Taking Community Banks National Demands a Niche and a Strategy

Simply trying to beat other institutions at the higher-rate digital deposit direct banking game may be too challenging as more and more institutions try that gambit. Instead, find a need that isn't being served and make that your own.

There’s a common misconception across the financial services industry. It’s that the only way to grow deposits is by offering the best online and mobile banking experience to nationwide consumers reluctant to visit branches.

Apple, Amazon, Facebook and a growing cadre of others are breaking into the consumer market, leaving banks and credit unions in desperate need of a new growth strategy. They have to find a path that does not rely on consumers switching their banking relationships to those with the highest rate, earliest direct deposit or the prettiest logo. They need a strategy that is different.

Here are thoughts on how to take your bank from Main Street to Any Street, U.S.A.

Step 1: Set the Strategy After You Find the Right Target

Ask yourself: Where is the biggest opportunity for growth today?

Begin by rethinking your institution’s distribution of services. Focus on the opportunities that can save clients time and money beyond basic money management. Consider how a shift in your core processing, payments and interfaces could better serve an underbanked industry. Creating a more open, interconnected framework through open application programming interfaces (APIs) could be a starting point to bring larger opportunities to your institution from a variety of industries.

For example, when First Trade Union Bank transitioned to Radius Bank, the evolution included a fresh new name and logo with business and consumer online account opening in under five minutes. However, that was just part of the growth strategy for the bank’s new ownership and management team.

Since rebranding in 2015, Radius has carved out a niche by working with start-ups, fintechs and the like by offering high-tech, high-touch banking services and white-labeled products to those without the luxury of a bank charter.

Thus, instead of only attracting deposits under the direct line of business, this innovative bank branched into untraditional territory to grow core deposits by leveraging user experience from other companies.

“Radius carved out a niche by working with start-ups, fintechs and the like by offering high-tech, high-touch banking services and white-labeled products to those without the luxury of a bank charter.”

Similarly, The Provident Bank, a commercial loan-driven bank in Massachusetts, recently rebranded to BankProv to supercharge a national, digital strategy to bank cryptocurrency investors, exchangers and brokers. With only a handful of other financial institutions in the digital asset mix, the bank’s deposits will grow exponentially by tapping into this wildly underbanked market.

On the surface, it would appear that a fancy new logo — and wildly different colors to boot — was driving the deposit growth. However, the growth is primarily due to leadership seeing an unprecedented opportunity to attract business from an underbanked market.

These examples scratch the surface of unique opportunities to grow deposits while other players are chasing down the faster, better, cheaper products.

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Step 2: Find the Right People to Execute on the Strategy

Ask yourself: Who is going to bring this idea to life?

The suggestion here is not necessarily to build out a robust team of software developers working around the clock to code apps and APIs from scratch. The “right” people in this case are those who understand what the future of your financial institution could look like, the data needed to support it, and how to elevate everyone to the next level. It’s not uncommon to look outside of the financial industry for leaders of this caliber.

Your new employees need to have:

  • A network of industry connections.
  • A strong history of working in lean or agile project management.
  • Experience delivering products quickly and efficiently to prospective clients.
  • Courage to take necessary and controlled risks.
  • Ability to inspire others.
  • Comfort with making their own roles.

As a marketer, don’t let your support role within the institution intimidate you. The marketing department is often the very department that the leadership team unknowingly leans on to make monumental changes to the way the brand is positioned in the market. It’s the team with the most access to the institution’s voice, identity, customer data and influence across the bank or credit union.

Again, Radius Bank exemplified this theory. Over the course of five years, a once minimally staffed marketing department blossomed into a massive new virtual banking business line for the bank, complete with teams of designers, data analysts, emerging tech relationship builders, and a full-service call center. Growth was slow and steady, and the business line —and the new hires within it — proved to be worth the investment.

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Step 3: Invest in the Right Technology When It Can Help

Ask yourself: What needs to be true tomorrow of your tech offering that isn’t true today?

Your new employees should guide the institution’s technological infrastructure and adhere to a healthy mix of in-house and outsourced platforms. They should have the connections, foresight and ability to drive the technological path that your institution must take for future success.

In the case of BankProv, the ability to onboard and service institutional players in the digital asset space required a major overhaul in the technology needed to support the new digital currency niche.

BankProv’s goal — to be a full-service banking provider for digital asset clients — could not be achieved without an investment in new technology and relationships with trusted third-party vendors.

While the bank was not in the business of holding crypto-currency, the onboarding process required an intense, technology-enabled process that heavily evaluated how their prospective client’s currency was obtained legally and cleanly, including where it had traveled previously.

This required an investment in the technological infrastructure that supported the bank’s plan for evaluating risk. Since the bank followed the above order by (1) setting the strategy to bank digital asset clients, then (2) employing a new team to cultivate the strategy, the technology needed to complete next steps became much clearer. The technology was truly able to support and enhance the strategy and the people implementing it.

Often, the right third-party tech partners can open doors to product and service offerings beyond the scope of the initial project. By choosing a provider with the same vision, goals and cultural alignment, you can ensure that the partnership will be mutually beneficial to both your partner and your financial institution.

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Working Smarter, Not Harder Is Critical to Obtaining Growth

While your peers are busy chasing down the latest trend in digital banking for consumer behavior, set your sights much higher on untapped, underbanked industries or markets in desperate need of support.

It’s far from a no-brainer. Succeeding with this strategy may mean a colossal shift in your game plan, but with the right plan, people and platforms, it will prove to be a successful endeavor.

Author Carie Kelly worked for Radius Bank from 2014-2019 in various marketing positions, and is currently Vice President, Marketing, at BankProv.

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