This post is part of Gallup's ongoing series on the shifting landscape for financial institutions. It provides insights into channel optimization, emerging customer behaviors and preferences, product penetration and relationship growth, engaging the most critical affluent and business customers, and reshaping banks' overall value proposition.
It isn't easy for banks to achieve success based on a strategy of customer engagement. However, when a bank engages its customers, it presents an opportunity for very strong brand differentiation.
A banking client that is on the path to create a culture of customer engagement recently asked me a very good question: When credit standards require a bank to decline a customer's particular loan request, isn't that going to erode that customer's engagement? It's a great question and one that Gallup clients regularly face. It also has broad applicability to other arenas outside of credit decisions. Discussions with customers about fees or service charges and the need to often say "no" to fee-waiver requests also presents banks with similar challenges and opportunities.
I believe the answer is all in how the bank and its employees choose to approach the situation. "No" doesn't have to be the end of the conversation. It can, and I think should, be the start of a discussion on how to get to "yes."
Lending standards are written to be clear and transparent. As important as the "no" is the reason behind it. In both small business and in consumer lending, requests can be restructured, reduced, or otherwise modified to lessen risk and increase acceptability.
Bank customers often know their situation well enough that a "no" doesn't surprise them. What's more, the best banks and bankers will be communicating with the customer honestly and transparently throughout the application process. On decision day, customers may indeed be fully expecting a "no." What will be apt to surprise and engage them is a bank's willingness to discuss the situation with an eye toward saying "yes."
There is always the risk of another lender with less stringent credit standards stepping in to approve what your bank declined. While you can't control that, what you can influence is the customer's perception and the degree to which you attempt to work with your customer to get to "yes."