Financial marketers may be short on staff, on time, on budget, on certain kinds of expertise … but one thing they aren’t short of is competitors. Which ones are giving execs working at traditional financial institution ulcers? Is it those hometown community banks just down the street? Big megabanks loaded with tech and hundreds of branches? The rise of big credit unions? New digital-only banks? Or the threat Amazon represented if they offered a checking account? There’s one thing every bank and credit union has in common: everyone want to eat their lunch. And maybe their dinner and dessert too.
This is one of the big conversation threads dominating Day 1 at The Financial Brand Forum. How many — and what types of — competitors banks and credit unions now square off against every day pose the greatest risks?
The competitive pressures facing traditional banking providers are growing deeper, wider, and more intense every day. And the list of competitors keeps growing — from GAFA and their ilk to digital banks like Marcus and neobank challengers like N26 and SoFi… not to mention the bank or credit union across the street or in the next town.
Of the bank and credit union executives interviewed by The Financial Brand, not everyone agrees on where the greatest competition is coming from. But all agree the threats are there.
GAFA: 10,000-Pound Gorillas or Side Show?
“Our biggest competitors are brands like Amazon, Apple, and Walmart,” says Dennis Rhee, CMO at First Financial Bank, N.A., Terre Haute, Ind. “Companies that have already aggregated a massive group of users will continually push the banking experience to reduce stumbling blocks in their own customer journeys.”
“Consumers are now in charge, and the typical banking experience is fraught with pain points.”
— Dennis Rhee, First Financial Bank, N.A.
Rhee arrived at First Financial last year after extensive sales and marketing experience with Harley-Davidson and Triumph Motorcycles. He’s been working to help the bank rev up its look and feel to compete with the likes of GAFA and fintechs.
An ongoing challenge, he says, “is continually elevating our customer journey into a seamless experience. I think many in banks and credit unions are overlooking how consumers compare what they do to the changes in retail,” says Rhee. “Consumers are now in charge, and the typical banking experience is fraught with pain points.”
Any bank or credit union marketer who has a Prime account has drooled over Amazon’s digital capabilities. Even so, not every marketer buys Amazon as the new bank across the digital street.
“I refuse the answer that our biggest competitors are Google, Amazon, Apple and the rest. That’s easy for consultants to say.”
— John Hanley, Equity Bank
Take John Hanley, SVP and Senior Director of Marketing at Equity Bank, Kansas City, Mo. “I refuse the answer that our biggest competitors are Google, Amazon, Apple and the rest,” says Hanley. “That’s easy for consultants to say. But the reality is that those companies already have financial institutions where they want us, where significantly more and more ad and tech dollars flow into them.”
Hanley sees large banks and neobanks that he believes pose the greatest immediate threat to banks like his.
What worries him is a fundamental mismatch between what consumers say and what they do. “Our ‘strength’ is that almost all research indicates that consumers want to bank with a bank in their community,” says Hanley. “Well, they say this. But their behavior is different.”
The truth is, financial marketers labor away at the confluence of multiple trends, a challenge as multidimensional as the mind of the consumer.
Brian Nutt, a longtime observer of the industry now with Spectrio, sees banks and credit union marketers facing the biggest competitive onslaught of their careers. He compares their situation to D-Day at Normandy — except that traditional financial players are the ones awaiting the invasion.
“Cloud-based core systems with open-banking APIs are the landing craft,” says Nutt. “We are in for a full-out war of wills.”
Nutt believes survivors will be those institutions learn to “move with the swiftness of Silicon Valley rather than Main Street. The race is to change to cloud-based, open-architecture core systems that invite innovation.”
Financial institutions must learn about, acquire, and implement these changes faster than the comparatively glacial pace of branch transformation that started almost a decade ago.
“This is not happening two years from now,” warns Nutt. “This is already happening!”
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To a degree, what’s happening with GAFA and challenger banks and fintechs that grab a single slice of the banking business is an evolution of the kind of competition banks and credit unions have been facing for decades. 40 years ago it was the then-new money market mutual funds that led the invasion. Digitization has turned up the speed and raised the stakes.
“Our economy is set up to foster innovations and consumers are free to embrace them.”
— Anthony Burnett, Level 5
“Certainly other companies are trying to get a piece of the bank and credit union pie — and why not?” says Anthony Burnett, Customer Experience Director at Level 5, the branch design firm. “Our economy is set up to foster innovations and consumers are free to embrace them. Any business that is flourishing, especially with a strong distribution and digital interface, could be a challenge.”
Adds Burnett: “It also helps if you are flush with cash, and want to get a return on it.”
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Slowed Down By Endless Acquisitions
Some smaller institutions have effectively retired, in the face of such factors, selling out to other smaller institutions that are trying to bulk up. So much so that many marketers say they are constantly kept busy helping their companies absorb another bank or credit union.
At Heritage Bank, Olympia, Wash., over ten years six institutions have been acquired. Now that the most recent pair have been assimilated, Shaun Carson, VP and Marketing Manager, hopes there will be more time and energy for beefing up digital capabilities.
“The largest national banks are ahead in digital services offered, and due to this they have captured a large portion of the younger population,” says Carson. “Community banks will catch up on the technology front as bank mergers and acquisitions slow down.
Carson explains the distraction. “Many community banks were focused on bank integrations, which hindered the ability to focus on technology implementation that our customers are accustomed to from other providers.”
For now, marketers say that larger institutions remain a challenge — in fact, several say that even with its ongoing image troubles, Wells Fargo remains a formidable competitor.
“One of the greatest benefits we can offer that a digital-only service cannot is real, live help when a consumer needs it.”
— Liz Bissell, Dedham Savings
“Right now, big banks are tough competition,” says Liz Bissell, SVP and Senior Marketing Officer at Dedham (Mass.) Savings. “But online banks and nonbank providers are also encroaching on banking territory. I think we will have to work to gain inroads with younger consumers who may be attracted to these alternative services, such as Venmo.”
Bissell thinks local players have to remember that they have home-field advantage.
“One of the greatest benefits we can offer that a digital-only service cannot is real, live help when a consumer needs it,” Bissell explains. “Not only can we help with banking services, but we can also assist with general financial questions.”
“Banks like ours will need to focus on this high-touch, consultative approach as we work to bring in new, young customers, who may need help organizing and managing their financial lives,” Bissell adds.
“USAA is an industry leader and was mentioned most as a direct competitor in our consumer focus groups,” explains Misty Albrecht, Marketing Director at Business First Bank, Baton Rouge, La. “They have been able to create a branchless network but still offer a personal connection from a call center. As we move into branchless technology over the next few years we are being mindful as we build our call center to translate the in-branch personal experience that we current have and see as one of our strengths.”
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Held Back on the Technology Front by Suppliers
Bissell, Carson, and others air their frustration with the vendor community. They often know what their institutions must do next, but feel constrained.
“We must rely on our vendors and service providers for new capabilities and service updates,” says Bissell. “This means we may not be able to offer something until the vendor makes it available.”
Bissell envisions a service tied into the bank’s core system that could target existing customers with a “next-most-likely product” approach. Sound familiar? It’s Amazon standard approach, with dozens of items on a consumer’s first Amazon page reflecting what Amazon wants to sell you next. But smaller banks and credit unions don’t have Amazon’s tech resources.
Financial marketers attending The Forum 2019 say they are hunting for solutions. “I am looking for outsourcing partners that can simplify the internal and external customer experience,” says First Financial’s Dennis Rhee.