Combine Digital With Traditional to Regain Community Banking Mojo

Community institutions are losing market share to big national banks and non-traditional competitors. Consumers simply have too many options and changed expectations. But the game isn't over yet. Here's how community banks and credit unions can get back on top and be cool again.

Traditional institutions have three incredible strengths:

  1. A strong reputation for delivering personalized service
  2. Deep rooted knowledge of their communities and customers
  3. A reputation as a trusted source for financial advice and products.

This should put community banks and credit unions in an enviable position. But instead, they face a bevy of changes that threaten their future. Why?

Because traditional banking products and services have become commodities. Consumers now have an abundance of choice and options for fulfilling their financial needs, often turning to Google, online influencers and other digital sources for information and guidance. People have, in short, lost a sense of connection with their local financial institution.

The typical consumer today now has relationships with an increasing number of institutions — essentially “accessorizing” their basic checking accounts — which costs community institutions lost market share.

To regain their former trusted position in the lives of their account holders, banks and credit unions need to adjust their existing service model and rethink how and when they engage people. Recapturing the glory days of community banking will take leadership teams obsessed with combining the power of their natural advantages — visible locations and expert knowledge of their communities — with the intelligent use of digital technology and the rich, first-party data they possess. Here’s how to start.

1. Engage Earlier in The Customer Journey

A simple Google search provides consumers and small-business owners an endless amount of information. The sheer volume and multitude of choices can easily overwhelm a person’s ability to choose a course of action. People often defer decisions as a result, or sometimes they search for an immediate way to qualify the information they consume, and ultimately become more susceptible to advertising and offers, many of which will not be in their best interest. There’s a big difference between making a hasty choice for a new bird feeder and a long-term savings account.

This is an opportunity for legacy banking providers. Historically, these institutions approached marketing in one of three ways:

  1. Building broad awareness through use of direct mail, billboards, radio, and TV
  2. Leveraging in-branch interactions to make inquiries of the consumer, and using internal signage to build awareness
  3. Delivering broad digital offers via email or on their website based on zero-to-little use of basic data

All of these approaches assume that the consumer:

  • Has a need for the product offered
  • Is aware of the need
  • Has the confidence in their financial acumen to recognize the value in the offer
  • Is open to receiving information, in that moment, about products and services that can fulfill that need.

“In today’s connected world, waiting until someone articulates their need to you is too late.”

In today’s connected world, waiting until someone articulates their need to you is too late. The volume of offers, information, and choice available makes it difficult for smaller regional and community financial institutions to break through the noise and even be considered.

By providing relevant and contextual information long before a customer makes a purchase decision, banks and credit unions can and make the customer’s shortlist of contending solutions and heavily influence who and what they choose.

The time between when a customer first becomes aware of a need and when the person finally acts, is the time to provide relevant content that helps them through their decision process. This increases the trust the individual has with the institution and boosts their likelihood of purchasing from the institution that helped them.

2. Advocate For Each Person’s Success

Focusing on revenue is useful and important, but paying ruthless attention to customer success is essential to building deep sustainable relationships. In their vision statements many financial institutions praise themselves for putting customers first, but few truly live up to this promise.

Each time an offer is presented for a product the consumer doesn’t need, already has — or worse, was not approved for — reinforces the perception that “My bank doesn’t know me!”

Every time someone discovers that their banking provider offers a more favorable product they weren’t made aware of, trust is lost.

When customers experience friction in the education or purchase process it decreases the likelihood that they will consider the institution for future needs (e.g. “I’m sorry, our Mortgage Officer is only here on Tuesday’s”).

Truly living the brand promise to “put the client at the center of everything,” or “serve as a trusted partner” requires an obsessive and ruthless identification and elimination of these failed moments-of-truth.

3. Focus on Access And Convenience

As mentioned, consumers have easy access to more financial product choices than ever before. A single financial institution is no longer able to develop itself all of the products desired by consumers, nor to provide all the access points, and the full experience sought. Parts of it, yes, but so much more is required now to meet consumer expectations.

Institutions that stick to a traditional mindset miss out on attracting new customers — especially among the “digitally savvy” — and experience churn and switching as consumers look for something better. As a consequence, the institutions also lose important customer data.

Turning this situation around doesn’t require open-source banking. It does require banks and credit unions to look outside their four walls, and possibly beyond existing vendors, for partners that complement and expand their capabilities. In this manner, they can provide products and experiences they otherwise couldn’t.

4. Utilize Tools to Enable The New Service Model

The growth and availability of digital and data capabilities makes it feasible for banks and credit unions of all sizes to change their existing service model. The options make it a real possibility for them to recapture their essential role in the financial lives of their customers and stem attrition.

Data points the way. Banks have a wealth of customer data available: transaction history, account activity, spending habits, and more. They have the transaction data to know where customers are shopping and what they are doing with their money. When viewed holistically, and with proper identification, transparency, and research, these data points can paint an accurate picture of a customer’s life and what financial needs they’ll have in the future.

Investing in the capabilities to collect, analyze, and activate this data is a must. Truly differentiating your performance and delivering value to the customer, requires a combination of data capabilities, enabling processes and an institutional emotional intelligence to know when to engage with consumers and what to present (it’s not always an offer) across all touch points.

Digital should guide consumers. Curating a holistic digital experience is essential for any financial institutions today. This is not simply having a cool app, and it is much more than offering digital account opening, although that must be set up. It is harnessing the power of digital to support and guide the client along their financial journey. This is how data intelligence (data IQ) and emotional intelligence (EQ) are brought to life.

Getting to this point is a function of integrating the capabilities, products, and experiences offered by third-parties into the digital experience offered by the institution.

What’s Old is New Again

Community financial institutions will once again assume a central role in the lives of the markets and customers they serve, if they embrace the following:

  • Commit to advocating for the customer and developing the institutional EQ to interact with customers in a manner which engenders trust and confidence
  • Use data and digital to know when, how and where to engage and guide clients in making financial decisions
  • Provide customers with simple and easily accessible digital tools to understand their options and action on their decisions.

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