The Remedy Blog

If you are in charge of marketing or data analytics at your bank, you likely are familiar with the concept of the primary account relationship. For those of you that are new to the concept, it goes something like this:

People can shop anywhere for their financial products. Most of us have relationships with more than one financial institution. You may have your checking account and your savings accounts at one bank, your auto loan with a credit union, and your mortgage somewhere else. Your student loan may be with an online-only lender.

Regardless of how all of those relationships came about, customers are most likely to first look at their primary financial provider (the FI that holds what they consider to be their primary account relationship) when their next financial need arises. Customers are also most sticky, aka they tend not to leave the financial institution, where they have their primary account relationship.

If you own one of these secondary relationships but not the primary, then your chances of being the place the customer shops first drop significantly…..in other words, they are equally as likely to shop elsewhere as to come to you.

Customers are also most "sticky," aka they tend not to leave the financial institution, where they have their primary account relationship.

Why is this important?

Take the example of two customers, Customer #1 has multiple account relationships at the bank. Customer #2 has a single account that is relatively inactive. Where do you spend your marketing dollars, Customer #1 or Customer #2? If Customer #1 is much more loyal than Customer #2, do you offer loyalty incentives?

Let’s look at Customer #2, that customer where you have only the secondary relationship. The customer has a balance in their dda account, but the account does not include a direct deposit, the account holder is not using their debit card, and you have no additional loans or accounts with this customer. This is an account that is really a loss-leader for the bank. What you are paying your core provider to host this account is higher than what you will make on investing the deposits.

If you want to be proactive on accounts where you are not the primary account holder, you may consider a fee for hosting the account, or more take a more proactive approach and offer an incentive for moving additional activity to your bank. Incent the behaviors that could someday lead to primary account relationship status.

If you are tracking your marketing results, you will realize that these secondary account holders are least likely to respond to your marketing efforts. Why is that? You have not convinced them that you are the most convenient, most friendly, most loyal, or offer the best products for them…whatever decision criteria people use when shopping anywhere.

How to identify primary account relationships:

The behaviors with a most direct correlation to a primary account holder are:

• Direct deposit (dda account)
• Debit card activity (dda account)
• Bill Payment (dda account)
• Use of multiple access channels at your financial institution (mobile, eCommerce, ATM, teller line)
• Multiple products held at your financial institution

How to use the concept of a Primary Account Holder to your benefit:

If you want the customers that are least likely to leave and most likely to approach you for their next financial need, start digging into your customer data.

Primary account holders: Segregate those customers that are currently primary account holders and flag them so that anyone on your team that has an interaction with these customers (tellers, customer support team, new accounts personnel) can ask those clients what they like about doing business with you, and what you can improve.

You could try to survey your primary account holders, but we would not recommend it. Customers in all industries are bombarded by survey requests and there is some evidence that customers are starting to shy away from providing automated feedback. These customers already like your process, your job is to subtly find out why and then try to duplicate the experience and improving upon the deficiencies.

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Secondary Account holders: In reviewing your customer data you will also identify those customers where you hold a secondary relationship. Perhaps you have an auto loan with the customer but have not been able to expand the relationship to a deposit relationship.

For these customers, you should also use your direct customer interactions to find out what brought them to you in the first place. Did they respond to a previous promotion, perhaps a low introductory rate on a loan? If so, perhaps your team needs a follow-up strategy on promotions to try to expand these relationships. Regardless of how you got that secondary relationship, once you identify these customers, consider an internal campaign to figure out how to cross-sell or at least improve these relationships.

The Bottom Line:

If you are the person responsible for KYC-Know Your Customer, this concept of holding the primary account relationship is just another way to analyze your customer data. You can relatively easily identify your most important customers and do everything you can to make sure that those relationships do not degrade.

Consequently, once you identify the customers where you do not hold the primary relationship, you have found a great opportunity to gain that primary relationship using the strengths of your organization. Perhaps you will also identify some internal weaknesses (better tools, better processes, etc.) that you can improve for both groups.