We recently saw this picture of George Reeves as Superman. He did not look stronger than a locomotive or faster than a speeding bullet. In fact, he looked like your average middle aged banker who enjoyed Krispy Kreme donuts and liked to dress up in a Halloween costume. This is a different perception than when we first saw him on TV way back when, where he seemed to be truly the Man of Steel. Things change and now the Superman of 2010 needs to put in more gym time.
Our perception of banking has also changed. In Reeves' time, families had one checking account with their financial institution and everybody was happy. Now, the goal is to capture more of a customer relationship (as well as ancillary relationships), since the average business has 3 to 5 banking relationships. If Superman walked into the bank, a good account officer would not only get him to open him up an account, but would want to make sure they were getting Clark Kent's balances, Ms. Lane's and even the Daily Planet's corporate account. While few bankers would disagree, there is still a shortage of banks using combined balances effectively.
One of the advantages of offering a premium-style account is that this high service product comes with fees that can be waived for a high balance. Smart bankers know that they should also offer a combined balance feature to make this account more attractive. A combined balance feature accomplishes something very important. It reminds the salesperson to ask about other accounts that can be brought over from other institutions in return for waiving fees. This forces the bank to become more of a selling organization and opens the door to talk about other products the bank offers to better service the customer.
One benefit of allowing customers to combine balances across products is that it entices them to sign up for more services (such as a revolving line of credit, retirement accounts, savings account or foreign currency transactions). With every additional product, profitability and retention are increased, while interest rate sensitivity is decreased. When BIG conducts a product audit for a bank client, one of the things we check for is the utilization of a combined balance feature. We find the proper use of combined balances in only about 65% of the banks we review.
Banks should evaluate their use of a combined balance feature to make sure they have one in place. The next step is to make sure it is applied to the most profitable products and utilized in the correct manner (in order to provide incentives to customers to conduct more business). Banks that can pull this off can be considered "Super" in the modern day sense.