At Avannis, we’re passionate about helping financial institutions optimize their customer service programs. Part of our mission is to provide education and expertise in the rapidly changing world that is banking—and so we keep an eye on any and all current events affecting the financial sphere. Here are some of the most recent happenings in banking and what they might mean for customer service.
What’s Happening in the Banking Industry?
Federal Reserve Cuts Interest Rates
The Federal Reserve has cut baseline interest rates twice since July, with the intent of offsetting an economic slowdown. This decision affects loan revenue, one of the largest revenue sources for banks, by decreasing what banks can charge on loans. But at the same time, those lower rates may also spur an increase in mortgage borrowing. Fortunately, overall credit quality is still good, and consumers are continuing to spend.
Top Banks Exceed Earning Expectations
The six biggest U.S. banks were expected to report a drop in total revenue, but the actual earnings reports were more favorable than predicted. J.P. Morgan Chase cited the strength of consumer banking operations, such as home loans and credit cards, as a valuable counter to lowered interest rates—although it remains to be seen if this trend will extend through Q4.
A strong consumer could mean valuable opportunities for credit unions and community banks. Smaller financial institutions are perfectly placed to first attract loan customers and then cross-sell them to other products. Unfortunately, converting loan business to a broader relationship can be a challenge for those smaller financial institutions.
Rising Repo Rates and Defaults
September of this year saw a spike in repo rates. Concerningly, numerous financial institutions are going back to the discount window for the first time since 2007. In addition to banks needing a boost from the Federal Reserve, banking customers are also finding themselves needing help with their loans. Currently, over 7 million Americans are three months or more behind on their car loan payments. As financial institutions enter into a cycle of collections, they’ll need to keep a firm handle on customer satisfaction.
What the Numbers Mean for Customer Experience Efforts
What does all of this mean for the customer experience? We’ve got a few insights to share.
Financial Institutions Must Do More With Less
As lower interest rates negatively affect loan revenue, competition for customers is increasing—and financial institutions need to figure out how to improve the quality of service while cutting costs. Take a look at your current customer experience program. Are you collecting data far beyond what you need? Are you running an expensive mystery shopping program? Are you measuring stats that are just easy to measure, or are you tracking the ones that can make a difference?
Too many financial institutions have the data and fail to utilize it. For instance, a community bank might be asking customers if they’re satisfied, but then will completely fail to implement a closed-loop feedback program or identify subsequent sales opportunities. You’re already reaching out to customers, so why not leverage all that info? If you’re unsure of how to proceed, Avannis can help you zero in on what you need, delivering the maximum amount of value to your customer experience program.
It’s Time to Streamline the Mortgage Lending Process
Those lowered interest rates we mentioned will lead to an increase in refinancings and other opportunities. Community banks and credit unions are at a particular advantage when it comes to loans, as their reputations and services typically make them stand out over larger banks. But the competition for these eager customers is fierce, so your financial institution will need to offer some attractive benefits.
One of the most powerful things you can do to support customer retention and growth is to identify and eliminate any pain points in the loan process. Whether you embark on a mission to increase staff engagement, or you’re seeking specific feedback through a mortgage survey, be sure that every change works to streamline the loan application and fulfillment process.
Take Advantage of Cross-Selling Opportunities
With lower interest rates encouraging borrowing, credit unions and community banks may find themselves inundated with loan applicants. These customers can be made exponentially more valuable if they’re exposed to the correct offers at the right time. A person might go get a loan from a small bank, for example, and then keep their money at a larger bank because of the convenience. That customer presents an opportunity. They might love the rate or personal service they receive at the smaller bank, and they need to be shown that this same ease of use and reliability extends across all of your banking services and products. Essentially, financial institutions need to create a loan experience that does a better job of converting.
Use Customer Service Data to Your Advantage
As we progress through Q4, we’ll be keeping an eye on changing interest rates and shifting consumer behaviors. If you’re looking for a way to stay ahead of the competition and refine your customer experience program, contact Avannis today. We’ll provide everything from industry benchmarking to tailored customer satisfaction surveys, giving you exactly what you need to improve customer loyalty. We look forward to working with you.