Graham Seel
Graham Seel Dec 8, 2016

The Millennial perennial: How can community banks keep up with customer demands?

In an article last month, I listed some of the major challenges facing smaller financial institutions. One of them is the fact that customers are demanding more and more.

The primary distinguishing feature of community banks is their personalized service for small businesses. And the customer is king or queen! Banks must respond – but how?

How customers want to be treated

Much of the focus on customer expectations has been consumer-oriented. But small business owners have expectations too.

Increasingly, small businesses are run by highly connected individuals or groups. Many of these leaders are millennials. Value, respect, listening, and responsiveness are paramount.

Community banks have a great leg up. They have always focused on a number of these items as they’ve built relationships. And yet things are changing.

  • Younger customers want to be able to do things for themselves, at their own convenience.
  • They expect all their banking services to be available on their mobile devices.
  • They also expect them to be intuitive and simple.
  • At the same time, they want to be able to talk to someone at the bank whenever they can’t do something.
  • They want complete information. They expect to be able to access data about their business when and where they need it.
  • They think banking should be enjoyable.

These preferences offer challenges but also opportunities. Community bank branches remain relevant, but most younger customers will rarely enter them. So downsizing and rethinking the function of branches makes sense. When customers want to do routine things for themselves, banks can reduce personnel expense. They can focus on personal service for more complex activities, advice and cross-selling.

Of course, community banks can’t just focus on millennials. For many years, some customers will still require high-touch personal attention.

The key is to offer options—self-service for those who want it or good old-fashioned personal attention if they need that (perhaps with some price incentives toward self-service for basic needs). Ultimately a hybrid model, with artificial intelligence in partnership with human touch and expertise, may satisfy everyone.

The Millennial perennial _resize

What customers want to be able to do


Small businesses still need loans. But they expect more flexibility, less paperwork and shorter lead times. They also expect to be able to access other banking services. These will include payments, cash management, and investment advisory services.

The other big change for small businesses is the increasingly global nature of their business. This has several implications:

  • They need to be able to send and receive cross-border payments, both high and low value.
  • Global trade means extended supply chains. Customers need assurance of payment and extension of credit (for example letters of credit).
  • Small businesses look to their banks for advice on international business. Community banks need to build up expertise in this area in order to keep the full relationship.

They also expect that you’re going to use available technologies that make their lives more convenient and improve the quality of information available to them. This includes more sophisticated mobile services and the use of artificial intelligence. Ultimately community banks will implement such things as chatbots and roboadvisors, as well as advanced data analytics and machine learning. We will address some of these technological wrinkles in future articles.

Where Do We Start?

Let’s start out by reviewing the assets community banks have.

  1. Banks know their customers, and have a great deal of data about them.
  2. There are many opportunities for interaction with customers, through a variety of challenges.
  3. Banks’ greatest asset is their people.

I didn’t list technology. There are exceptions, but for most community banks, technology is an expensive “must have.” Technology should be a great asset to be celebrated and touted. The most successful banks will turn this around.

There are challenges too:

  1. Technology has limitations, and smaller banks don’t have the resources to address them.
  2. Senior staff are knowledgeable and experienced, but they’ve only known the old way of doing things. Community banks typically lack younger managers and directors.
  3. Banking is becoming more and more technology-driven. But bank boards and senior executives have not kept pace and simply do not have the technology knowledge necessary.
  4. All the focus has been on regulation—there isn’t time or money to focus on what customers look for.

A Major Decision Point

Community banking stands at a crossroads. Critical and difficult decisions need to be made. But the point in time has arrived to make them—while loan books are healthy and net income is growing. This is the point because if you wait too long, new opportunities will pass you by. This is the right time. Millennials are not just becoming the biggest consumer group. They will soon become the biggest group of small business owners.

Banks face some difficult decisions to meet changing customer expectations. Their business strategies need to be rebuilt to address the changing needs and wants of their customers. Questions to be answered include:

  1. Should we invest more in technology?This is hard because the returns will come a couple of years or more down the road. But it is unavoidable and, done right, can enable huge opportunities.
  2. Should we invest in a younger workforce? Youth in itself isn’t an asset, but neither is longevity. The experience of the most adaptable employees mustn’t be lost. But young leaders bring agility and knowledge of their generation.
  3. Should we change senior leadership to increase strategic understanding of technology? This is essential if the bank’s business is to be technology-enabled.
  4. Should we create partnerships to share the burden? Most community banks will never be able to fully satisfy all stakeholders alone. They can't focus on customer, regulatory and shareholder requirements all at once.

These are questions that must be addressed strategically. This starts with a renewed vision of the bank. How will it contribute to the business communities in which it works?

There is good news in all this. More than ever before, small businesses will prefer to work with the community banks that keep up with their expectations. If you adapt to what they need, your customer base will grow and deepen significantly. This will be especially true as other banks get left behind.

Graham Seel, a 30 year banking veteran, runs BankTech Consulting. He is an expert in commercial banking, and provides strategic insight and innovation consulting to banks. He also works as a fractional customer success executive to FinTech firms, facilitating their partnership with banks.

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