Building the Future of Primary Banking Relationships: The Digital Shift

For decades, traditional banking relied heavily on physical branch networks to cultivate and manage “primary” banking relationships (PBRs)—those where customers are deeply invested in a bank’s offerings. However, as the financial landscape evolves, driven by digital innovation and changing consumer behaviors, banks must adapt to stay competitive.

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Rethinking Primacy Historically, PBRs were defined by metrics like direct deposits, transaction volumes, and average balances. Today, a more nuanced approach is needed. We propose defining PBRs as accounts where banks manage over 60-80% of a customer’s payment transactions. This includes not just high balances but also regular, diverse transaction flows—essential for a robust, long-term relationship.

The Digital Imperative The shift to digital is central to acquiring and managing PBRs effectively. Banks need to enhance their digital capabilities in several areas:

1. Mobile-First Strategy: Banks must develop robust mobile banking platforms. Current offerings often lag behind, providing only basic transactional features. Leading banks, however, are setting ambitious goals to overhaul their mobile capabilities, prioritizing this with dedicated resources and adopting a “mobile first” mindset. This shift involves reorganizing teams and streamlining processes to enhance digital engagement and servicing. Example: Revolut has set the standard with its highly sophisticated mobile app, offering seamless financial management, including budgeting tools, instant spending notifications, and a marketplace for various financial products. Their approach exemplifies a comprehensive, mobile-first strategy. Example: Chime has also excelled in this area by focusing on delivering a simple yet effective mobile experience, which includes automatic savings features and no-fee banking services, catering to a broad segment of digital-native users.
2. Enhanced Acquisition: To capture and retain PBRs, banks should: Use data-driven insights to identify and target high-potential customer segments. Develop tailored value propositions and digital-first product offerings. Invest in effective digital marketing strategies, including SEO and targeted ads, to reach and convert potential customers. Example: HSBC uses advanced analytics and segmentation to tailor their marketing efforts, targeting specific customer segments with personalized offers and educational content. This approach has helped them improve conversion rates and customer engagement. Example: Citi has integrated AI into their digital marketing efforts, using predictive analytics to target high-intent customers with customized offers and streamlined onboarding experiences.

3. Seamless Account Opening: Optimizing the account opening process is crucial. Banks should aim for a streamlined, mobile-friendly application that leverages existing data to reduce friction and prevent fraud. Example: N26 offers a fully digital account opening process that can be completed in minutes. Their use of facial recognition technology for identity verification simplifies the process and enhances security. Example: Monzo has implemented an intuitive mobile application that allows users to open accounts quickly, with minimal paperwork and friction. Their system integrates KYC processes seamlessly into the digital workflow.

4. Effective Activation: Ensure new accounts are quickly activated with features like instant card provisioning and personalized activation campaigns. This could include gamified experiences or targeted incentives to encourage initial use and engagement. Example: Barclays has introduced gamified elements into their account activation process, such as rewards for completing initial transactions or setting up direct deposits, to encourage early and frequent use. Example: American Express leverages personalized onboarding campaigns, offering tailored guidance and incentives to new cardholders to ensure they utilize the card’s full range of features.

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5. Deepening Relationships: Use advanced CRM and hyper-personalization techniques to deepen customer relationships. This involves understanding individual needs and offering tailored financial solutions, as well as leveraging AI to enhance customer interactions and offer timely, relevant suggestions. Example: Bank of America’s Preferred Rewards program provides increasing benefits based on customer engagement, similar to a loyalty program. This incentivizes customers to deepen their relationship with the bank. Example: Goldman Sachs uses AI-driven insights to offer personalized investment advice and financial planning services through its Marcus platform, enhancing customer engagement and satisfaction.

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6. Robust Retention Strategies: Proactively monitor for signs of customer dissatisfaction or reduced activity. Implement a structured approach to address issues, turning potential negative experiences into opportunities for enhanced loyalty. Example: Capital One employs a robust customer feedback system and real-time analytics to identify and address issues before they lead to attrition. Their proactive customer service approach includes targeted outreach and resolution efforts. Example: JPMorgan Chase uses predictive analytics to monitor customer behavior and engagement, enabling them to offer personalized solutions and maintain high levels of customer satisfaction.

Measuring and Monitoring Success

Acquisition: % of sales done digitally for New customers

Activation:

• Traditional: % mobile enrolled customers
• Traditional: % active customers at 6 months
• New: % of customers achieving "primary banking relationship" status

Deepening

• Traditional: # of products per customer
• New: % of sales done digitally for existing customers

Retention

% of customers closing relationships

% of customers going from active to inactive

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The Future of Banking Banks that embrace a mobile-first, omnichannel strategy are poised to excel. By focusing on digital transformation, enhancing customer engagement, and leveraging data-driven insights, banks can drive profitability and maintain a competitive edge.

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Stay ahead of the curve. Embrace the digital shift to build stronger, more meaningful primary banking relationships and achieve operational excellence.