“Build a better mousetrap and the world will beat a path to your door.” –Ralph Waldo Emerson.
Listening to Customers and Delivering What They Want
SITUATION
For many years, First Niagara’s focus had been on rapid growth through the acquisition of regional banks and thrifts. Study of customer behavior after a bank merger/acquisition shows that customers of the acquired bank head for the exits at a faster rate than usual. There are obvious reasons for this but, nonetheless, it means attrition rates increase after disruptive events like mergers.
In addition to the disruption of existing and acquired customers, a few years had passed since our deposit products had been designed and their features and pricing lagged the industry a bit. These two factors led to the one-two punch of high attrition and low replenishment–the tub was draining faster than the faucet could fill it. Since attrition was returning to normal all by itself, I put my focus on fixing the product set.
ACTION
As I made an assessment of the situation, it became clear that changes were needed in both checking and savings products. Customer research and branch feedback highlighted three opportunities:
- Potentially valuable customers were being turned away. This was due to their having overdrawn their account at another bank. We found that the majority of these customers had not committed fraud. They simply weren’t managing their accounts well. Often, they had numerous overdrafts in their history and had paid high fees to other banks.
- Current checking products were too complicated. Our mass market account had no less than four rules for how to get the monthly fee waived. Although the idea had been to give the customer more choices, the customers just ended up being confused.
- The bank was making it hard for customers to save. Entry level savings accounts came with a $3 per month fee for balances below $400. Customers felt trapped–they knew they should save, but our account charged more in one month than the account would earn in 7 years.
Under my leadership, the product development team successfully addressed each of these opportunities through the creation and introduction of:
- Merit Checking–a product that offers underbanked customers the chance to have a safe bank account without fear of overdraft. After 6 months of responsible account management, the customer is eligible to upgrade to a non-restricted account.
- Simple Checking–an account with only one requirement to avoid the monthly fee–make a deposit of any amount. In focus groups, this idea was very popular and once rolled out, we saw sales ramp up rapidly.
- Companion Savings–a free savings account for checking customers. This account only requires that the owner be a checking accountholder.
I led the customer and competitive research, product design, legal and compliance reviews, corporate governance, IT, operations and training components of each of these development projects culminating in the roll-out of all three products in 2014.
RESULT
The two checking products generated an immediate lift increasing new account sales by 40%, annualized. The savings product was introduced near the end of the year and in 2015 generated massive increases in sales and significant increases in savings balances.
One final note, as a direct result of these new products, the checking account portfolio grew organically for the first time in years and shows no sign of slowing.
Contact information:
Alpine Jennings
Senior Financial Services Executive
