Banks and Others Base Their Service On Their Most Profitable Customers (2024)

FAQs

Who are the most profitable customers of banks? ›

For banks, the most profitable customers are those who keep several thousand dollars in their accounts, use a teller less than once a month and hardly ever use the call center.

Banks earn revenue primarily on the difference in the interest rates charged for credit accounts and the rates paid to depositors. Financial services like these primarily earn revenue through fees, commissions, and other methods like the spread on interest rates between loans and deposits.

Banks with a higher loan-to-assets ratio derive more of their income from loans and investments. Banks with lower levels of loan-to-asset ratios derive a larger portion of their total incomes from more diversified, non-interest-earning sources, such as asset management or trading.

Loyal customers are more profitable than one-time purchasers. Not only do they spend more money on your brand but satisfied customers also provide a highly persuasive force to attract new customers, saving money from your acquisition budgets.

Consumers consider just about every banking feature important. They look for accounts with low fees and competitive interest rates. They want their money to be both secure and easy to access. They expect quality customer service and a good brand reputation.

“J.P. Morgan Private Bank is the more elite program serving ultra-high-net-worth individuals,” Naghibi said. “It offers comprehensive services in savings, checking and retirement account management. But, more than anything, it gives clients access to their bank and team with a concierge feel.”

(NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) are some of the most profitable banks in America.

Stubbs said, on a risk-adjusted basis, term deposits and home loans were making banks the most profit. “On a commercial loan the interest rate might be higher but they have to put more capital aside so the best risk-adjusted returns are in term deposits and mortgages.”

JP Morgan is named the world's best private bank by Euromoney magazine, the leading authority for the world's banking and financial markets. JP Morgan Private Bank is especially known for their investment services, which makes them a great option for those with a lot of money in their account.

Which bank account will earn you the most money? ›

A money market account (MMA) is a savings account that typically pays higher interest rates than regular savings accounts. MMAs usually offer tiered rates, meaning you can earn an even higher rate on large balances or on part of your balance over a certain level.

J.P. Morgan Chase is the number one bank in America in terms of total assets held, according to the Federal Reserve.

Your most profitable customers are those with the highest customer lifetime value (CLV), which is the total net profit you expect to earn from them over their entire relationship. To calculate the CLV of each segment, you must consider acquisition cost, retention rate, and average revenue.

To calculate customer profitability, use the following formula: Gross profit margin = (Revenue – Total cost) / Revenue.

According to Philip Kotler, "a profitable customer is a person, household or a company that overtime, yields a revenue stream that exceeds by an acceptable amount the company's cost stream of attracting, selling and servicing the customer."

This segment of wealth customers, described as those having investable assets in the range of US $100,000 to $1 million, accounted for about 11% of the overall global population in 2020, a healthy proportion of which are digitally engaged young professionals.

These include minors, lunatics, drunkards, married women, undischarged insolvents, trustees, executors, administrators etc. Extra care is also needed for the banker while he deals with customers like public authorities, societies, joint stock companies, partnership firms etc.

While commercial banking clients include individual consumers and small businesses, investment banking clients include governments, hedge funds, other financial institutions, pension funds, and large companies.