The most critical factor and thus the most important part of a bank merger is making sure the value of the merger doesn’t walk out the door. Literally, preventing customers from leaving the bank you just acquired is by far the most important thought on everyone’s mind involved in leading a bank merger. Customers will react in funny ways after a bank merger announcement - including wandering across the street to the competition for the most basic of offers and for promises that are short-lived.
So why do 17% of customers leave or ‘attrite’ during and after a merger anyway?
According to Deloitte Center for Banking, there are two top reasons why customers switch banks after a merger: purely emotional reasons and a competitor’s offer.
36% of bank customers who leave after a merger announcement do so for purely emotional reasons.
This is driven by the unknown and fear of change - and not knowing what this merger will mean to them. People don’t like change. Think of your own life and what happens when a change occurs that is beyond your control. It's simple human nature to react and try to take control. And so will your customers. Even if changing banks is not in their best interest, the unknown and fear takes over and they move. What becomes clear is to communicate with the newly acquired customers. Setting clear expectations immediately following the merger announcement and throughout the process will minimize customer anxiety about "what does this mean to me?"
For more information on bank merger communications best practices, download our best practices guide here.
17% of bank customers who leave after a merger announcement do so for a competitive offer.
The next largest reason why people leave is a competitive offer. Offers from your competitionto your acquired customers will roll in quickly and intensely. Be ready for this because once the proposed merger is announced, the game is on. With the critical nature of social media today, these offers are in the public domain quicker than ever - and can have a negative impact before you have a chance to strategize and react.
Be prepared to act quickly.
Even more concerning is the speed at which these customers make their departure. Of the customers that leave, 64% leave within a month of the merger announcement. Another 21% leave within 2-3 months of the announcement. So over 85% of the customers leave within 3 months of the merger being announced. That is quick by any standards - but especially quick considering that usually very little has changed by that point and the true conversion of the account system, branch consolidation, etc. has not even happened yet.
The key to this is getting out ahead of this trend and not react in the moment - because if you are reacting, it’s too late. When planning the customer experience you would like to create for the newly acquired customers, it is best to reverse engineer the process to truly reduce customer attrition and set the merger up for success.
So where do you begin?
You as a leader in this process must think of the key components to make a proposed merger into a successful acquisition. Leading through a difficult process is not always easy. Being prepared will eliminate as many unforeseen bumps in the road and keep the team on track. This is perhaps a reason you are reading this information right now. Having a guideline and critical steps should prove helpful. Some of these steps include assembling the best team and figuring out what to do yourself and when to align with partners. For more information, download our guide, Nine Critical Steps for Leading a Successful Bank Merger. You'll find nine key activities you and your team should consider as you begin developing your merger strategies.