{"id":1752,"date":"2021-10-05T09:40:16","date_gmt":"2021-10-05T09:40:16","guid":{"rendered":"https:\/\/tenlifestylegroup.com\/?p=1752"},"modified":"2023-09-20T11:44:27","modified_gmt":"2023-09-20T11:44:27","slug":"interest-rates-are-changing-and-so-are-customer-strategies-in-financial-services","status":"publish","type":"post","link":"https:\/\/tenlifestylegroup.com\/2021\/10\/05\/interest-rates-are-changing-and-so-are-customer-strategies-in-financial-services\/","title":{"rendered":"Interest rates are changing and so are customer strategies in financial services\u2026"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

<\/p>\n

Interest rate rises increase the value of most personal banking clients to their bank [1]. This means that as interest rates rise, that should change your customer strategy.\u00a0<\/p>\n

<\/p>\n

<\/p>\n

Whether the relative value of high net worth and mass affluent increases over other segments does depend slightly on the structure of the balance sheet, and each bank will be different; however, most bank CEOs agree that the average \u201cLife Time Value\u201d (LTV) of higher-value customers grow as they make more money from cash deposits and other products that benefit from an increase in interest rates [1]. \u00a0<\/p>\n

<\/p>\n

<\/p>\n

The other thing that happens when interest rates go up is that people, especially those with sizeable cash deposits, pay more attention to what their money is doing. With 50 basis points on the table, frankly it\u2019s not worth much effort to move it around even if it\u2019s quite a large sum. When savings rates go up the wealthier folk tend to get a lot less passive about letting their money lie around so the big banks tend to see their relative share come under pressure. This threat to \u2018big bank\u2019 market share is compounded by two other factors:\u00a0<\/p>\n

<\/p>\n

<\/p>\n

\u00a0<\/div>\n

<\/p>\n

<\/p>\n

    \n
  1. The impending arrival of automated sweeping and switching enabled by open banking regulation.\u00a0\u00a0<\/li>\n<\/ol>\n

    <\/p>\n

    <\/p>\n

      \n
    1. The continuous stream of new market entrants looking to pick off the top-end segment. \u00a0These new entrants are not only the fintechs such as Revolut, N26, Monzo or Currensea. They also include \u2018big banks\u2019 from other regions (eg JP Morgan Chase coming into the UK with a digital offer that will appeal to mass affluent too, as the Goldman Sachs \u2018Marcus\u2019 account did a couple of years ago). \u00a0\u00a0<\/li>\n<\/ol>\n

      <\/p>\n

      <\/p>\n

      \u00a0<\/div>\n

      <\/p>\n

      <\/p>\n

      \"Businessman<\/figure>\n

      <\/p>\n

      <\/p>\n

      \u00a0<\/div>\n

      <\/p>\n

      <\/p>\n

      So, interest rates rising means 3 things for private and retail bank strategy.\u00a0<\/p>\n

      <\/p>\n

      <\/p>\n

        \n
      1. You can invest more because your clients are worth more to you.\u00a0 If LTV has risen by 25%, it makes strategic sense to invest some of that in both customer acquisition and retention.\u00a0<\/li>\n<\/ol>\n

        <\/p>\n

        <\/p>\n

          \n
        1. You need to invest more to defend your clients because your competition (whether new fintechs or the big giants) will be investing more.\u00a0<\/li>\n<\/ol>\n

          <\/p>\n

          <\/p>\n

            \n
          1. You need to invest more in retention mechanics because your clients are more likely to leave you than before, because there is a more compelling reason with higher interest rates. \u00a0This is compounded by open banking and fierce competition.\u00a0<\/li>\n<\/ol>\n

            <\/p>\n

            <\/p>\n

            \u00a0<\/div>\n

            <\/p>\n

            <\/p>\n

            But what are the proven ways to invest in customer retention and acquisition? And what should you watch out for, especially in an environment where you can\u2019t guarantee that interest rates will continue to increase? \u00a0\u00a0<\/p>\n

            <\/p>\n

            <\/p>\n