Winning a new corporate banking deal is a cause for celebration for banks, especially amidst challenging market conditions. But it must not become the end of the customer journey. As banks strive to cement long term, personalized, and value-driven relationships with customers, it is crucial for them to manage the customer journey effectively across the deal lifecycle right up to renewals. Renewing deals on terms that benefit both the bank, and the customer is a significant achievement and a step forward for long-term customer relationships.
The Importance of Efficient Deal Renewals
Banking deals comprise structured offerings that the bank provides to their corporate customers based on their needs and business objectives. Banks craft personalized rates, prices, and bundles based on the customer relationship, potential value, and customer commitments, such as minimum balance maintained or a certain value or volume of transactions, while ensuring the bank’s interests are protected and its risk exposure is carefully managed. The inking of the deal establishes a foundation of trust, but it is the renewals that solidify the trust into a long-lasting relationship between the bank and the customer. Renewals are not just about extending contracts; they are opportunities to reinforce trust and build deeper connections. Renewal at the end of a contract period is indicative of robust processes and customer-centric engagement from the bank’s end that won the customer’s trust and interest in continuing the relationship in the future.
Most corporate deals are long term, such as five years or ten years. During this time, the bank must continuously monitor the customer’s business and engagement. In case it detects any problems in the customer’s business, it must be able to offer help in mitigating their challenges. This is crucial as prolonged difficulties that are not identified or addressed may result in the customer exiting the deal prematurely. On the other end of the spectrum, its crucial to acknowledge the equally significant role of corporate deals with short term duration like one year. This is because both the bank and the customers want to keep their options open, where the decision to renew or initiate a new deal contract becomes a deliberate, annual strategic choice for both. In those cases, a series of well-executed renewals establish a sense of continuity, despite the short deal duration, which in turn drives the customer lifetime value.
Building Incremental Relationships Through Deal Renewals
Banks must work towards building incremental relationships. This is an outcome of proactive deal reviews and the ability to transform insights gleaned from monitoring the relationship into beneficial action. Both banks and customers have their unique perspectives, objectives, and requirements for this process, and it is important to understand both.
- Customer Needs
The starting point for any successful re-negotiation is in-depth analysis of the current deal performance. The customer usually continuously assesses if they are receiving the best value for their money. They compare their existing deal terms like interest rates, service fees, and other associated costs, with those offered by competing banks. This empowers them to negotiate for better terms.
Deals renewals are also often impacted by evolving needs of customers, particularly when they expand their business operations. For example, they may acquire other companies, start new revenue streams, or expand operations into new geographies, and they may want to include these new entities or regions in their banking deal. Most often, they don’t want to create entirely new agreements but just change the existing deal to cover their growing business operations. This is particularly true if they are already familiar with the bank and are satisfied with the way the existing deal was managed. Integrating evolving business needs during the renewal ensures continuity, reduces administrative complexity, and supports a smoother integration of their changed business dynamics.
Customers expect deal renewals to reduce costs and implementation time even for new markets as the foundation is already set during the previous deal term. This includes expectations around faster approvals, accurate implementation of negotiated terms, and updated pricing structures. They also expect to secure improvements to the financial terms of their deal, like interest rate cuts, fee adjustments and negotiated rates, and personalized products and services.
- The Task Before Banks
On their part, banks must understand the pulse of the customer – behavior, engagement, and changing needs. They must also leverage real-time insights into customer behavior to implement incremental adjustments to deal terms. This is why the renewal process and discussions must begin well before the contract expires. Banks must understand changing customer needs and be able to translate them into tangible offerings and benefits that address them. They must also have a good understanding of the market landscape to understand what other banks are offering. By analyzing client data and market trends, they can design personalized deal structures that maximize profitability, while remaining competitive. This involves optimizing pricing, revising fee structures, and offering product bundling.
Banks must be able to track customer commitments throughout the deal lifecycle and alert the customer if commitments are not being met. Ongoing commitment tracking helps them ink better renewal terms. They may need to revise or renegotiate existing terms, commitments, and pricing structures based on the customer’s behavior and their ability to meet commitments. Renewals are also an opportunity to ensure that deals remain compliant with evolving regulations. As clients expand their operations into new geographies or revenue streams, banks can use the renewal phase to assess and incorporate regional or domain-specific regulations into the renewed contract.
The availability of historical data on customer behavior and relationship with the bank helps them carry out better revenue forecasting. And since renewed deals are usually long term, this ensures a stable and predictable revenue stream for an extended period. Banks must be able to carry out comprehensive risk assessment by leveraging data on the customer behavior during the period of their engagement. This must include transaction history, loan repayment records, credit utilization patterns, and financial statement analysis. This data provides a holistic view of the client’s financial behavior and performance. This further enables banks to make more accurate risk assessments and avoid potential surprises.
Existing relationships are an excellent opportunity for banks to upsell or cross-sell products and services, further increasing revenue predictability. It is easier to do this with existing customers rather than brand new ones. Strong client relationships and successful renewals enhance the bank’s reputation and credibility within the market. Positive client experiences and testimonials drive new client acquisition, while successful renewals establish trust and differentiating banks from their competitors.
Modernizing Deal Renewals with a Cloud-Native Middleware System
Evidently banks need to make the maximum use of the data they have on customer behavior, then back it up with market intelligence, and ensure a seamless, data-powered renewal process. Legacy banking cores are powerful drivers of foundational banking processes. But they lack the agility and scalability required to unify and analyze disparate data sources, or help relationship managers understand market trends, and create renewal terms that delight the customer and ensure profitability for the bank. Fortunately, they don’t have to replace legacy cores, or even touch them at all, to drive efficient, data backed, and seamless deal renewals. All they need is a robust, cloud-native, and microservices-based middleware platform that can sit over their banking cores and drive data backed deal renewals.
Key Features of a Cloud-Native Middleware Platform for Deal Renewals
Such a platform must be able to carry out both manual and automated renewal actions. Auto renewals are perfect for ensuring on-time seamless continuity for straightforward deals with pre-defined terms. Manual processes are important for complex deals that require negotiations. The platform must simplify the process of extending existing deals approaching term expiry, especially when negotiations are not required. The platform must offer multiple channels for accessing renewal functionalities and include user-friendly UI and robust APIs, ensuring smooth integration with other/external systems.
It must offer advanced approval and verification workflows, including multi-layered approvals, automated data validation, and comprehensive audit trails, thus minimizing the risk of errors. The platform must also streamline the deal implementation process, by capturing the negotiated terms, rates, carrying out simulations for revenue projections, and enabling scheduling of different service implementations. It must be able to track commitments and alert relationship managers when discrepancies are noted. The platform must have an efficient alert and notification system that can send timely deal renewal alerts to customers and relationship managers, enabling them to take requisite action. Additionally, the system must have comprehensive, user-friendly dashboards, so relationship managers can easily track expiring deals, ensuring proactive oversight and timely intervention.
Conclusion
Frictionless and personalized deal renewals build sustainable, mutually beneficial relationships, positioning banks as strategic partners in the clients’ long-term growth. Successful renewals demonstrate the bank’s commitment to client satisfaction, which fosters loyalty and high customer retention rates. Banks need powerful technology platforms that can help them leverage deal renewals as a strategic tool for driving growth and enhancing client loyalty.
A platform like SunTec Xelerate enables banks to leverage deal renewals as a strategic tool for driving growth and enhancing client loyalty. It caters to diverse renewal scenarios by offering both manual and automated renewal capabilities that can be accessed through multiple channels. The streamlined post renewal deal implementation process ensures the organized set up of negotiated terms, fees/rate set up through detailed and accurate simulations.