Digital-First Banking Doesn’t Mean Chasing Every Fintech Innovation

Alliant Credit Union has closed its last branches and aims for a completely digital experience. Input from a cadre of tech-savvy consumers helped guide it. Marketing changes have proved to be as essential as tech upgrades. Close attention to the voice of the customer rather than trendiness kept it out of a Google partnership, for now.

Alliant Credit Union began moving towards a branchless, digital-first model in 2014, when it had about a dozen offices that were seeing less and less use. The credit union’s reach had been increasing as it continued adding additional employee groups to its membership, which had started with employees of United Airlines. Two branches remained as COVID-19 hit the U.S., one open only to members of a single employee group and the other Alliant’s HQ branch in Chicago. Both closed temporarily for COVID isolation.

Those two branches had been slated for closure at the end of 2020. But as the pandemic continued, management advanced its game plan to be completely branchless. It bit the last bullet.

“We decided that we were not going to reopen those two branches after all,” says Phil Salis, SVP for Member Engagement and Chief Banking Officer at Alliant, which has nearly $13 billion in assets and over 500,000 members nationwide.

“We are now completely, fully digital,” says Salis.

Alliant’s Road to Branchless Banking

Closing the last two branches was a comparative nonevent, says Salis. Out of half a million customers, roughly 16,000 — about 3% — used the offices, on average once every 18 months. So Alliant had substantially made the transition to branchlessness already.

“When we started closing all the other branches, that was the ‘big gulp’ moment,” says Salis. The executive’s roots go back to branch banking in New York City, where he ran Manhattan branches for Chemical Bank, so there was a bit of a transition for him too. But the time had come.

“I’ve been here for eight years,” says Salis. “We would go out and do branch visits. At any time during the day, you could shoot a cannon through a branch and not hit anyone. In fact, 96% of the transactions that were occurring in the branches could have been done digitally.”

The remaining 4%, Salis continues, weren’t happening in offices because members preferred to bank that way, but because Alliant policy forced the choice. He explains that many transactions were check deposits over $25,000, which at the time Alliant wouldn’t take remotely.

Phil Salis almost all transactions could be done digitally quote

“We decided to raise our threshold for mobile deposits to $50,000 per check,” he explains, “and that basically got us up to about 99% of the transactions that were done in person.” Now most members could do almost everything they needed via mobile app.

The transition to branchless banking required simultaneously beefing up its technology, according to Salis. For example, it went from branding a white-label mobile app to developing its own proprietary one.

But the tech journey is ongoing because going branchless means committing to constant innovations and continual upgrades, says Salis. Going digital-first means accepting a rate of digital change that moves at a geometric rate, versus a branch experience that changed glacially by comparison.

“We had to develop everything from the ground up,” says Salis, “hiring new people with new skill sets to build core competencies that now serve us well. Now we’ve got a cadence, especially on mobile, that we just didn’t have four or five years ago.”

Making this transition demanded building a strong tech foundation with redundancy. “You have to be able to get things up and running again really fast if there is an outage, and in a way that is imperceptible to the customer,” says Salis. There’s no physical network to fall back on anymore.

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Serve the Consumer, No Matter How Long It Takes

The other side of branchlessness is the criticality of the call center, one of the executive’s key areas of oversight. In ordinary times the ability to reach a human when there are no branches is essential, and the COVID-19 era has been a testing time. Salis says calls for loan deferrals, as well as for new mortgages and for refinancings, has been quite high and many other COVID-related questions keep things hopping.

So, it’s no surprise that he says one of the qualities Alliant seeks when hiring call center staff isn’t sales ability — it ditched sales quotas some time ago.

Salis says the credit union works to find people who have patience.

“The relationship we had with people when they came into the offices — the camaraderie and the knowing-your-customer aspect was very intimate,” says Salis. “In the digital-first world, it’s very different.”

Salis isn’t convinced anyone has completely nailed this intimacy yet. However, he has huge respect for USAA, which given its membership and approach is somewhat in a league of its own. Likewise, he has been very impressed with Ally Bank, which he considers the originator of today’s direct banking model and adept at improving as it gains more and more experience.

“We don’t put limits on how long call center staff spends on the phone. We want our reps to spend as much time as they need to take care of the customer’s needs.”
— Phil Salis, Alliant Credit Union

“The goal for me has been to replicate the kind of relationship we had when Alliant had branches, but via the phone,” Salis says. “So we don’t put limits on how long call center staff spends on the phone. We want our reps to spend as much time as they need to take care of the customer’s needs. We want them to take the time to walk them through issues that they have.”

This contrasts with the typical call center’s measurement of time taken with each caller, and the setting of goals to get them off the line ASAP. “We take the opposite philosophy,” says Salis, which can sometimes be excruciating for an efficiency-oriented manager.

“I have sat in on calls where our rep was literally on the phone with a single customer for 45 minutes. As a manager, I pull my hair out, thinking that the call is too long,” Salis admits.

But he wouldn’t change things, because hand-holding matters.

He gives a recent example. An older caller was on the line, and wanted to be guided through how to get online with Alliant.

“Our rep patiently walked the caller through every step, helping him through every screen, explaining how to set up a password and user ID, helping him to navigate through everything,” says Salis. “By the end of the call, we had someone who had learned something new, had joined the digital age. And we had gained a loyal promoter for the future.”

( Read More: How to Keep Seniors Coming to Digital Banking After America Reopens )
 
Staffing this kind of operation means finding people who haven’t been working for a phone mill that emphasizes speed and brevity above all else.

People with these skills come from many places, but two key ones are retail and phone stores. Recruits from mobile phone stores are especially good, he says, because they have been trained to guide customers through phone setup, downloading apps, and other digital challenges.

All this said, Salis’ own objective — what he calls his “BHAG,” big hairy audacious goal — “is to create a very reliable, consistent and frictionless member experience on the digital side.”

“Ideally,” he says, “no one should ever need to call Alliant —unless they’re lonely. That’s one of my big challenges. We have to continue to innovate, upgrade and enhance our digital experience.”

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Going Branchless Required a New Marketing Team

Alliant serves both its original membership bases as well as additional consumers who have come to it since it adopted its national digital-first approach. Among the early measures the credit union took in pursuing this strategy was a serious assessment of what it needed in Marketing to get the transition done.

Ultimately, “it instigated a 100% turnover in our marketing group,” which also comes under Salis.

“We went from old-school marketing relying on direct mail and traditional advertising to a very competent digital marketing group that is focused on digital advertising, search engine optimization, search engine marketing, and all the other ‘S words’ that might be included in that list.”

This was as important to the transition in its way as the digital technology improvements themselves, says Salis. “You need to make those changes to people with the necessary mindset and skill set.” This shift, and the staffing up for digital skills, was a journey itself, he says, finding people both competent in what was needed who could also fit into the evolving team. Some didn’t work out and were replaced along the way.

“Alliant’s target is dubbed PIMs — Plugged-In Maximizers. PIMs research everything and typically seek best-of-breed services.”

Along the way, Alliant’s base evolved as new consumers who wanted what it was offering came to the credit union. This group, who became Alliant’s target, is dubbed “PIMs” — “Plugged-In Maximizers.” These consumers tend to be more affluent — with incomes between $80,000 and $100,000 — and they defy the usual generational groupings.

“They range from 18 to 70,” says Salis. What makes them stand out is active seeking for the financial products they want.

“PIMs are people who research everything,” Salis explains. “They talk to neighbors, friends and relatives and they work the web. They are looking for the best checking account, the best savings account or the best bank. They tend to be fairly critical and they look for best in breed and tend to not put all their eggs in one basket.”

Salis estimates that about half of Alliant’s customer base today consists of PIMs. This explains something you see when you visit Alliant’s home page. It sports badges indicating status as “best” from sites like NerdWallet, Money, MyBankTracker.com and The Simple Dollar.

“We’re very proud of those rankings,” says Salis. “And they are very important to us.”

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What PIMs and Others Want … and What They Don’t

Alliant relies heavily on consumer research as well as direct feedback from its member base in deciding what to add to its roster.

“We have a very tech-savvy group of customers,” says Salis. “Not all of them, but a sizable segment. They asked for two-factor authentication, for example. It took us a bit of time to get that done, but we’ve got that in place now.”

Another demand, increasingly strident, was for Alliant to connect to the Apple Pay digital wallet. Alliant made that happen based on the irresistible demand.

“Now they are focused on Zelle,” says Salis. “We’re not participating with Zelle at this time, though we think it is a good product. We’re waiting for our core system provider to complete work on a Zelle interface.”

On the flip side, lack of demand heard from members will slow or stall adoption of other technology.

One example is access to Alliant via smart speakers. “There’s been virtually no demand for this,” says Salis. “It is literally not on anyone’s list no matter what age they are.” One reason: concerns over security of people’s banking information.

“It is not a hot button for our customers,” says Salis. While he admits to some interest in using Siri personally, he wouldn’t use it for banking himself. Besides the security issue, “there are so many other ways to access your information.” Alliant experimented a bit with Amazon’s Alexa but dropped the effort.

( Read More: Banking’s Interest in Conversational AI Jumps During COVID Lockdowns )

Why Alliant Got Close to a Deal with Google, and Then Backed Off

One of the buzz issues right now is Google’s partnering with banks and credit unions on a banking account with Google-style customer experience features. The company has been working with eight institutions of all sizes to develop this product. Thus far details are sparse.

As a financial services veteran — besides Chemical/Chase, he has worked at American Express, MetLife and Marsh & McLennan — Salis says he is cognizant of the common urge to be a “first mover.” He doesn’t buy into it.

And Alliant has thus far decided to pass for now on the Google option.

“We actually sat down with Google. We had a proposal from them regarding this product,” says Salis. “But we decided it was not the right fit nor the right time for us to get involved in this product, or what I would call an ‘experiment.’ But we’re closely watching it. We’re very interested in it.”

Salis says Alliant’s examination of the deal indicated a level of resource commitment and cost that gave management pause. There were issues relating to control and to ownership of the customer that concerned Alliant.

“I am very curious, in terms of the few institutions that have signed up, what they think they are going to get out of it, and why they got involved in the first place,” says Salis. “I’m of the opinion that we don’t have to be first in. We can be a fast follower.”

He notes that even for all the member clamor for Apple Pay, and Alliant’s being one of the first credit unions to sign up for that, it satisfied a member demand but has not seen anything like adoption by the majority of members. And the cost of getting involved with Apple Pay wasn’t that high.

“This product [from Google] is a slightly different case,” he says, “and has different attributes we have to look at a bit more carefully.”

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Look at What Customers Actually Do in Their Banking

This gets to something Salis places strong reliance on: customer journey mapping. He says it is key to what he calls “common sense design.”

Ultimately, financial institutions have to pay closer attention to what consumers want to accomplish, not worrying so much about how the institution would prefer to deliver services. Looking at how transactions flow and how new ideas and technology can assist that is key.

“Financial institution people can overcomplicate things,” he says.

Common sense can be scarce when financial institutions fall in love with tech and design for its own sake, Salis warns. A key to going digital-first is being willing to be iterative, constantly course correcting. But common sense is essential.

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