Should Banks Cross-Sell Financial Products?

4
Is it possible to cross-sell a restricted range of financial products and still serve the customer's best interests?
  • No (54%)
  • Sometimes (24%)
  • Yes (22%)
  • Not sure (0%)

Our latest poll weighs a fundamental free-market principle (cross-selling) against the notion that the best interests of bank customers are almost impossible to serve within a ‘closed shop’ environment.

In a perfect world, there should be nothing wrong with any business in any industry marketing the full range of its services to its existing customer base.

But in our imperfect world, businesses can sometimes create inappropriate processes and practices, and individuals can become motivated by greed or other pressures that result in the best interests of the client taking a back seat (see CFPL Scandal… and Serious Conflict Posed by Vertical Integration).

A recent Roy Morgan poll focused on the progress of the big four banks in terms of their cross-selling endeavours.  Its report concluded that, while the big four banks have made some small gains in product cross-sell in recent years, “… there is plenty of scope for these banks to increase their business from their existing customers rather than chasing new ones.”

The implication from this report is that cross-selling by banks is an accepted and natural strategy. In terms of serving the client’s best interests, however, is the strategy itself the issue, or is it simply the tactics that are sometimes employed to achieve the banks’ cross-selling sales targets?

We would love to hear your views…



RELATED ARTICLESMORE FROM AUTHOR

4 COMMENTS

  1. Practices do vary between the Big 4 and a couple of the larger non-bank financial institutions. In finding the worst examples, you don’t actually have to look far but to contact the Finance Sector Union of the serial bulling that accompanies cross-selling, as well as those institutions who experience the highest rate of financial planner turnover. A pandora’s box…

  2. I don’t see the problem being that a company is trying to cross sell a product that may improve the clients financial position, whether it be a better interest rate or protection for their family or assets.
    I see the problem being that a company may only offers their own products, when there may be 10 more appropriate products in the market.These clients may never get to receive information about the better options if they are not so inclined to research the market.
    In saying this I guess having a suitable product (rather han most appropriate product) is better than not having any of these products at all.

  3. Another ASIC failure. Some years ago I confronted Alan Asher, then with the ACCC, stating that Third Line Forcing ( known as cross selling ) was rampant amongst the big four banks

    He thought there might just be a problem, but the ACCC needed written complaints from affected clients. Advisers had no standing, because the ACCC saw that as just competition working as it should

    I pressed on,. I informed him of the practices of the then #3 bank where pressure was placed on the applicant to a bank for a loan just as the decision was about to be made. The conversation went “now Mr Smith, your application is just about over the line, but we notice you have insurance with ABC Coy ( picked up by analysing debits ) and if we had that insurance with our bank you will have enough points for approval ”

    All subsequently confirmed by an ex branch manager

    I told Asher no client is going to write a letter of complaint. He remained with his argument

    Nothing changed. That bank bought a life coy & fund manager and ploughs on

    The ACCC and ASIC should get off their backsides and earn their keep Pigs might fly

    • BillB – you’re confused on the difference between Third Line Forcing and cross selling. The example you present is third line forcing. Cross selling is when you go into the bank to cash a cheque and they offer to review your insurances. Or in your example, you are at the same stage of approval as above but rather than link it to the approval of the loan they simply offered a comparison quote.

      It’s important to note the difference in order to mature the conversation around whether cross-selling is in fact inherently conflicted. The answer is no. However, the main point of this argument is related to cross selling in an environment where only a subset of the products in the market are available for purchase ie: only CBA products are available. In my opinion, the compliance obligations relating to advice (general vs personal) and the product structures required around cooling off periods etc – there is enough consumer protection built in to minimise issues.

Comments are closed.