Customer retention strategies in the banking industry are an extremely important metric for credit unions and banks as they track their lending efforts and seek to stay relevant for current and future customers.
In addition to individual customers seeking financing, the United States is home to over 33 million small businesses, many of which are dealerships. These dealerships need reliable sources of financing for their own customers, which used to be a somewhat attainable goal. Since the Great Recession, however, many individuals and small business owners have struggled to meet the requirements for traditional loans. These struggles can be attributed to having reached their borrowing limits or needing a program that falls outside of the products their banks offer.
Strict traditional lending requirements are here to stay, but they shouldn’t be the reason small businesses like dealerships have to accept defeat. When banks fail to provide alternative lending options for their customers, it forces clients to go through the headache of finding a new bank, and causes banks the stress of losing customers.
Client Retention Strategies
While the landscape of customer retention can feel dire due to inflation and stringent lending requirements, there are so many options for banks to capitalize on that will put them ahead of the curve for customer retention.
Customer Service
Give your customers an attentive experience every time they bank with you. For many individuals and small business owners, the mere act of banking can be stressful. Through intentional service and thoughtful actions, your organization can reduce these feelings of stress for your customers. Thoughtful customer service will ensure their banking experience makes them want to come back again and again, rather than dread it.
Loyalty Programs
Creating incentives for customers to bank with you through VIP programs that they can’t access anywhere else is another great customer retention strategy. Providing perks like credit card rewards and points for purchasing specific services will encourage additional financial activity and keep them coming back.
AI and Digital Banking
Mobile banking is necessary for today’s day and age. A well-designed mobile app and efficient chatbot assistants put your customers on a fast track to having their questions answered and staying happy with quick and easy access to their information whenever they need it.
Indirect Lending for Customer Retention
The strategies listed above are necessary for effective customer retention, but an often overlooked strategy for bank client retention is indirect lending.
Indirect lending is when a third party provides a loan to the borrower, rather than the bank directly offering the loan to the borrower. Indirect lending provides services and programs that banks can use to retain business clients and give them the funding they need.
Indirect Lending Benefits
Traditional loans pose a challenge for banks seeking to retain clients because they do not always fit the needs of individuals looking to obtain a loan.
If clients are not able to qualify for a traditional loan with your bank, they will have no choice but to seek financing elsewhere.
This doesn’t just apply at the individual level, though. For dealers and lenders looking to provide alternative financing options to their customers, this can lead to less flexibility in who they are able to serve and consequently, lower margins.
Indirect lending is the ideal solution for these dilemmas, as it offers a full complement of programs designed to help dealers provide the funding their customers need. Banks can then leverage these programs and tailor them to their business clients to provide more flexibility and opportunity to meet their goals.
Additional perks of indirect lending include:
Reduced Turndowns
No one wants to tell a client they don’t qualify for financing. But the reality is that many individuals don’t have the credit ratings or established financial histories to meet the requirements for traditional loans.
Instead of turning down clients and watching them take their business elsewhere, indirect lending allows banks to offer more options regardless of credit ratings or financial history. The solutions offered through indirect lending are accessible to new and small business owners, so banks can successfully increase account retention.
Security and Confidentiality
Banks can be understandably wary about offering lending products that are not their own. The good news is that indirect lending offers a secure and confidential process, as well as a clear path for customer retention strategies in the banking industry.
Banks can reach out to an indirect lender to see if a client is approved for a specific program without placing the prospective applicant in direct contact. This provides a buffer of confidentiality between the bank, the client, and the indirect lender. Additionally, if the client tries to go around the bank and deal with the indirect lender on their own, the indirect lender will send them back to the bank.
Indirect Lending You Can Trust
Web Finance Direct offers indirect lending solutions based on the needs of your bank’s portfolio, and we work with lending managers to understand the requirements of their clients. We have our own network of dealerships, businesses, and alternative lenders who can provide financing ranging from working capital to equipment, credit, cash flow solutions, growth financing, commercial real estate, and more.
We can also assist in filling your portfolio with the loans you require and find a buyer for our book of loans once capacity is reached. Web Finance Direct only engages in confidential and ethical practices with our banking partners.
If you want to expand your offerings, grow your portfolio, and improve account retention, contact Web Finance Direct today and learn more about our indirect lending programs.
FAQs:
How to increase customer base in banks?
Some customer retention strategies in the banking industry are: serve your customers by investing in them through programs like mobile banking, automated customer service, loyalty clubs, and indirect lending options.
What is customer retention for banks?
Customer retention refers to a bank or financial institution’s ability to keep their customers doing business with them, even in the midst of financial difficulties or new stages of life.
How can indirect lending increase customer retention for banks?
Indirect lending provides flexibility for customers who need a non-traditional lending option due to circumstances that may preclude them from qualifying for a traditional loan.
Why is customer retention for banks important?
Customer retention reflects a bank’s ability to serve its customer base. Customer retention is a great metric for measuring the success of a bank and its ability to adapt to the real needs of its borrowers.