Banking is in a rough spot right now and community banks in particular face a host of daunting challenges. Often saddled with legacy technology, they must compete with fintechs and neo-banks while tech giants apply for bank charters. And as their customer bases age, big banks keep getting bigger. Luckily, local banks have a secret weapon—relationship-building. Few of their challengers can match their ability to create authentic, “know-your-name-when-you-walk-through-the-door” connections.
Still, a big question remains: As transactional banking increasingly finds users on their mobile devices instead of inside a local branch, how can community banks remain relevant? Local sports teams and fundraisers who need a donation would certainly argue that community banks remain relevant--but it doesn’t have to end there. By course-correcting from these common mistakes, on the one hand, community banks can remain integral to their local fabric—though certain dangers come with any assumption that this protects them from a multitude of potential pitfalls.
Five sure-fire ways to disappoint your customer
- Blend into the crowd — Nearly everyone researches products and services online. If your products, brand and marketing look exactly the same as those of your competitors, why would anyone choose you?
- Offer confusing products — If a prospect can’t immediately understand which checking account best fits their needs, they’ll also pass on your “deposit account matrix” in favor of an account that helps them reach specific goals (such as Wealthfront’s Cash Account) or is easy to understand (SoFi Money).
- Underutilize retail locations— Does your branch really need all that square footage and an army of tellers only available during normal working hours (or less)? People who need help with their personal or business finances pass your office locations every day, so figure out why don’t they drop in to leverage your expertise. How else might you use a branch to increase relevance and engagement with your community?
- Settle for underwhelming mobile technology — Yes, your mobile app can deposit checks, but how does it help with your customers’ financial needs and goals? Are you investing in technology that helps users bring their money into your bank, reach savings goals, earn more interest, avoid fees and make smarter decisions? And as you investment in mobile technology, shout it from the rooftops. Citibank has figured this out with their open PFM app.
- Accept fragmentation — Think about all the financial accounts you have to your name: 401(k), HSA, checking, savings, investments, insurance, credit cards, store cards, mortgage, personal loans and more. As the banking app Numbrs has already figured out, you need not offer all these products and services to provide a consolidated picture of your customer’s financial life.
So, what’s a community bank to do?
If identifying the problems has you panicking, take a breath. Solutions exist. The important thing is to get moving forward before you get left behind. Here are 10 ideas to get you started:
- Differentiate with perks — Provide more relevant products that include perks people will actually use. As an example, T-Mobile offers a Netflix subscription to customers. Banks also have in-house expertise that could be bundled into free perks, such as wealth planning, mortgage advice, trust advisory, entrepreneurship training, and personal finance training. .
- Leverage local partnerships — Provide personalized offers in tandem with trusted local companies. For example, offer a window replacement loan in tandem with a vetted local company, since finding trusted vendors represents a real pain point for homeowners.
- Make the branch worth visiting — Design your space around helping people, not just selling. Think through the experience that different types of prospects and customers might have during their first time at your branch and reassess your hours to align with your ideal customers. While staffing a branch around the clock would prove impractical, consider complementing your hours with 24/7 live phone support like Ally Bank does.
- Bring the fun — Leverage gamification in your mobile app to make saving money fun, reimburse ATM charges, and host regular contests both online and in-branch. And don’t damage customer relationships with fees. (This BAI podcast discusses how gamification is changing financial services.)
- Create a community — Proactively develop a brand people care about and want to interact with. Invite your customers to provide you with feedback and ideas like Ally Bank, and host physical events to bring customers together a la Sofi.
- Make your customer’s life easier — As personal and business finances become more fragmented across various mobile apps and providers, consider how you might help consolidate your customers’ financial lives. Wealthfront, Citi, Mint, Numbrs, and others can consolidate all financial accounts for their users under a single app that provides useful insights and opportunities.
- Invest in tech — Customers often think of community banks as lagging behind big banks with their technology. While a lot of community banks stay content with whatever technology they’re provided from their core, you don’t have to settle. New fintech companies are rapidly breaking into this space with online/mobile banking technology that can differentiate your community bank.
- Invest in your business clients — Don't just be a vendor; help your business clients grow! Leverage in-house expertise or your existing vendors to provide marketing services, sales leads, financial intelligence, and IT security strategy. Make sure to showcase clients’ businesses in your branches, taking a cue from Umpqua Bank’s small business showcase.
- Invite marketing into the C-suite — Empower your marketing team to leverage customer data to improve customer experience and personalize your communications.
- Consider new revenue models — To remain relevant, banks should also examine their current revenue model. Is fee-based revenue sustainable given the rise of no-fee banks like Chime? A subscription banking model, for example, could offer customers a free checking account as a base tier, with the opportunity to pay a monthly subscription for premium services that include coworking space at local branches, a safe deposit box, free checks, a quarterly consultation with a financial planner, etc.
Closing thoughts: Community banking comes of age
Even as the banking industry changes drastically, community banks will never disappear. Yet with many factors at play, a lack of relevance may be to blame for the continued increase in mergers and acquisitions among community banks. So ask yourself: Will your bank remain relevant, or just remain? You can be so much more to local residents than just a familiar building: So much will depend on what you are building.
Brian Reilly is a marketing strategist at BankBound, a digital marketing agency focused on the financial services industry.