Why do some local banks and credit unions fail and have to shutter their doors, while others grow… and acquire those failed and flailing institutions? Your acumen with digital marketing could be the factor that determines which group you’re in.
By Jeff Bartlett from www.GoBankingRates.com
Around 100 banks and credit unions have closed already this year, and many more have been swallowed up by prospering financial institutions before they had the chance to fully fail. To list all the reasons why these banks and credit unions didn’t survive on their own could fill a library. But there are some common flaws shared by most of these failed institutions — something that set them apart from the groups that acquired them and from their competition who continues to thrive in the same economic environment and the same geographical footprint.
Why Some Institutions Fail
Many failed financial institutions succumbed to the glamor and glitz of real estate lending — poor practices and overpriced homes — that came back to bite them, eating away at their capitalization, their asset quality and their liquidity. But let’s remove these factors from our analysis for now.
The spotlight today is on the community banks and credit unions that consciously choose not to adapt vs. slowly dying, closing down or getting swallowed up. There were no bailouts for these small financial institutions.
Credit unions should be experiencing a renaissance with the “flight to local,” and renewed perceived value in customer service, piled on top of the backlash against big banks and their bailouts. There was even an entire day created for consumers to move away from their banks and find a “nicer banking relationship” through the movement dubbed Bank Transfer Day. Yet despite all this momentum, these same local banks and credit unions continue to fail and get swallowed up at an incredible rate. But why?
Key Fact: From published data, credit union membership in the U.S. rose by 7 million members between 2007 and 2012. That’s an average of around 1,000 members per credit union.
Thriving financial intuitions continue to focus in the right direction, while the suffering institutions continue to make excuses for why they cannot or will not embrace the changing of consumer demand and behavior. The banking and credit union industry has no choice but to accept that online and mobile banking are here and are here to stay.
The Rise of Digital
More than 70% of consumers research online first before making major purchase decisions, and that includes banking decisions like choosing an institution or product. This number is only growing, and it is not just among young people under 30. Consumers have made it abundantly clear that they want simple and powerful online banking products, mobile features like deposit and account access, and strong security that they can trust.
Many strategically- and financially-challenged financial institutions continue to allocate $0 of their marketing budget to online marketing — for reasons they don’t really even understand, or for reasons they choose to ignore.
Banks and credit unions that continue to grow are investing in digital advertising as well as investing in their online products and services. They are investing in programs to cross-sell and up-sell in a way that fits consumers’ behaviors and preferences.
The best banks and credit unions have more people visiting their website than their branches. But it’s no accident; it’s because they have built great websites with interactive features leveraging the many third-party products and platforms servicing the banking industry.
Dying banks continue focusing their budget on their branches and traditional marketing strategies… while consumers flock to the internet, and competitors’ websites. This doesn’t make any sense!?
Leadership at these struggling institutions must immediately refocus on growing and improving their digital marketing skill set.
It comes down to simple Darwinism, where the strong survive and thrive, and the weak will be acquired or simply allowed to die off.