How Mid-Size Banks Can Win Against Big Tech and Megabanks
Matt Wind, Head of Product Management at Popular Bank, discusses how mid-sized banks can thrive by focusing on specific market segments, making smart technology investments, and maintaining the personal relationships that distinguish them from larger competitors.
By Justin Estes, Contributor at The Financial Brand
Mid-size financial institutions face unprecedented challenges as they compete with larger banks wielding massive technology budgets and nimble fintechs deploying innovative solutions. On a recent episode of the Banking Transformed podcast, host Jim Marous spoke with Matt Wind, head of product management at Popular Bank, about how regional banks can leverage their unique strengths while modernizing their technology and service offerings.
Q: What unique advantages do mid-size banks have in today’s market?
Matt Wind: Coming in there as the head of product management, they had been without a leader in that space for about a year. Similar from the standpoint, they’re a commercial organization that’s really trying to go after the commercial accounts and the commercial customers, and then kind of following with the employees and the executives of those organizations.
What I love about being at Popular so far is the culture’s great, the people are great, and they’ve got a lot of long-term employees who’ve been there, who all advocate for their customers, advocate for their colleagues. They’re going out into the marketplace; it’s one-on-one. They’ve got their relationship managers on the ground, meeting with customers and really building those relationships, unlike the big boys out there who have billions and billions.
Q: How should mid-size banks approach market segmentation?
Wind: It starts with really going after and knowing who you want to target. In my opinion, the mid-majors are going to be a real struggle if you’re trying to be everything to everyone. What Popular and my former employer did really well is target the segments and the business lines that you really want and the industries that you really want to go after and be really versed in those?
For example, at Popular Bank, they’ve got a huge association banking platform. They’re very well-versed and know everything there is to know about that business. So when they’re in South Florida, where this is one of their major business lines, they can go out to customers, whether those are target customers or existing customers, and really sell and talk to them from an SMS. They know everything about that business, and so they gain the confidence of the customer or the target up front.
Technology Investment Strategies
Q: What framework guides build versus buy decisions?
Wind: From a partnership perspective, one comes down to resources. In mid-major banks, there’s just not an unlimited budget for building. Then, the kicker to the building is in a lot of institutions. There’s always the chance that we could build it perfectly, but the key to the whole thing is maintaining it on a go-forward basis. And a lot of times, the cost of maintaining it outweighs the initial cost of building.
I’ve always looked at, first and foremost, partnerships. I want organizations with the same mentality, the same view on customers, and the same way they treat their employees as we do in our organization because that says a lot about the company you’re working with.
Q: How can banks maintain agility while managing costs?
Wind: A lot of times, you’re buying something to replace what you had. One of the things, sometimes the path people go down in that situation is they loved what they had, and they want exactly what they had; they just want to rebuild it somewhere else.
The biggest advice in a lot of situations is to take it out of the box and take what’s there. It’s going to work 95% of the time for you, and all those little one-offs you want to add will cost you a lot of time and resources going forward. Because taking something out of the box from a partner when they start going to version 2.0, 3.0 and 4.0, those upgrades are easy when you don’t have customizations.
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Balancing Digital and Personal Banking
Q: How are mid-size banks maintaining personal relationships in a digital world?
Wind: I mean, obviously, that’s key. Everybody’s got web and mobile, and if you ask my college student what a checking account is, he doesn’t know what a checking account is. You know what he wants, he’s got his phone, he wants access to his money. Whether he has to send ten bucks to the fraternity or $20 to a roommate, that’s the access and things they want.
Let’s be honest: These customers aren’t walking into your branches every single day like they did 25 or 30 years ago; they’re only going when they have to. So, that’s why you got to pair that with the ability to message and communicate with them in ways that they want to.
Q: What role does technology play in enhancing customer relationships?
Wind: Whether it’s text or email where you’re directly communicating with them or through social media where you’re getting your customers to follow you, whether it’s on Instagram or the other ones, and then you’re able to provide information about your organization or different things you’re doing. It does not always have to be advertising products or services, but community events, great things you’re doing out in the environment, or the communities you serve are all things that help build a brand that helps build loyalty to your customer base.
The Data Advantage
Q: How are mid-size banks leveraging data for competitive advantage?
Wind: Data is probably the biggest key to the industry because when you look at the Walmarts of the world or the Amazons of the world who’ve historically wanted to get into banking or are tiptoeing into banking, what’s the reason they want to get into banking? It’s not necessarily because they want to have transaction accounts, you know what they want, they want the data.
I think banks really understanding the data they have, cultivating it, and using it to help grow their existing customers and go out in the marketplace and attract new ones is going to be critical on a go-forward basis.
Q: What opportunities does open banking present for regional institutions?
Wind: What excites me about banking in general right now is we’re going to be coming into a time, and we’re probably already starting to get to where the open banking concept is. And I think what open banking has allowed, allowing a lot of banks to do, and especially if you exclude the top maybe 5 to 10 banks in the country and you get down to the middle, the regionals and below, open banking allows them to compete in a lot of avenues that they probably couldn’t.
Q: How should banks prepare for ongoing industry evolution?
Wind: Be open to change. The industry is evolving, and all organizations must be open to change and transformation. Just because you’ve always done it one way or targeted one segment doesn’t mean that you can’t evolve and look for something else and I think that will be even more critical for the mid-majors as we move forward.
Q: What security considerations shape technology decisions?
Wind: While making things a lot easier, cooler, and slicker, what it does is potentially allow a lot of bad guys to enter the system as well, so you have to make sure you’re protecting your customers. Ultimately, one of the most important things we do on a day-in, day-out basis is provide a protective environment for people’s financial assets.
Industry Evolution and Partnership
Q: How can mid-size banks stay competitive through partnerships?
Wind: How do you make your core so that it’s available to consume these APIs on a very easy basis so that when you’re working with these partners and whether they’re fintechs or known partners in the industry, it’s easy connections in, it’s not these huge drawn out technical projects that take two and three years to get there, how do you make it easy to consume so that you’re out there and can kind of stick with and stay with the fintechs?
I think that that’s going to be critical to success, but I also think it’s a huge opportunity for the industry to go forward to be a part of that. So, I just think the sky’s the limit and money movement will become easier.
For a longer version of this conversation, listen to "Crafting Unique Business Banking Experiences", a podcast with Jim Marous, available here. This Q&A has been edited and condensed for clarity.
