However, according to its survey of 30 individuals from 17 different lenders, it is unlikely to happen in 2007. The majority (79 per cent) of respondents argued that paying a procurement fee will become industry standard but not in 2007. They believed procurement fees would be paid by lenders to advisers in order to counter the increasing trend of ‘churning’ books of business, and to recognise the value of retaining a customer. Less than 3 per cent of the respondents felt that paying proc fees would never become standard.
Simon Kent, head of retail banking at Troika, said: “The introduction of proc fees across the board would represent a major step-change for the industry. Although, comparatively speaking, lenders are pretty good at knowing which customers they want to keep and what it will take to retain their business, proc fees coming in across the board would really shake up the industry.
“Very few organisations currently reward their distribution force on retention and existing book value - most are still only rewarded on new business. As long as this remains the case, there is no incentive for an intermediary to stop churning a book.”
The research also demonstrates that the majority of mortgage market executives feel that the industry’s approach to offering deals to new and existing customers should change. 68 per cent of respondents feel that existing customers should receive the same deals as new customers, which would mean a significant shift in current industry practises.
Simon Kent explained: “While the respondents expressed a view that although the common treatment of customers is ideal, it may not be possible to achieve this while new business has such thin margins and the industry continues to use market share as a measure of success.”
Other findings of the survey:
- Letter (70 per cent) and phone (60 per cent) remain the channels most favoured by lenders when contacting customers for retention purposes. New media take-up remains low – just 13 per cent of lenders contact customers via email and just 10 per cent use other channels, such as web-chat;
- Just under half (48 per cent) of the respondents feel that their organisation has identified all the trigger points for customer retention;
- 63 per cent of organisations do not adopt a common approach to customer retention across different products
