5 Major Retail Banking Challenges (and How to Overcome Them)

Here are five key trends financial institutions will be forced to fight in the year ahead, and how they can tackle them.

Challenge #1 – Wrangling The Rising Interest Rate Environment

In a perfect world, financial institutions would enjoy a stable, predictable interest rate environment. You’d have a high concentration of core deposits and reasonable costs to acquire more of them.

In the real world, the Federal Reserve has undertaken a policy of quantitative easing a number of times over the past decade. Now, as the Fed tries to reduce the size of its balance sheet and unwind some of those activities, it’s clear that rates will continue to rise. In 2017, the Fed raised interest rates in March, June and again in December. As the economy continues to strengthen, the Fed said it is planning three more rate increases in 2018.

How to overcome this challenge: Now is the time to acquire low-cost deposits, anchored with checking accounts. It can take time to translate low-cost deposits into service relationships that are sticky and profitable — with active debit cards, checks, direct deposit and mobile banking, for example. So don’t wait… start now.

Develop a program to acquire and cultivate these deposits before rates rise. Use multiple channels in doing so, and stick with it. It often takes a few waves of outreach to have an impact. These deposits will become more valuable going forward as you deepen relationships with accountholders who came to you for a checking account.

Read More: Big Banks Are Deposit Vacuums: How Other Institutions Can Slow the Flow

Challenge #2 – Navigating the Regulatory and Compliance Landscape

When it comes to financial industry regulations, there are lots of gray areas. One agency says one thing, a second says another. Staying on top of rules and regulations is extremely difficult. And with the amount of turbulence in the U.S. political landscape, compliance has become extra tricky.

How to overcome this challenge: The best course of action is to think about a perpetual, cloud-based governance, risk, and compliance solution — one that outlives the tenure of any one individual who’s currently responsible for GRC. These types of tools allow everyone in your institution to connect simultaneously, and guide everyone’s input in a consistent way. This approach helps to ensure your financial institution is both organized and stays clear of compliance headaches.

Challenge #3 – Delivering Mobile Banking for Primary Status

Mobile is definitely trending upward. Over 55% of all adults now utilize mobile banking, and 81% of mobile deposit users say they are “extremely” or “very” satisfied with their bank, compared to 72% for non-mobile deposit users.

But adoption rates for remote deposit are frustratingly slow. You need to be proactive in marketing — and remarketing — your mobile capabilities, encouraging accountholders to try your app and get them in the habit of mobile deposits.

Recent findings from FindABetterBank indicate that 60% of consumers under age 34 consider mobile deposit to be a “must have” or “nice to have” feature. In fact, accountholders who use mobile deposit are less likely to change banking relationships than those who do not utilize the remote deposit capabilities.

How to overcome this challenge: Conversations about your mobile app should start at account opening. Help new accountholders download it before they leave the branch. Make sure they have clear instructions and know how to access their account information. Show them how to make mobile deposits.

And remember, incentives work. Consider targeting accountholders who aren’t using mobile deposit via a direct mail campaign that features a low-denomination check — $1 or $2, say — and encourage them to deposit it using your app. This serves not only as a nice gesture to your accountholders, but also gets them started on the path to making mobile deposit part of the way they bank.

Don’t lose sight of small business when it comes to mobile. Electronic bill pay, presentment and merchant acceptance should all be part of the discussion. Don’t leave these opportunities on the table.

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Challenge #4 – Driving Greater Marketing ROI With Data-Driven Insights

Getting the dollars to fund any marketing project is a challenge. Those presiding over the budget demand a strong business case and clearly defined KPIs before signing off on such initiatives. Then once marketers get the green light, the entire C-suite expects to see tangible benefits.

To that end, recent Harland Clarke research finds 94% of marketers are measuring their return on marketing investment (ROMI), underscoring the demand for useful data that demonstrates results.

How to overcome this challenge: New strategies and technologies can help institutions develop the accountholder-centric focus needed to create loyal relationships. But a key component will be the in-depth insights they need to turn their data from insight to action. Institutions that take a comprehensive approach to optimizing performance and incorporating data intelligence into their marketing mix will be best positioned to identify and target the right consumers. Make no mistake: this is how financial institutions must now retain and grow their accountholder base.

Start with a small survey tool to establish a baseline. You need to take the temperature and gain understanding of what’s happening in your market, and it doesn’t have to be exclusively quantitative: Qualitative research can tell you a lot.

Challenge your own perceptions and get to know as much as you can about the people you are currently serving, and those you’d like to serve. Collaborate with the right suppliers who recognize the science behind these tools.

Challenge #5 – Creating Personal Connections in an Increasingly Digital World

Banking is a relationship business, and it’s nearly impossible to have a relationship without some sort of person-to-person interaction.

According to data from Nielsen, one out of every three accountholder complaints that start out on social media end up being resolved by voice. Think about that. The fact that accountholders are using the contact center to escalate requests means that channel is an even more important component of an institution’s customer and member service game plan. If they have not been able to find the answers they seek online, accountholders have an urgent need to fill and frequently pick up the phone to do so.

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How to overcome this challenge: Somewhat ironically, this is where technology can help. For example, interactive video ATMs is one solution for distributing costs among branches. Providing access to specialists via video conferencing is another way to bring specific skill sets into branches where you can’t justify staffing those positions full-time. Online chatbots using automated scripts can also be helpful. Most financial institutions haven’t yet embraced these models, but they will soon. Bottom line? You need to work on a strategy that leverages technology and digital channels in ways that keep banking personal.

In the meantime, be sure that you’re taking full advantage of all the person-to-person interactions you already have available, including call center personnel. Outbound calls can make a huge difference in onboarding, service activation and loan marketing.

And in the digital age, you need to make sure your internal teams are talking to each other. If a loan-marketing piece has been mailed to an accountholder, the branch staff should be alerted so that they can engage that accountholder in conversations about their credit needs when he or she enters a branch. If an accountholder’s debit or credit card hasn’t yet been activated, branch personnel can help make that happen right then and there, when the accountholder is in the branch.

Closing Thoughts

While you’re working to address these issues, review your service models and determine the best way to fill any deficits to ensure your accountholders get the most “high touch” experience possible.

No, the environment for our industry isn’t perfect, and that won’t change as we start a new year. There are, however, many steps you can take to get closer to providing an optimal retail experience for our accountholders. Take stock of where your institution lands on addressing these challenges; you may be surprised by the ways you can provide value through small changes and channels you hadn’t considered.

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