Why 'cross-selling' is on the nose in financial services

Why 'cross-selling' is on the nose in financial services

Banks are constantly thinking up new ways to enmesh themselves more deeply in our lives – in the past month alone we've seen the launch of banking via text message, through voice-activated digital "assistants", and even using an electronic ring you wear on your finger.

Yet for all this effort, they have not been particularly good at convincing us to take out more and more of their financial products.

Banks have toned down the incentive for tellers to pursue sales targets.

Banks have toned down the incentive for tellers to pursue sales targets.

Recent figures from Roy Morgan underlined this point – and banks are tacitly admitting it, too. Rather than trying flog more and more types of products, the industry is moving to ditch or at least tone down "cross-selling" – the financial version of being asked "would you like fries with that?"

If the trend continues, it would be good news for bank customers and shareholders alike.

Roy Morgan's figures show that for all the banks' emphasis on "cross-selling" in recent years, most customers still prefer to deal with a few different financial services companies.


Most banks' "share of wallet" – the share of a customers' loans and deposits held by one bank – has basically remained flat at less than 60 per cent for the past four years, the survey data shows.

Rather than trusting all our financial needs to one bank, the average customer dealt with about four different financial services outfits, it says.

The finding is timely, because lately many banks have also stopped trying to be all things to everyone.

Three of the big four banks have quit life insurance (Westpac is staying), and some are also in the process of exiting parts of financial planning, superannuation, and funds management.

As part of the banks' expansion into wealth management, which occurred about two decades ago, bank tellers were pushed by their employers to sell you all sorts of financial products. While you're opening up that transaction account, for example, you might be asked if you've ever thought about life insurance?

Tellers' bonuses were tied directly to product sales targets. What could possibly go wrong? Quite a bit, as it turns out.

The Finance Sector Union had long protested about the pressure this put on staff, and the potential for customers to end up being sold products that were unsuitable.

And in the past few years there has been a growing recognition that giving front-line staff aggressive targets to sell financial products can have damaging results for customers.

The most powerful example was the United States banking giant Wells Fargo, where staff opened millions of fake accounts as they tried to hit aggressive sales targets.

Our banks have not had problems on this scale, but "cross-selling" is out of favour all the same. A high-powered review of how bankers are paid last year recommended bank staff no longer get bonuses solely on their ability to hit sales targets, and all of the banks have agreed to make this change.

At the same time, Commonwealth Bank, National Australia Bank and ANZ Bank have been busily carving off multi-billion dollar bits of their businesses specialising in wealth management.

After spending billions in previous decades to enter the wealth sector through deals such as National Australia Bank buying MLC, or CBA buying Colonial, the returns have not generally lived up to expectations. One reason for this is that cross-selling hasn't delivered what they'd hoped, while also created a whole new set of headaches in the form of misconduct towards customers.


Instead, the trend these days is for banks to focus on what they're traditionally best at – making loans, taking deposits and processing transactions.

This tends to be a lucrative business, so shareholders are happy with the move. And for customers, it should be welcome that you're less likely to be offered something you might not need.

Clancy Yeates

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.

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