There was once a golden age in the merchant services industry and many banks held the reigns of powerful performing programs that generated significant revenue. However, as many private companies and independent sales organizations entered the playing field, the years of bountiful harvest dwindled, which left many banks with stagnant programs pushed aside for other programs that were generating revenue. Now, as the search for elusive revenue has become even more important, every bank should review its current programs as there are proven ways to revive these programs and, more importantly, positively affect the relationship with a bank’s current and future business customers.
The first crucial decision a bank can make is the type of program it should be using. While agent-type programs hold a high promise for more revenue — sometimes as much as 70–80 percent of the total revenue — it should not be the sole reason for the decision. There are greater overhead costs for running and servicing an agent program as well as the risk of presenting a program to customers that bank employees are not comfortable selling and servicing. For many community banks, referral programs provide the best of both worlds for the bank and its customers; a strong competitive solution that will foster greater growth and customer penetration. The revenue streams of a correctly done referral program over time can well surpass those of a poorly performing agent program.
Whether the bank is using an agent or referral program, a close relationship with a merchant services partner is a key to long-lasting success. Some of the best partnerships involve merchant service providers who make local representatives available for frequent in-person support. This allows the bank to become comfortable with the representatives who are working with their customers and allows trust to build confidence, which further boosts referral activity. These representatives also can make frequent in-person visits to the bank’s business customers to walk them through a sale or provide timely customer service, which enhances the bank’s relationship with its customers.
From the start, the merchant services partner should take a consultative approach to building a program based on the bank’s overall philosophy, marketing strategies and types of customers. This is one factor that is often overlooked, as many providers take the program-in-a-box approach, which does not account for the subtle nuances that exist in every bank and vary between branches. In a consultative approach, it is possible to use the power inherent in a core system’s reporting structure to analyze potential customers by branch, standard industrial classification code and merchant service deposit volume. By using these reports driven by the core’s data mining tools, the merchant service partner can closely work with the appropriate bank employees to determine a highly focused marketing and selling strategy that will yield great results. These reports can even be used to reveal customers that should be sending merchant service deposits to the bank, but currently are not. Pre-implementation surveys are also critical tools that can be used to uncover lack of training and confidence issues that can severely affect reaching the true potential of the bank’s program.
Many community banks have experienced the typical flurry of new referral activity at the start of a new merchant services program or new partnership. However, they have also experienced the lull that also normally occurs sometimes as soon as six months into the partnership. Oftentimes this is the result of newer projects and cross-selling opportunities that simply crowd out older programs. To overcome this occurrence, the bank and its merchant services partner need to develop a strategy to keep the program fresh.
Quarterly review meetings are great opportunities to sit down and go over the successes and shortcomings of the program during the last quarter and to address any retraining, marketing or customer service issues. At these meetings, specific re-training plans should be discussed as well as any special marketing efforts that will happen over the course of the next three months.
There is no doubt employees are critical to the success of a program and often play a big part in the lulls that many banks experience in their programs. There are two strategic plans that need to be in place to avoid this pitfall: ongoing focused training and a dynamic employee incentive program. While the initial training a merchant services partner provides at the implementation of a program is important, quality ongoing training is critical to keep the confidence level high for all employees talking to their business customers about merchant services.
Variations on training strategies can include monthly spotlights on certain industries, which will allow bankers to learn more about how specific businesses are taking debit and credit card payments. These monthly spotlights should also include follow up questions that the banker can use when speaking to his business customers.
Specially designed employee referral incentive programs can also play a key role in producing the kind of results that a bank can attain. The incentive program needs to be relative to the revenue of the referred account as flat-fee incentives can sometime lead to employees becoming unhappy about the fairness of the incentives (i.e. two bankers referring accounts of vastly different projected revenues getting the same incentive). Some merchant service partners have used points-based programs, which allow the employee to redeem points for items hand picked by the employee from an online catalog. This is one example of an incentive program that drives continued interest in referring business because the employee can build points to redeem for big-ticket type items that he or she might otherwise not be able to buy.
Bank employees need to feel confident about what they are sharing with customers as well as be able to have fun while doing so. In the end, the employees will be able to celebrate the success of the merchant service program together.
Bryan Grieve leads merchant services consulting for financial institutions with Gravity Payments in St. Louis.
Copyright (c) January 2012 by BankNews Media