Context

The bank has not spent a lot of money in marketing and has limited streams of user acquisition. The number of branches is on the decline and the user base is aging. 

The bank has further noticed a rather worrisome trend. The number of dormant customers month on month has been increasing and as a result, the net number of active customers is declining irrespective of the monthly acquisitions being done. 

Industry Insights

A retail bank customer is termed dormant post his/her account being non- operational (no customer-initiated transaction) for 24 months. The banks internally tag these customers as dormant post 12 months of inactivity. If the customer initiates a transaction within 12-24 months, the account can be activated. However, post 24 months, a KYC refresh is mandated. For most customers, this step is too troublesome, and they choose to disengage and slowly attrite.

The leadership has reached out to the program manager to tackle this issue on priority.

Exploration

Understanding the trends

Customer data for the last 24 months were studied to understand if there were any trends. Data points around customer activity, demographics, acquisition periods, acquiring regions, product penetration were observed.

Evaluating the factors

For each data point, an in-depth study was carried out. It was observed that the user base that was disengaging were from two brackets, first legacy customers who fell in the 50-70 user base with their association with the bank being well in excess of 15 to 20 years, and second, recently acquired customers who were in the 25 to 30 age brackets, with their association being less than 2 years with the bank.

The other factors like product penetration were higher for the older segment while it was less for the younger lot. The acquisition period, region, etc. did not provide any decisive variables.

Solution

Skills in action:

·         Data Analysis

·         Problem Solving

·         Analytical Thinking

·         Stakeholder Management

·         Effective Communication

The solution was categorized across two verticals, one, the engagement with the dormant customers and customers who were about to turn dormant, and two, digital approaches to reduce churn.

Engagement

The customers across both segments needed different engagement approaches. The segment of older users who had more value with the bank, who were not digitally savvy, needed a degree of hand-holding. Also, given that the revenue from these customers was significant, it was decided that the call center would be brought into action to help simplify the journey from dormancy to activation. At a tactical level, activation of dormant customers was included as a KPI for the frontline sales staff. Regional and branch level activation weeks were introduced to drive branches to activate such customers. Simplified processes were designed to gain and record the customers’ acceptance to ensure they were who they claim to be.

Digital Outreach

For the younger segment, the solution could not be a stopgap. While it was important to act quickly, it was also critical to solving the problem at a root cause level. To ensure higher engagement with this base, a customer lifecycle was designed which enabled the bank to have frequent check-ins with the customer, introducing the customer to the bank’s offerings and benefits in a time-bound manner. The customer using this lifecycle of communication could also be incentivized to keep his/her relationship active with the bank using just in time monetary benefits and loyalty-driven programs. This solved the more critical long-term engagement problem.

But the short-term problem of increasing numbers remained. And provided that this user base was not bringing in the kind of value the older customers base was bringing in and were much larger in purely numerical terms, a more digital approach was required. A process mapping was done, and it was understood that a lot of customers were not willing to call customer care or visit a branch just to keep their accounts active. It was also found that a certain percent of the base was completely disengaged with the bank with zero to negligible balances in their accounts. Given that account maintenance incurs a per-account cost, a tactical call was taken to close these accounts. Not only would this ensure that there was a cost-saving, but it also meant that the statistics would not present a more accurate picture of the percentage dormancy within the portfolio.

For the remaining, a simplified SMS-based account activation process was drafted. The bank would send out SMS blasts at a set frequency to this user base and they could request activation just by replying yes to that SMS. Checks like the Date of Birth were added to the SMS reply to ensure that customer validation was done as mandated by the RBI. This simplified process was launched centrally and would later be built into the customer lifecycle discussed earlier

Result

There was a 30% month-on-month decline in the # of new dormant customers post the customer lifecycle implementation while the SMS blasts had a conversion rate of 5%.