Why Your Customer’s First 90 Days Are Critical To Your Bank’s Growth

by Grant Turner

There is no question that first impressions are important. However, you might be surprised at just how important the first 90 days are to a new bank or credit union customer. Banks and credit unions can and must use effective “onboarding” to decrease customer attrition and cross-sell additional products.

In a study conducted by BAI entitled ‘Quest for Deposits: The Ninety Day Window of Opportunity’, it was found that 75% of all cross-selling takes place in the first few months of new customer acquisition. Although cross-sell potential will be high during this period, unfortunately customer loyalty will be at its lowest. In its annual survey of retail-banking customer satisfaction, J.D. Power & Associates indicated that new bank customers are the least satisfied and those most likely to leave. In fact, it showed they are nearly three times more likely to show attrition during the first ninety days of opening a new account.

With first year attrition rates ranging on average from 20% – 40% (sometimes higher), and an ever-increasing need to maximize the revenue and relationship potential of each customer, having a robust and effective onboarding process is clearly of critical importance. It seems financial institutions are beginning to acknowledge the need for greater emphasis on onboarding. A 2012 survey of banks and credit unions indicated that onboarding would be one of the most important strategies undertaken over the next couple of years.

However, despite the increased recognition of the importance of onboarding, it appears efforts in this area still have major obstacles to overcome. Recent studies have revealed that bank client onboarding remains largely a fragmented, under-funded, and technology lacking process. These issues contribute to a “well-spring of problems in the areas of compliance, regulation and risk management; client experience; technology and data; and operational efficiencies.”

A 2013 report issued by the Aite Group suggested that over 70% of U.S.-based institutions viewed client onboarding as either a back-office function that needs to be cost-contained, or merely a front-office automation tool. According to the same report, only 30% viewed client onboarding as a competitive differentiator. Unfortunately, banks have often times viewed the onboarding process as simply routine, focusing instead on efforts to retain a more mature client base. In doing do they overlook a great opportunity to build a lasting, profitable relationship with new customers.

Banks and credit unions clearly have different takes on the onboarding process, both functionally and philosophically. Some focus their efforts entirely on cross-selling, in a process Andrew Frawley once called a “dump-truck” effect, “where multiple offers are pushed out indiscriminately to customers along a set corporate timeline.” Still others advocate a reduced emphasis on pushing additional products, opting to use those first few months to focus on personal communication and relationship building to drive longer-term loyalty and share of wallet. As with most things, the best answer likely lies somewhere in the middle.


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