Do you know one of the most important questions which a customer consultant asks himself before he meets you? The answer of “Are we house bank or how can we become it?” is essential for the following advice because thereof depends how much your consultant will do for you. But what is a house bank or better what is relationship banking and what are your benefits?
A simple definition
Relationship banking means a long-term partnership between customer and bank for mutual benefit (house bank principle). Its major purpose is obtaining a competitive advantage compared to other banks by utilization of information which competitors don’t have (e.g. cross selling). In return, customers get attractive terms, valuable information and often assistance in financial distresses. Customers can be private persons, companies or public authorities.
Understanding the advantages can help to appraise the value of a relationship:
Benefits for relationship banks are
- increasing market power through customer loyalty,
- competitive advantage by information gain,
- calculable revenue during a long-term partnership, and
- lower credit risks because of better information and priority collaterals.
In brief, if you buy more than one product and if you generate in total a good revenue over a long time then a bank is able to do more for you than for its other clients and it will do it. It’s like in real life if you buy daily 10 rolls as only one then you get discount and a friendly service. Right?
This results in your benefits
- Better conditions for savings, loans, and investments means attractive interests and lower fees.
- Better service includes cup of coffee or glass of champagne, individual solutions as well as reliable and prompt decisions, e.g. important for home financing, because your credit officer got any information about your finance already.
- Assistance if you’re in financial mess.
- Easier access to useful information, e.g. introduction in the rating process, balance analysis, customer contacts or industry evaluations for investment decisions.
You can use one-night stands for each financial problem, maintain your anonymity and get no more than others have or you enter in a trustfully business connection with all its advantages. And the best, you keep your independence and affairs with other institutions are allowed.
Photo: © Miroslav Sárička / SXC