Essay on Not Everyone Wants a Relationship
By Rick Spitler and Sherief Meleis
Some banking customers — just like consumers who shop at Wal-Mart or fly on Southwest Airlines — are happy to trade style or comfort to get their business expedited on attractive terms.
• Discount Banks Pursue the 'Other Half' of the Market
• Winning Formula
• Transforming the Generalist Retail Bank
For one view of what the future of the banking industry may look like, consider the airline industry, where Southwest Airlines Co. has ascended to dominance in just 30 years.
While "full-service" carriers like American Airlines Inc., Delta Air Lines Inc. and United Air Lines Inc. focused on building elaborate jet fleets and "hub" systems at major …show more content…
Of course, not all of the banks that we place in the discount category necessarily define themselves in that manner. But they do share a general set of characteristics, including exceptional efficiency that enables them to pay high rates on deposits and still achieve healthy profitability. Notable examples include Fifth Third Bancorp, Cincinnati; Charter One Financial Inc., Cleveland; and Citizens Financial Group Inc., Providence.
These discounters are succeeding by drawing on an often overlooked and yet broad-based customer preference for utilitarian simplicity. It's an approach that contradicts a prevalent view in the market, which finds many institutions focused on building high-touch relationships. The assumption is that most customers value personal interaction with their financial institution and are receptive to consultative selling. Huge investments have been made in staff resources and product capabilities to pursue such strategies.
But that premise is not supported by a recent national study conducted by BAI and Novantas, which found that roughly half of all deposit customers fall into a "utility market" that prefers basic services and attractive prices and yields. Not unlike customers of Wal-Mart Stores Inc. and Southwest Airlines, banking utility customers just want