As digital technologies are creating exciting opportunities for financial institutions to position themselves for the future, the winners will be the ones who can succeed to deliver exceptional customer experiences. According to a JD Power survey, the largest banks experienced strong overall customer satisfaction for the first time ever, while midsize banks saw a decline, and for regional banks this plateaued. In an industry where consumer behavior is driven by the new digital reality that cannot stand the legacy technology mindset, is there anything that Community Banks can do differently to position themselves better?
We caught up with Kevin Tynan, Retired Sr. VP Marketing, Liberty Bank of Savings, as he spoke about how community banks and credit unions had themselves to blame for the dwindling number of customers in their branch lobbies. Can they make a turnaround to transform their relationships with their customers and survive in this stiffly competitive digital ecosystem? Read on as Kevin shares some interesting insights.
1. After a long and successful career in banking, when you reflect back what are some of the key turnaround moments in banking over the years which comes to your mind?
Several events come to mind:
- Launch of the ATM in 1969 and the subsequent movement to push customers out of bank lobbies
- Deregulation of banking starting in 1980 which ultimately resulted in the collapse of the S&L industry, a huge government bailout, and broad new powers for banks
- Repeal of the Glass Steagall Act in 1999 allowed big banks to get into riskier investments prompting the sub—prime mortgage crisis of 2007 and industry consolidation
- Online banking changed the industry by significantly increasing competition and allowing big banks to leverage their assets to dominate the marketplace
2. How do you think community banking has evolved over the years? How has customer demand for technology evolved with the consolidation of community banks?
The influence and importance of community banks has declined over the years. Consolidation has cut their numbers in half. They can’t match the convenience of online services provided by big banks.
Customer demand for the convenience of technology has heightened competition among banks who are rushing to meet the demand. Technology requires significant and continuous investment, however, that’s more than community banks can afford so there is pressure on banks to consolidate assets to make online banking and other services more efficient. Smaller banks can’t afford to be innovative.
One comment, consumers don’t inherently like technology, they like the convenience it offers. Consumers don’t trust technology but most are willing to use it because it makes banking easier and faster. Consumers want simplicity and they are starting to push back in all industries against complex technology.
3. As a leading executive in community banking, what are the key technology challenges you faced while serving your customers?
Key technology challenges included: gathering and distributing meaningful consumer data to all front line employees; collecting data from old customers to help win them back; convincing management to invest resources in marketing technology. A small bank typically has one and a half people doing marketing – far less than most industries.
4. What according to you are the advantages community banks have over the mainstream banks?
Community banks have real advantages: They know their customers and their community better. They can be more flexible when it comes to lending and corporate policies. They have longer and deeper relationship with families. They can be faster as far as being more customized in responding to competitive changes.
5. In the era of digitization of services and evolving customer journeys, what according to you the future holds for community banks and who according to you would be the winners?
Community banks must become niche payers. They must find market segments where they can outcompete big banks such as seniors, the disenfranchised and untraditional businesses. The all-purpose community bank is going away. Big banks are getting better in providing personal service. The big four are already opening half the checking accounts in the US and they are the innovators in online convenience.
6. When we talk about making a niche space for Community Banks, what do you suggest the role of technology would be in this niche?
Technology can help bankers define their niche through customization. Research can segregate customers by lifestyle and banking preferences, then technology can be used to deliver the type of service they want – personal, electronic, advisory, eg. like a college savings program.
Customers feel increasingly estranged from their bank so banks must strengthen their bond or risk losing them to competition.
Technology must evolve customer communications from one-size-fits-all to crafted communications that reflect a knowledge and familiarity with the customer.
The growth of online banking is flattening out. Growth will only come by educating the less sophisticated, the fearful or new prospects. Technology must rise to the occasion not just through better communications but by creating easier to use technology, technology that is hidden behind a friendly face or service.
7. With the increasing dominance of Fintech and the rise of big 4 tech giants in the financial services, what would be its impact on community banks?
Big banks will take over mainstream online banking. They have the money to fund and purchase promising fintechs. To survive, small banks must focus on the less tech-savvy crowd such as the intimidated; those without email or those with security fears. Community banks should look for ways to support and educate the reticent; they shouldn’t try to be at the cutting edge because they can’t get those customers anyway.
8. What are some of the key areas where community banks should pay more attention to empower and strengthen the existing deep relationships?
Community banks think their unique advantage is customer service but that’s no longer the case. Big banks have improved their game significantly in their last five years. Small banks need to strengthen relationships by anticipating consumer needs, analyzing past transactions and offering new customized services.
It’s a matter of examining processes and streamlining operations. Consumer expectation of excellent service has been heightened by Amazon, Apple etc. and banking must overhaul their consumer interactions.
In these changing times, Kevin calls for a robust community outreach program to acquire new customers and counter the loss in lobby traffic. It’s important for Community Banks to create those niche areas in deepening relationships with their customers to outcompete the big banks while playing to their strengths. This can only happen when they optimize a data-driven strategy for successful personalized offerings with their target audience.
We thank Kevin for his valuable inputs and hoping Community Banks can take a leaf out of Kevin’s page for successful customer engagements!