The banking industry is poised to face a myriad of challenges in 2024, driven by a slowing global economy and a complex economic landscape. As detailed in the latest report by Maveric Systems, titled: Optimizing Client Retention: Digital Marketing Blueprint for Banks. banks must shift their focus from traditional strategies to more sophisticated, contextualized retention frameworks.
Economic Pressures and Market Conditions
The global economy in 2024 is characterized by slow growth and heightened uncertainties. According to the report, the International Monetary Fund (IMF) forecasts global growth at a modest 3.0%, with advanced economies like the US, Europe, and the UK growing at only 1.4%. Despite a drop in inflation to 5.2%, high interest rates have led to increased deposit costs, particularly for regional banks. This scenario underscores the need for banks to find cost-effective ways to sustain profitability, making customer retention and expansion more critical than ever.
Cost Pressures
Higher interest rates have significantly impacted the cost of interest-bearing deposits, especially for smaller banks. In Q2 2023, deposit costs for the largest banks were 2.2%, compared to 2.5% for smaller banks. As banks struggle to lower these high costs, retaining existing customers becomes a more viable strategy than acquiring new ones. Retention efforts help mitigate these cost pressures by maintaining a steady revenue stream from loyal customers who are more likely to engage with multiple products and services.
Criticality of Retention & Expansion
The banking sector is experiencing intense competition from traditional rivals and new entrants like fintech companies and digital-only banks, making customer retention and expansion crucial. Banks need to focus on existing customers to foster loyalty and build long-term relationships, serving as a buffer against competitive pressures. Additionally, consumer behavior is rapidly evolving, with customers demanding more personalized and seamless banking experiences. The report indicates that 44% of banking customers are willing to switch banks due to poor personalization and lack of tailored offers, emphasizing the need for retention strategies that enhance customer satisfaction through personalized services and real-time engagement. Furthermore, the cost disparity between acquiring new customers and retaining existing ones highlights the strategic importance of retention. Acquiring a new customer can cost five times more than retaining an existing one, and existing customers typically have higher lifetime value, making retention a cost-effective priority in the current economic climate.
The imperative of contextualized retention framework
However, merely acknowledging the criticality of client retention and expansion is not enough. Every bank with the right investment appetite can access necessary technologies, processes, people, strategies, and frameworks to drive retention. True differentiated success lies in how these tools, platforms, and strategies are executed. Aligning digital marketing efforts, customer engagement processes, and technological investments with the bank’s unique brand promise and value proposition is therefore crucial. By contextualizing retention strategies to reflect the core values and distinct offerings of the brand, banks can create personalized and meaningful customer experiences that foster loyalty and drive long-term growth.
In conclusion, the latest report by Maveric Systems, titled: Optimizing Client Retention: Digital Marketing Blueprint for Banks. underscores the critical importance of shifting focus from customer acquisition to retention and expansion. And it further gives a clear rationale for the need of a brand promise focused retention framework for differentiated win. For a more detailed roadmap on how to navigate these challenges.
Co-authored by Ashutosh Karandikar, and Venkatesh Padmanabhachari
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Established in 2000, Maveric Systems is a niche, domain-led, BankTech specialist, transforming digital ecosystems across retail, corporate, wealth management, cards & payments and lending domains. Our 2600+ specialists use proven solutions and frameworks to address formidable CXO challenges across Customer Experience, Assurance, Regulatory Compliance, Process Excellence and New age AMS.
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