Smaller than the so-called “Big 4” banks but vastly larger than community banks and credit unions, super-regional banks stand before a land of opportunity, says Pat O’Donnell, senior vice president of KeyBank.
The Cleveland-based bank (with its $135.8 billion in assets) has the resources to make serious tech investments or strike partnerships with FinTech companies that can enhance their offerings to consumers and business clients. Yet super-regionals like KeyBank remain agile enough to maintain face-to-face customer contact, says O’Donnell, who has held executive positions in both the technology and banking sectors.
O’Donnell is scheduled to speak at BAI Beacon in Atlanta. The presentation “What Do Small Businesses Want in Banking Partners: More Touch or More Technology?”, will also feature Jason Cohen, vice president, small business digital strategy for Wells Fargo, and Ed O’Brien, executive vice president, research and strategy, for ath Power Consulting. They’ll discuss how to strike the right balance between offering more personal services versus more technology solutions for time-pressed business banking customers.
“The super-regionals have the ability to develop, maintain and nurture business relationships because they’re smaller in size and complexity than the largest national banks,” O’Donnell says. “The super-regionals’ agility allows them to have closer relationships with business clients. They’re able to understand client needs and respond to them more quickly than at a larger institution where it will be more siloed—which makes it harder to get to a solution as quickly.”
To enhance its offerings to business clients, KeyBank has recently taken an investment position in three FinTechs. While some banks regard FinTechs as a threat, O’Donnell says KeyBank has tapped their expertise.
That works both ways. “We’ve taken the approach that we have expertise to offer the FinTech community,” she contends. “We also believe the FinTech community can help us deliver effective solutions to our clients.”
When the pieces land in place, the whole emerges as much greater than the sum of the parts. “We bring an understanding of the risk and compliance structure, which FinTechs need to continue to grow their business,” she notes. “We offer them the expertise we’ve developed to help them become better at their business as we become better at ours. It’s very collaborative. It’s not at all competitive.”
For example, KeyBank announced that its equity investment in Billtrust, a cloud-based payment cycle manager, to complement the launch of the KeyTotal AR (accounts receivable) platform. It allows KeyBank's business clients improve operational efficiency via electronic invoicing and payment. Billtrust’s software automates processes such as invoice delivery and payments and will drive the new KeyBank platform.
O’Donnell, who chairs the Electronic Funds Transfer Association (EFTA), says the pace of change in payments for the super-regionals, and across the financial services industry, is rapidly accelerating. “Think of all the trends under way: the EMV (Europay, MasterCard and Visa) chip is still in the adoption phase; ACH (automated clearing house) network payments continue to expand their reach; person-to-person payments have come on strongly; and the Federal Reserve’s payments system improvement initiative is ongoing.”
She recounts a recent visit with a business client where they discussed structuring the company’s receivables operation so that customers could pay through a variety of options—including cash, check, ACH and credit card. “Banks need to provide ubiquitous options,” she says.
Ed O’Brien agrees with his co-presenter that the super-regionals occupy a sweet spot between technology and touch. But the super-regionals, he believes, may be at risk of “getting squeezed” between the highly efficient omnichannel capabilities of the trillion-dollar Big 4 banks and the very personal approach of consumer banks and credit unions. Meanwhile the smaller financial institutions (which were far behind in banking automation five years ago) have made rapid advances as they partner with technology firms.
“The super-regionals seem to be doing well, certainly in terms of customer satisfaction,” O’Brien says. “They know how to execute, they have the advantage of size and scale and they’re considered somewhat of a local bank. But the super-regionals can’t necessarily count on the loyalty of the small business client.”
Then there is the issue of brand loyalty. “There’s loyalty if you help them grow their business,” he points out. “But ultimately they’ll ask: ‘What have you done for me lately?’ If you can differentiate yourself as an institution and help a small business grow, there will be great loyalty.”
While there’s no secret sauce for financial institutions, O’Brien says there is a way to spread things just right.
“It all comes down to engagement,” he observes. “If you’re going to invest in digital banking and small business digital banking specifically, you need the personal touch. And you need to use education to build awareness of your digital capabilities. Small businesses, because they are so busy, may not know what you can do for them. That’s how to get them engaged.”
A former senior journalism instructor and communications manager at DePaul University, Edmund Lawler is a BAI Banking Strategies contributor who lives in New Buffalo, Michigan.
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