Keeping the community bank feel through a digital transformation

Banks and credit unions know the future is digital, and that traveling there is a long road with many obstacles.

Chris Craver, head of digital products at Valley National Bank, joins us to talk about his bank’s approach to digital transformation and outlook for the future.

A few takeaways from the conversation:

  • As the bank progresses in its digital transformation, a key priority is to not lose what Craver calls the
    “community banking ethos.”
  • A major challenge is dealing with legacy technology issues – journey mapping and human-centered design are helping on this front.
  • Valley already provides payment-related services to cannabis outfits, a rising industry that most banks are still trying to figure out.

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Many if not most banking institutions are somewhere along the journey of making their operations more digital. Our guest on this podcast is Chris Craver, head of digital products at Valley National Bank in New Jersey. He joins us to tell us about his bank’s approach to transforming itself digitally and to also share some of its experiences. Chris, thanks for being with us on the BAI Banking Strategies podcast.

Thanks, Terry. Great to be here today.

Chris, probably the best place to start today’s conversation is by having you tell us a little bit about Valley Bank and also what your role is there.

Sure. Valley Bank is a $50 billion national bank. We are headquartered in New Jersey. We have around 250 branches in New York, New Jersey, Alabama and Florida. Through recent acquisition, we’ve also expanded our presence nationally. We now have offices in Chicago, Los Angeles and Silicon Valley. By and large, we’re a relationship business with a significant focus on commercial real estate, C&I and certainly residential mortgages and the deposit businesses that go along with that. I lead a team of digital product professionals. We’re working to expand the digital capabilities of the bank that span both retail and business, lines of business. This is everything from acquiring new customers 100% digitally, so they can be out of our branch footprint, and that’s to support our ever-expanding business growth. We’re certainly working on things to improve our efficiency, improving our online banking in order to continue supporting and engaging customers digitally.

Valley Bank, as you say, is in the midst of its journey to develop its digital capabilities set. That makes you probably pretty much like every other bank in the country. As of today, where are you in that journey, both in terms of your customer-facing and also your middle- and back-office transformation?

Like many, we’re well into it, and I think this is where I’m supposed to insert the analogy of we’re flying the plane and swapping out the engine or driving the car down the highway and swapping out the engine there. But this is a multifaceted journey, as many institutions find. You can’t just take a linear path to it and so maybe the best way to describe it is some of the things that we’ve recently accomplished. A big one is digital account opening for us, as I mentioned at the outset. When you take on something like that, you have to look at the processes that you have in place and typically you have to improve them. They haven’t been looked at for a period of time because you don’t want to just digitize legacy process. But then you have the opportunity to do things, like improve efficiency through automation, and out of that you get things – with that examination, that focus – better customer experience and then ultimately better data that then feeds that process again and it becomes a continuous loop. That’s certainly one of the areas of focus for us, but we’re also working on things like branch transformation, as you mentioned, back office transformation. We’re about to embark on a core transformation as well too, so we’re well into our journey.

A digital transformation like the one you’re describing involves making decisions that have near-term impacts on how you run your bank day-to-day, but also how the bank positions itself for the longer term. How would you describe your overarching vision for digital at Valley Bank?

What’s important to recognize at Valley is we, even though we’re a $50 billion financial institution, we are at our core relationship business, and we really espouse the community banking ethos. We don’t want digital and technology to take us in a direction where we would impede on that or we would lose that. We want to continue to be high touch, but leverage high tech, and not just the sake for efficiency and scale, but because customer expectations have changed. You look at Amazon, Google, Apple, Facebook, rattle off the list – we have to make sure that with those consumer expectations that are evolving, that we’re along there with them as well.

In working to meet that longer-range vision for digital, knowing that everything can’t be done at once, where did you start and how are you prioritizing your digital makeover such that you make sure that you’re staying centered on the customer’s needs?

Terry, you hit the nail on the head – “How are we staying focused on customers’ needs?” One of the ways that we’re doing that through account opening. We saw this through the pandemic – people couldn’t come into the branches because they were closed and so we needed a way to allow them to transact with us for expanding their business and new needs. Offering that capability during that time was really important to us. We’re doing the same thing with as we go under branch transformation and our core transformation piece, keeping the customer and the customer experience in mind while we’re working on those back-office transformations as well. It has to be supportive of our business and our ethos.

With digital transformation being such a major trend across the industry and everyone tending to offer the same sorts of products and services, how much room is there really for any particular banking institution to distinguish themselves from the competition? In other words, how much of what Valley is doing and what other banks are doing, how much of that digital makeover is playing offense and how much of it is just playing defense?

Clearly, it’s a matter of both, but I prefer to look at it from the standpoint of mostly offense in that we have our core competencies and our core specialties, and I mentioned a number of those at the outset. How do we approach this in much the same way that an Amazon, a Google, an Apple or a Facebook would? And that’s in a number of principles, so how do we understand if we’re going to offer proposition to customers digitally, is it desirable? Is it feasible? Is it something that builds on our core strengths or is it something that’s adjacent to us in our business line today, which typically you don’t want to pursue out the gate. Is it viable? Is this something we can turn into a sustainable business? We have those already today – a number of niche capabilities and businesses that we offer and how do we use digital and technology to scale those things. It’s not the IT projects and you implement technology and then you move on to the next thing, which we describe as output. It’s focused on outcomes. How do we scale our pre-business? How do we scale our C&I? How do we scale our mortgage and reach? How do we scale through digital account acquisition that we otherwise wouldn’t be able to do without technology and this approach and principles of ways of working?

Like any entity embarking on a major change, one of the big challenges is that you only have limited visibility into what the future might bring in terms of customer preferences, in terms of technology advances, in terms of how the competitive landscape may change. Because you can’t see over the horizon, what makes you think Valley Bank is on the right long term course now, and how much flexibility do you have to correct course if that’s necessary?

Certainly, I wouldn’t be here if I didn’t think we were on the right course. But look, I agree with you. You can’t see the next black swan around the corner we’ve just come out of and certainly there’s a number of ways that even the macroeconomic situation we’re in right now could end up. But what I would say for Valley in this particular case, the way you describe it, past performance can be indicative of future results. We’re almost a 100-year-old financial institution. We’ve been around for a long time and proven our team and our approach through the pandemic, our PPP efforts, and rallying our teams now around transformation efforts and changing our focus to outcomes where we need our business to be. That gives me the confidence that we have the right focus, and that if we need to be flexible, we can.

As you just said, Chris, Valley Bank has been around for nearly a century now. I’m guessing that you’re dealing at least to some degree with legacy technology issues as you work to go ever more digital. How big a challenge has that been and what’s been the path for your bank in addressing it?

The core for us is making sure that we don’t lose the human touch and recognizing who’s at the other side of whatever technology that we might be implementing or leveraging. As we transform from what might be more manual processes or things that don’t scale, we have to recognize that we want to minimize as much as possible the customer impact. Being mindful of that and doing activities like journey mapping and human-centered design approaches are things that help us maintain that community bank ethos. It’s not a linear approach for us – it’s multifaceted. Of course, we’re working on the foundation, but we’re also improving the experience at the customer. There’s a lot that you can do in between so the customers don’t know that you’re swapping out that engine in the car while it’s driving down the highway. Then the other thing that we do is we place bets in a way that if they’re successful – this is prototyping and testing and getting feedback, and iterating – then we can scale if we’re successful on those things. If we’re not, we’ve been smart about our commitments and we can readjust. In many ways, that makes it easier for us to work with those that are out there taking this approach already today, which are fintechs and startups that help augment our capabilities. I think across all of those things, we’re able to work our way through this transformation.

As digital banking expands, a common theme is that progress in making business banking more digital – and this is for small business customers in particular – that this is lagging that of the retail customer. How are you doing with delivering digital capabilities to businesses?

I think we do a great job here from a relationship standpoint, and I think we’re on a path to doing better from a digital standpoint as well. We start to recognize, as we’re building out our teams, is that… Let’s just say an accounts payable solution that works for a large corporate customer of ours, an enterprise, is not going to work for one of our smaller, small-town organizations as well. So, how do we provide those types of differentiated capabilities and value to our customers through digital for the right segment? Those are the things that we’re working on right now. One of the segments, I’ll just give you an example, is HOA. We deeply understand that segment, we understand their needs and we’re supporting them with very specific digital capabilities and propositions to help improve the value that we deliver back to them as a financial institution.

Speaking of small enterprises, since late last year, Valley Bank has offered payment related services to cannabis businesses. Tell us more about those products, and looking more broadly, what kind of long-term banking opportunity do you see with cannabis and how do you envision exploiting it?

Well, first off, I would say, Terry, that cannabis isn’t just a small business. We work with some of the largest multi-state operators that are vertically integrated. Having those types of businesses to start out with goes a long way in supporting what is the risk evaluation that banks need to go through to serve this particular segment in the current regulatory environment. It’s an area that we started with banking this particular segment, and as you mentioned, we started offering payment-related services. I think it’s a great example that we deeply understand what our customers need. In this particular case, it was cash and too much cash in their system and their environment, so how can we digitize that and provide a digital payment mechanism? It’s a core competency of ours as a national chartered financial institution and now we have the digital product and engineering capabilities to be able to offer these things in a rapid turnaround. The more that we will do that and go deeper in the cannabis space, but also other verticals that we’re focused on, the more it helps us grow our business in a very differentiated way.

Following up on that, are there other sectors of the economy, either already established or emerging sectors, that are currently overlooked and where you think digital banking could perhaps bring more efficiency, could be perhaps more effective than traditional banking?

I would say yes, for sure. Hopefully the theme that’s coming across today is that financial institutions can offer more in value to their customers than just the financial products that they provide. They can provide, in the case of us for cannabis, means for addressing a particular problem, and because we’re in a unique space, we can solve that for them. I also think that in a more generalized way, as we look to humanize digital and bring that to our businesses across various segments, we’ll start to learn and listen what those needs are across those businesses as they grow. It gives us an opportunity now with the new digital product capabilities we have to start operating and thinking like the Amazon, Apples, Googles, and Facebooks, and really build and deliver those types of value-added capabilities. The pandemic only accelerated the adoption of technology, and consumer expectations are higher because of that. For us to be successful, we have to increase our capabilities there and our ability to respond in that environment.

There’s no reason to think that customer expectations won’t continue to climb in the years ahead. So, with that as a given, as you look for new ways to offer customer value, this could be a path to differentiating yourself in the market. Chris Craver, head of digital products at Valley Bank, thanks again for joining us on the BAI Banking Strategies podcast.

Thanks for having me, Terry.

Terry Badger, CFA, is the managing editor at BAI.