Importance Of Relationship Management in Banking

---

There has been a rise in interest in executive-level accountability for the company’s financial operations since the Internet bubble burst and the world became more aware of corporate financial abuses. 

Regulations have been put in place (particularly in the US and the EU) to hold businesses and their executives responsible for successfully and securely conducting their activities. Failure to comply now carries heavy penalties and perhaps jail time in addition to endangering the company’s finances and the careers of executives. However, customer relationship management in banking is turning things around. 

Relationship Banking: What Is It?

Relationship banking is a tactic adopted by banks to increase client loyalty, improve customer retention, and offer a centralized point of contact for a variety of goods and services. A bank customer could begin with a basic checking or savings account, but relationship banking entails a personal or business banker delivering solutions meant to assist clients in reaching their financial goals while boosting profits for the financial institution. It can mean everything from analyzing the leverage ratio for a customer to loan and debt restructuring or providing lines of credit.

What is a Relationship Banker?

A relationship banker is a financial professional who provides advice and guidance to customers on various banking services.

Duties of a Relationship Banker

• Create an environment of trust with the customer.
• Explain banking terminology in an easy-to-understand way.
• Use marketing techniques to expand the client base and identify potential sales opportunities.
• Stay up to date on industry trends, regulations, products offered by the bank, etc.

Relationship Banking: An Understanding

Relationship banking involves banks consulting with customers to understand their unique requirements and circumstances and to respond to changes in their personal or professional lives. Small-town banks readily exhibit the relationship banking strategy, but giant money center banks also employ it in their retail locations.

The management of bank accounts has continued to lag behind other types of account management in terms of tracking and maintenance, despite an increased focus on audits and compliance to seek for abuses in financial processes and systems. There are numerous factors, including:

• Due to the nature of their financial activities and the globalization of businesses, corporations have a wide range of connections.
• Depending on local customs and legislation, bank relationship management rules and procedures can vary from one country to the next. Each bank partnership has a unique procedure for opening, closing, and maintaining bank accounts that include a plethora of forms, the company’s preferred format, and other internal compliance needs. Even benchmarking banking relationships for the same company in different countries can be a challenge.
• The provisioning and management of accounts, user access privileges, and employee duties have historically been handled manually or via regional systems that don’t scale across geographies and business units.
• Controlling all of these facts promptly is a challenging and time-consuming task due to the volatile nature of personnel turnover, organizational restructuring, and changes in bank accounts and relationships.

Because of this, businesses have little to no real-time insight into a full list of bank accounts or which employees within the business have access to what functions at which accounts across different banks.

Additionally, they are unable to tell without a lot of effort whether the business is abiding by its internal policies or whether there has been an attempted or actual breach of the operational security or reliability of their accounts.

Furthermore, the company misses a chance to take advantage of those partnerships to benchmark, cut fees, and optimize internal operations because it has limited visibility over all of its international banking ties across all of its departments and divisions.

When a corporation manages its bank ties actively, rewards can appear quickly and frequently. A fantastic place to start would be by replacing the laborious manual duties associated with the bank relationship operations. 

It might also be significant to cut the time and costs associated with organizing your annual bank account audit from months to hours.

When it comes time to negotiate costs, having a better knowledge of your whole relationship with each bank as a worldwide, diversified financial organization might pay off handsomely. 

After all, banks offer services beyond cash management account services, such as capital markets services, trade services, and insurance services, but frequently businesses negotiate each of these services independently.

Importance Of Relationship Management in the Banking Industry

The banking industry is one of the most competitive industries in the world. To survive and thrive in this industry, banks need to have a good relationship management strategy in place.

There are many reasons why relationship management is so important in the banking industry. Here are just a few of them:

1. It Helps Banks Build Trust With Their Customers

Banks rely on customer trust for survival. If customers don’t trust their bank, they will take their business elsewhere. Relationship management helps banks build trust with their customers by providing them with excellent service and developing strong relationships with them through personalized service.

2. It Helps Banks Keep Their Customers Loyal

Customer loyalty is another important factor for banks. If customers are not loyal to their bank, they will be more likely to switch to another one. Relationship management helps banks keep their customers loyal by providing them with a good experience and developing strong relationships with them.

3. It Helps Banks Attract New Customers

Banks need to constantly attract new customers to survive and grow. Relationship management can help banks attract new customers by making it easy for them to do business with the bank and by providing them with a good experience.

4. It Helps Banks Retain Existing Customers

Banks need to retain existing customers to maintain a healthy customer base. Relationship management can help banks retain existing customers by making it easy for them to do business with the bank and by providing them with a good experience.

5. It Helps Banks Improve Their Bottom Line

Banks need to constantly strive to improve their bottom line. Relationship management can help banks improve their bottom line by making it easy for customers to do business with the bank and by providing them with a good experience. By recommending actions such as technology investment banking initiatives, banks can have a positive impact on their bottom line.

Relationship management is a critical part of the banking industry. Banks that don’t have a good relationship management strategy in place are at a competitive disadvantage.

If you’re a bank executive, make sure you have a good relationship management strategy in place. It could be the difference between success and failure.

Relationship Management With Banks

The inherent financial and operational risks connected to businesses’ banking activity must be managed and reduced. However, regular reviews will help the business identify the services it uses and the costs associated with each banking partner. Most organizations lack effective performance metrics to assess these risks, nonetheless allowing them to compare costs across all banking partners and, ultimately, bargain for lower fees and rates.

Normally, businesses rely on their banks to handle these connections and give them the information they need, but there is technology available that can help with the entire administration of your banking relationship.

A new type of relationship management is starting to emerge: bank relationship management (BRM), which reflects the trends toward customer-managed relationships and gives the customer power.

There are three main objectives:

1. Reduce the complexity and risk of managing a company’s interactions with all of its financial partners, audit violations, as well as the likelihood of fraud and liabilities due to a failure to adhere to corporate and industry standards.
2. By giving customers the knowledge they need to manage their banking relationships with their banks, you can put the client in control and achieve improved visibility, cheaper fees, better cash flow management, and more accurate performance reporting.
3. Tools for administration through automation in banking that reduce the cost and time associated with authorizing transactions, mapping them to bank mandates, tracking transactions, and providing additional data on performance, fees, and maximizing the use of funds.

A corporation may track and manage all of its bank relationships with the aid of technology and processes that bank relationship management offers by:

• Giving a global, unified view of all accounts and transactions with a bank. This covers things like insurance, credit lines, bank accounts, and currency exchange.
• Supplying a single view of each person’s and each account’s authorization rights along with the means to set and manage those rights (provisioning the account).
• Giving both an overview of all fees associated with these accounts and an overview of all fees paid to each bank
• Assisting in the creation of corporate policies for best practices in bank management and account administration and mapping these to specific bank requirements.
• Reporting on actions that violate a person’s access privileges or the company’s compliance requirements.
• Giving auditors summary reports.

While several solutions can monitor account activity, BRM goes above and beyond to provide business management over those accounts and the capacity to proactively manage the relationships with the banks across accounts.

Instead of only recording activity for auditing when a breach is eventually identified, bank relationship management offers a solution for the mitigation of fraud.

The Benefits And Drawbacks Of Relationship Banking

Customers may be able to benefit from a bank’s intention to foster relationship banking by getting better rates and fees, as well as better customer service, which is particularly true in a smaller bank like a community bank.

For instance, if a customer uses a bank to obtain a mortgage loan, the consumer might be allowed to create a checking account with no monthly service charges as long as a certain minimum level is maintained.

Another example is that a small company that obtains a revolving line of credit would be in a position to bargain for lower merchant processing rates.

Relationship management does have certain drawbacks for customers, such as being restricted to using only one bank for the majority of their financial needs and running the danger of complacency in place of analyzing the benefits and costs of other financial institutions.

Since the bank has access to integrated financial data on the client and could use it to its advantage and as a negotiating chip, privacy and data security are another client risk. Client accounts are significantly exposed if the bank has a data breach.

Relationship management could raise the bank’s risk exposure with particular clients in the event of default, in the bank’s opinion.

FAQs:

Conclusion

BRM should be incorporated into every company’s financial systems due to the increased emphasis on adhering to internal controls and compliance regulations, as well as the need to implement affordable and controllable systems.

The right system will improve account creation and maintenance speed, decrease audit costs and bank fees, and increase compliance, in addition to helping to cut risk and improve compliance. It will also help save money by lowering total administration costs.

Additionally, businesses now get a unified view of all global banking-related account relationships, providing them with the knowledge they need to better bargain fees and rates across bank relationships.

Bank relationship management is one area where the appropriate solution can allow the company to have its cake and eat it too, but traditional risk reduction and compliance-related operations have usually raised costs and administration to fulfill the needs of legislation.