Bank mergers and acquisitions (M&A) understandably slowed in 2020 at the height of the Covid-19 pandemic but are showing signs of life in 2021. This June brought the highest monthly total for M&A announcements since September 2019, totaling 26 deals, according to S&P Global.
Many experts expect the surge in M&A activity to continue over the next three to five years for a variety of reasons, including scale to mitigate rising technology costs, growth into new markets and pursuit of specific expertise to diversify revenue sources.
For years, financial institutions relied on a similar playbook when converting acquired customers to their new organization: announce the acquisition; show strength and commitment with a letter from the president or CEO; send a packet and various letters detailing what service the customer would move and a few social posts welcoming new customers. The goal (and the deal qualifiers) often centered on keeping attrition below a certain percentage, and it usually worked.
But over time, missed opportunities to foster loyalty often resulted in hidden attrition (the dwindling of deposits or absence of wallet share growth) as customers sought connections with more meaningful services and brands.
As we enter the next uptick of M&A, will retail, technology and marketing professionals at financial institutions revert to their familiar communication and conversion strategies or are they willing to try a new approach? If the pandemic taught bankers anything, it’s that they are strategically and operationally more flexible than ever before. How banks and credit unions onboard newly acquired customers is the next frontier — and one that is ripe for disruption.
The Old M&A Engagement Model Creates Disengaged Customers
The bank conversion marketing playbook hasn’t changed much since the dawn of online banking. Most common tactics include press releases, website alerts and various letters that detail the name of your new account and how to access digital banking. The bulk of product communications often appear 60 to 90 days before the official system conversion, and some follow-up or experience surveys are common 30 to 60 days after conversion. Trust is quickly broken if critical, explanatory communication doesn’t arrive on time and with clarity.
Financial institution mergers are exhausting for employees and customers alike. The current communication style is often formulaic because there is little time to think about new ways to engage the acquired bank’s customer base. But it’s been shown that attrition in M&A-active institutions rises to 8% compared to the often-quoted industry norm of 5%.
If an acquiring bank already suffers from low customer engagement, the rate of attrition at the target institution can rise to nearly 10%, Gallup research has found. One-tenth of your new customer base walking out the door is nothing to scoff at.
Every stakeholder needs to be kept in the loop in a merger — if communication is missing or poor, trust is quickly lost. But while speed is essential, it shouldn’t come at the expense of innovation.
The old communication model is a natural byproduct of the speed at which acquisitions occur. By the time a deal is announced, and a conversion plan is in place, your marketing team may only have weeks or a few months to execute various, complex communications.
One of the larger issues is the lack of post-merger communication. Once an acquiring institution converts its new customer base into its system and services, the communication reverts to the standard cadence the acquiring bank uses with its legacy customer base.
Niche: A New Spin On the M&A Marketing Playbook
Instead of pulling a new customer base into the same cadence, banks and credit unions have an enormous opportunity for growth with much deeper, more relevant engagement. To leverage the opportunity, consider how to emotionally connect with new consumer needs.
This isn’t a series of cross-selling emails that explain all your products and features a few weeks after your new customers log in to their new mobile app. The answer is a new, innovative model of post-M&A marketing that involves niche-focused products and services.
Niche marketing isn’t a new concept to financial marketers. Appealing to a specialized segment with a known affinity is one of the most timeless and effective marketing approaches. Yet, most financial institutions reserve segmentation to simple life stages (e.g., teens, students or seniors). Building a brand and service that appeals to one or many customers an institution acquires can do what most conversion communication can never do: quickly create a lasting connection.
Effective niche development doesn’t mean your bank or credit union becomes something it is not today. It isn’t a marketing ploy to deceive a potential customer base. It starts by looking at your data or, in the case of M&A, looking at the acquired institution’s customer data to see what opportunities exist to connect more deeply.
For example, is the acquired customer base skewed toward agricultural lending? How might you, as the acquiring bank, build on your service and digital offerings to farmers and the agricultural supply chain companies in your communities?
Don’t Be Who You’re Not:
People don’t want a financial institution that parades a marketing campaign that doesn’t reflect the values and style of the institution or its customers.
Launching a new niche effort won’t happen in the 90 days leading up to your conversion date. But you have an opportunity to research, kick off conversations and build more purposeful marketing strategies that will energize your new audience.
A letter telling new customers they are converting from “Premium Checking” to “Shiny Checking” doesn’t create the same excitement as a set of communications asking those you identify as local farmers, for example, if they want to take part in building a new type of service to better manage seasonal financial volatility.
The latter tells the new customer that not only does my financial institutions offer a good customer experience, but it truly cares about me as an individual or business owner, not just as a checking account in their database.
Fully leveraging the growth opportunity in today’s M&A environment will require more than generic new-customer onboarding and nurturing programs. It will call for innovative approaches that identify and deliver value to niche markets for lasting relationships and long-term growth. Financial institutions can better connect to their new customer bases with bolder ideas, not teaser rates.
Banks and credit unions are able to foster deeper trust in their new customers and members by building brands and focused financial services that not only make it easy to bank, but make it clear their organization understands its audience better than any other.