LAKE FOREST, Ill.—A new analysis shows that banks, overall, cross sell more than double the number of services per customer than do credit unions with their members.
In addition, regardless of an institution’s cross-sales success, the Wells Fargo scandal is expected to have widespread implications for all financial institutions, not only increasing regulators’ scrutiny on the tactics used to get consumers into other services, but also in focusing FI attention on the efficiency and effectiveness of their sales processes, according to one analyst.
Cross-sales numbers rise as both bank and credit unions increase in asset size, according to the analysis by Moebs $ervices. Banks above $10 billion average 3.2 services per customer, while credit unions from $100 million to $10 billion average 1.4. Not surprisingly, credit unions below $100 million cross sell the least (1.0). The data includes all accounts and loans for banks and credit unions. Credit union numbers exclude the mandatory share account, Moebs $ervices said.
“We found that about half, or 51.7%, of financial institutions are order-takers,” said Michael Moebs, economist and CEO of Moebs $ervices. “However, it is important to recognize that an efficient order-taker can be just as important as a productive salesperson to the success of an FI.”
CUs Better Order Takers
As data from Moebs $ervices Cross-Selling Study shows, credit unions are generally better order-takers.
“So with limited resources for marketing and sales, the focus is to be efficient and diligent,” said Moebs. “You can equal what the larger banks and credit unions do just by selling one service but doing it very effectively—not only efficiency in booking the sale but also in ongoing maintenance.”
CUToday.info recently reported on FI cross-selling practices.
While more credit unions are feeling the need to cross sell more effectively to turn many of the mega-bank converts into profitable members, Moebs insists that smaller credit unions shouldn’t be chastised for being order-takers.
“That would be like asking a kid who is not a good runner to be a good soccer player. It simply may not be in a credit union’s abilities, due largely to limited resources. So don’t ask a small credit union to be good at cross-selling. They can be a good order-taker and simply be efficient at it.”
Moebs’ Cross-Selling Study found that as FIs get bigger in asset size, adding both employees and branches, the strategy shifts away from order taking to sharpening marketing and selling skills. Simultaneously, when a financial institution moves beyond its economy of scale, there is less achieved in sales efforts because of inefficient use of resources.
“This is the Wells Fargo Bank case,” said Moebs.
The “dilemma” most financial institutions face is moving from being an efficient order-taker to full marketing and sales efforts, said Moebs.
“Institutions have difficulty figuring out which strategy will work best with their overall operations. Driven by economies of scale, management needs to understand and iden
Michael Moebs, Moebs $ervices
tify when to make the strategic shift from tellers as order takers to incorporating a sales force with proper incentive-based, compensation structure,” said Moebs. “However, management must be mindful as a financial institution grows in size, sales efforts’ costs increase and can eventually surpass revenue.”
Increased Examiner Attention
The Wells Fargo selling “tsunami” will certainly affect many banks and credit unions through increased examiner focus on cross-selling, Moebs stated.
“Regulators will not only look at the rate of overall services sold per consumer, but also scrutinize the overall compensation structure,” said Moebs.
What will the new examination protocols look like?
“If you are a small financial institution, less than $100 million in assets, it will be business as usual,” predicts Moebs. “However, the larger an institution becomes, the need to focus on measuring and auditing sales efforts is essential. Cross-selling becomes much more important. Incorporating solid cross-sell metrics will make it easier for a financial institution to target when to shift from being an order taker to a full sales process.”