What is a relationship bank? (with photos)

It is important for relationship bankers to have high-level communication skills.

Relationship banking is a process that involves proactively anticipating the needs of the bank’s individual customers and taking steps to satisfy them before the customer presents them. The concept behind this approach has to do with developing more comprehensive working relationships with each client, assessing their individual situation and suggesting various services offered by the bank to help improve the client’s financial well-being. This approach is often associated with smaller banks taking a more personal approach to customers, although a growing number of large banking companies are starting to encourage similar strategies at their local branches.

Traditionally, smaller banking institutions have made efficient use of relationship banking as a means of competing with large banking corporations.

At the root of the banking relationship is the idea that the institution and the individual customer are partners with a common objective: to improve the customer’s financial security. For this reason, customer support representatives within the bank are constantly seeking to understand what customers like and don’t like about the services offered by the bank, how they are presented and how to identify which of these services can be beneficial to each customer. This type of proactive approach is very different from the reactive approach used by many banks over the years, where the bank essentially establishes its set of services and the qualifications to obtain them, then passively waits for customers to approach them. With a banking relationship, the institution’s representatives do not expect customers to come to them; they go to customers with a plan of action.

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The banking relationship usually starts with opening a checking account at the bank.

Traditionally, smaller banking institutions have made efficient use of relationship banking as a means of competing with large banking corporations. By focusing on personalized service, encouraging employees and executives to recognize customers as they enter the establishment, and recommending services that are likely to be of use to the individual customer, a locally-owned bank can often maintain a solid clientele, even if the large conglomerate down the street is offering what appears to be competitive rates and great deals on mortgages and other types of loans. In fact, the local bank may be able to match these fees and without some of the hidden fees and requirements encountered with greater concern.

There are advantages and disadvantages to a relationship banking approach. One benefit has to do with getting information into the hands of customers, which is likely to result in better financial prospects for each of those customers. Because the bank has brought this information to the customer rather than waiting for the customer to ask for it, there is a greater chance that the customer will feel more like an individual and less of a statistic for the bank. At the same time, some customers resist the banking relationship, thinking this more personalized approach is nothing more than a sales tactic designed to entice customers to open accounts they don’t need and commit to paying for services they don’t want. When this is the case, the relationship-oriented approach may actually drive the customer to leave, rather than strengthening the relationship.

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