens. Instead of positioning a product push as another solution based on a recently implemented batch job, it should be more about providing customers with everything they need to optimize their money management and goal achievement. Banks also need to elevate their offers to a personalized level to meet each customer’s needs, based on context and knowledge from past interactions. This means having the tools in place to understand that not every action is about the next sale, but rather understanding where customers are on their journeys and taking the appropriate next step. This will enhance the customer experience, help customers achieve their goals, and dramatically strengthen the bank/consumer relationship.

Enhance transparency—both with regulators and customers.

Customers value transparency because it is inherently linked to trustworthiness. As part of the process of prioritizing focus on the customer, organizations should keep institutional regulations and procedures at the forefront of all customer communications. Agents should be able to clearly explain the purpose and benefits of the products they are selling, while also providing guidance and straightforward answers. This will also ensure customers are fully aware of any regulatory requirements and are assuaged by the organization’s compliance with them.

Extending beyond transparent, customer-centric interactions between institution and customer, banks need to ensure they have digital audit trails documenting these interactions. This will ensure that, should an audit occur, the bank has full digital documentation available to make the audit process smoother and easier, and they can quickly resume business as usual. The risk and effort associated with regulator audits is significantly minimized when thorough records are kept, as banks can easily and clearly show compliance.

Embrace the digital revolution.                                                        

Like most industries, banking is increasingly digital. And because of the seamless mobile experiences they’re used to while shopping or finding transportation, customers expect banks to offer online products and services across channels, so they can manage their money at any time and place.

Expanding digital offerings that unify systems is a critical step in placing the focus back on customers. Banks must provide streamlined, omnichannel digital solutions in order to establish trust, guide customer journeys, and distinguish themselves in a rapidly evolving marketplace.

Cross-selling isn’t dead, nor is it on life support. But many banks need to reframe their strategy to think beyond just the next sale and instead with an eye toward ensuring customer satisfaction and lifetime value as their first priority when making sales, documenting sales, and establishing digital banking processes.

Scott Andrick is senior director and industry principal of Retail Banking & Cards at Pegasystems, a company that develops strategic applications for marketing, sales, customer service, and operations. Email: Scott.Andrick@Pega.com.

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