Basing your strategic plan on the feelings of a 25 year old?
We read articles every week about the demise of the bank branch network and the future of technology in the banking world. While much of this is based on real numbers and projections, the reality is not as clear as some would have you believe. Technology has certainly changed the banking world and will continue to do so. The number of bank branches is shrinking and each year teller transactions are dropping. However, when a 25 year old millennial answers a survey question, stating that he will be banking online and doesn’t need a real person at a real branch location, he is answering that question based on his current position of having $50 in a checking account, not owning a home (possibly still living with mom and dad), and very likely living paycheck to paycheck. His perspective and answer to those same survey questions will change significantly in the next 10 to 20 years. It would make more sense to take a look at the big picture before basing your strategic plan on the feelings of a 25 year old millennial. However, if that’s the direction you decide to take, then good luck with that!
The banking world has changed, is changing, and will continue to change. Leadership will plan and position the bank for the next 20 to 30 years. But in the here and now of today and the next 5 years, what can be done? Keep this in mind… if your community bank is struggling to make a profit, you can’t seem to stay ahead of the ever-changing regulatory environment, your ROA is stuck below 1.0, and profitable growth is something you dream about but never experience, then your board, your CEO, or your managers are really not going to care much about your awesome 5-year growth strategy that never gets implemented. They want to know what you’re doing today to impact the bottom line in the coming months or the next year.
What makes sense?
If you’re listening to the the banking world’s gurus on TV or reading many of the latest articles from the so-called experts, your first order of business would be to take most of your resources out of the branch network and place them into “technology”. As a community bank, if your goal is to be on the cutting edge of technology, you’re going to have a hard time keeping up with the big banks. Does it make sense to be equal or better in that area? Should we even have to ask that question? What makes sense, is knowing that while teller transactions have been going down, loan traffic in the branch has not. What makes sense, is realizing that a certain percentage of people will eventually go online to get a home loan or small business loan, but also understanding that a large percentage are still going to want that person to person contact, even 20 years from now.
Where can your bank win?
A community bank can win at the relationship level. Less time and money should be placed in the teller network and more resources should be placed in the business development network or real relationship bankers at the retail branch level. Many banks have “relationship bankers” but they’re not real. They’re relationship in name only. They don’t round out the account relationship and they don’t grow the net DDA’s in their bank through a clear deposit acquisition strategy. The lending side is even more critical and should implement not only a loan acquisition strategy but also a deposit acquisition strategy. The community bank with real relationship bankers and a real strategy that is being implemented can win rather easily because the competition is amazingly weak.
When you should compete?
Technology is certainly a big part of the future. Any community bank that doesn’t get that and doesn’t plan on being competitive, is destined for a bleak future, regardless of their service. The vast majority of relationship-based customers will still demand a competent level of technology and a community bank should be smart enough to implement said technology. For instance, if your bank doesn’t allow mobile deposits via your mobile app (we’re assuming you have an app and know what that is), you’re not competing. If your website isn’t optimized for mobile friendly access and technology, again, you’re not competing. You don’t need to have the best app or mobile technology, but you better have something competitive. Not being competitive in this area is just being lazy, cheap, or both. In other words… incompetent.
Move to the cutting edge in service not technology
Customer service is horrible at so many banks, big and small, and this includes a vast majority of community banks. For most community banks this is because they lean on technology and order-taking instead of remarkable service. Roughly 25% of customers don’t want face to face service and are satisfied with virtual options for banking. Those customers are perfect for banks like Bank of America or Allied Bank. What does this mean for your community bank? It means that 75% of banking customers still want remarkable service and this is where your community bank can shine. Notice the word, “Remarkable”. Average or even good service won’t cut it anymore and any community bank that doesn’t deliver remarkable service deserves the fate they’re destined for. Here are a few good places to start in moving your community bank to the cutting edge.
- Eliminate the “transaction only” teller position
- Build a relationship with your CD customers. Most managers don’t even know who they are.
- Score the customer service experience. We score it and 75% of community banks score a D or an F.
- Quit trying to fix the non-performers on your banking team. Recognize and reward your superstars.
If you seriously want your bank to be cutting edge in customer service and separate yourself from the competition, the future is bright and the competition is practically non-existent. If you can’t even get your bank to #1 in your market on the phone, then you shouldn’t even be in leadership or management in a community bank. Make your move to the edge today and begin cutting the competition.
