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Industry News Customer loyalty in banking translates to reduced delinquencies 2010-07-09 A new study by TransUnion has found that customers who show greater loyalty to a particular financial institution also show reduced delinquency rates across the board, even after the customer's credit score is taken into account. The study looked at approximately 19 million consumers at six major financial institutions from 2007 to 2009, and compared delinquency rates of consumers that had more than one account with a particular bank to those that had just one relationship with the lender. Researchers said that in nearly all cases, the rate at which customers were more than 30 days behind on their payments decreased as the number of banking products they had increased. "As the economy recovers and lenders return to more active customer acquisition, our study gives clear, timely evidence of the value in lenders establishing multiple relationships with the same borrower. Our results go a long way toward easing the concerns some in the industry have voiced through the recession regarding customer concentration risk," said Ezra Becker, the author of the study and director of consulting and strategy in TransUnion's financial services business unit. The most striking example was found in mortgage payments. For consumers who had only their mortgage with a particular financial institution, researchers found that the average customer had a 30-day delinquency rate of 4.8 percent. But that rate dropped 17 percent to a delinquency rate of 4.0 percent if they had just one additional account, and dropped all the way to 1.9 percent if a consumer had five or more accounts with the bank. Similarly, auto loan delinquencies fell 70 percent - to 0.6 percent for customers with five or more accounts, while the number of customers who were behind on their credit card payments dropped more than 40 percent. "There is a clear, consistent and quantifiable increase in customer value associated with loyalty," said Becker. "It behooves financial institutions to understand how their marketing acquisition efforts and product offers to current customers impact delinquencies and write-offs throughout their operations." In an attempt to increase the number of potential banking relationships available to their customers, many banks have started or acquired new financial arms. Financial institutions such as Bank of America and Wells Fargo are both encouraging consumers to use their newly-acquired brokerage firms, while UBS - traditionally a brokerage firm - has begun to offer mortgages to its clients, the Wall Street Journal reports. 
Two More Words on Client Retention
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