Definition of Cross selling by Banks

cross selling by Banks

Cross selling by banks is defined as offering the existing customers additional banking products. For example, a deposit customer who is already operating a savings account can be offered a term deposit account or a fixed deposit account or call deposit account. Another customer can be offered  mortgage finance, credit card and personal loan.

cross selling by banks can also be said to be the art of customer retention by ensuring customers are provided with as many products to meet their needs.

Process for effective cross selling by banks exercise,

• Analysis using existing customers database should be done for each customer, identify their specific need and match with a product that can be offered to the customer as a cross selling product.
• After identifying the product,  the banks should come up with a strategy on how to disseminate information about the product to the customer. The strategy may suggest each customer be assigned a particular staff for smooth management of the relationship.
• The staff members charged with this responsibility should be knowledgeable and well trained in cross selling to be able to market all or majority of the banks products to the customer.
• There should be continuous periodic review of the customer needs and the database to identify the needs of new customers.

This exercise has proved to be very beneficial with more banks adopting the approach, major banks have expanded their banking business.

 Benefits of Cross selling by Banks:

1. There is increased profit as the bank is able to greatly expand their banking business by offering more products to existing customers. There is tremendous growth in business.
2. There is reduced cost as it has been proven that the cost of acquiring a new customer is four times higher than serving the existing customer, with reduced cost the profits will also increase.
3. There is ensured loyalty of the customer to the banks and therefore there is little or no likelihood that the customer would shift their business dealings to another bank. This is also known as ‘ring fencing’.
4. The bank would have a competitive edge over the other banks, because in the process of analyzing the needs of the existing customer they would come up with innovative products which are not being offered in he market.
5. Cross selling by banks can also greatly build team spirit among the staff members of the bank, creating loyalty and reducing staff turnover as they are well trained and feel part of the team that brings in the business and not just ‘robots’.

Cross selling by banks is an art if well mastered by the bank will have a great long term effect on the business growth and put the banks on the cutting edge of innovation. Training in cross selling by banks is a must to grow and compete in the industry.

Most of the major Banks in Kenya and parts of South America have embraced Agency Banking as a way of improving their services to their customers and cutting a niche for themselves in an ever competitive market.

 Why Banks have embraced Agency banking

Agency Banking

Agency banking has enabled bank customers to access the basic banking services, for example, cash deposit, cash withdrawal and bank balance inquiry conveniently or what would be termed as within the comfort of their neighbor-hood. The convenience of access to banking services and the extended hours that the agencies work has been the most attractive features to the customer (as most agencies work between 8am up to 8pm). The rural population especially has heartily welcomed this idea since they have had to sometimes go through Vexing experiences to access banking services due to the poor road infrastructure and high costs.

 Benefits of Agency banking to Banks

It is not only the customers who have benefited from Agency Banking. Banks too have benefited a great deal at a time when most banks are working towards cost management. Some of these benefits are listed below:

• Huge savings on cost of construction of bank premises and leasing costs when banks are using the Agency premises.
• Human Resource expenses have reduced. The banks do not have to employ new staff to manage the agency and the cost of training if any is to the bare minimum.
• Savings on equipment like furniture and computers.

 Challenges of Agency banking for Banks

There are of course challenges that the banks need to address to avoid losing customers and maintaining the Banker- Customer relationship. The customer is still the responsibility of the Banks and the same has not been delegated to the Agency. Some of the challenges that need to be addressed are:

• Confidentiality – Every year Banks ensure that their staff members sign secrecy forms and maintain confidentiality for all customer information. This should be looked at as these agency employees are not bank employees.
• Security – Most of these agencies are in areas that are what would be considered ‘high Risk’. The Bank needs to audit the security measures being taken by the agencies to ensure the customer can transact confidently without having to look behind their backs.
• Customer service to the bank customer – Service is a huge challenge for the banks as they need to train and retrain the Agents so as to maintain high levels of customer service..
• Issues of Fraud – The agency staff will be a target by fraudsters as they are aware that they will not be able to easily identify fraudulent transactions for example identification  of documents for originality or if they are fake.

The bank must address the challenges that are posed by having agency banking while at the same time taking advantage of all the benefits of having this channel of banking. Agency Banking may eventually lead to financial inclusion in the countries where it has been adopted.

In many parts of the world credit bureaus have been in operation for many years. They give credit rating for customers and it makes it easier for banks and financial institutions to give loans to majority of customers who are able to repay the loans. The Kenya credit reference bureaus are used to ascertain the credit worthiness of customer for loans.

Why the Kenya Credit Reference Bureau

Kenya Credit reference bureau

With the legislation of the Kenya credit reference bureau in 2008, the central bank allowed a third party to source customer credit history. In the past, banking in Kenya had clauses that protected the customer, because the banks were not allowed to share customer banking details. There were customer confidentiality clauses binding the banks from sharing information about customers. This made the sharing of important information like the bad debtors illegal. The sharing of customer information has now been allowed, showing the importance of the Kenya credit reference bureaux.

It is mandatory for banks to give a listing of all their bad debtors’ information to the Kenya credit reference bureau. The information collected from all financial institution is collated and is useful especially for credit facilities. It is seen as a way to ensure that bad debts reduce. The bad debts in banks have meant that profits have been limited, since the bad debts have to be provided for in the financial statements of the banks.

Importance of Kenya Credit Reference Bureau

The banks’ reputation has also been affected by the huge bad debts portfolio. Banks with high bad debts provisions are seen as failures in their operations. The banks images will be improved meaning increased business for the banking sector.

When an applicant approaches a bank for credit facilities, the bank submits the identification number of the customer and their name. The Kenya reference bureau confirms if the applicant has been listed on their data base for any reason. A report is then given to the bank. If the applicant is listed, the application is declined. The reason may be given to the customer if they inquire or require it.

How to improve your Kenya Credit Reference Bureau rating

If you are planning to take a loan with a bank, it would be important to ensure that you do not have any unpaid debts that are not being serviced. The city council of Nairobi also give lists of those who have arrears with any council repayments like land rents and rates. As the Kenya credit reference bureau grows it will become the reliable way for scoring Kenyans on loans.