Make Banking an Information Service
Neil Stanley, President, Bank Performance Strategies
Promontory Interfinancial Network is dedicated to helping banks meet their balance sheet management goals with innovative solutions that combine technology and a nationwide network of thousands of financial institutions. We talked with bank strategists who shared what community bank leaders should be thinking about now to help their banks in the future.
A big focus for banks looking to the future is how to create an environment that’s less about the transaction and more about delivering financial expertise.
Today, most people don’t walk into a community bank thinking that they are going to engage a financial expert, especially in the retail deposit line of business. They think they’re just going to conduct a transaction. That may explain why some have expressed the idea that banking should be boring, or even reduced to a rote function within the post office. This type of suggestion clearly demonstrates how little expertise customers have come to expect from banks.
Avoid the B word
By categorizing banks as boring, people are implying that banks are not, and maybe should not, do anything creative. Bank executives that buy into this idea are perpetuating this mindset and will soon be overtaken by their more forward-thinking counterparts. While a bank CEO may be a financial expert, most banks don’t have processes to bring that expertise to the frontlines. As a result, many banks offer a set of generic offerings, leaving customers with the impression that they don’t need community banks and that they may as well bank with big banks and take advantage of the expected technology and resulting convenience.
Within the highly competitive banking environment, community banks have allowed themselves to become perceived as less than cutting-edge, not just in terms of new materials or technology, but even in knowing the best options for handling standard customer concerns and needs.
In theory, technology can level the playing field to make the small guy play like the big guy, but with the public perception that community banks aren’t bringing any specialized expertise or customer awareness, the trend has been for people to move to the large, national bank brands.
Abolish commodity thinking
Here’s the good news: It’s not inevitable for community banks to lose ground to big banks. Community banks have unique and genuine relationships with their customers that allow them to push the customer experience forward and to alter the banking experience from the sale of a commodity to a consultative, information-rich dialogue.
I speak from the experience of working with numerous banks on their time deposits. I believe that just as we have been able to help banks to de-commoditize this one area of banking, banks should be able to unleash more value in other areas.
For example, in time deposits, many bankers assume that customers just want the highest rates and shortest duration. But that’s not always the case. When we analyze bank portfolios, we see rates and durations that are all over the place.
What customers actually want are solutions to their specific needs. Sometimes they need to ensure the safety of large deposits, sometimes they want shorter durations, sometimes they prioritize higher rate. The fact is, customer needs vary, and in many financial institutions, the person selling the CD doesn’t have a process for responding to the customer’s actual needs.
We’ve helped banks turn that process around. Those banks now have meaningful discussions with their customers about things like how much money they will have at maturity for each of their options, what competitor rates are and how those rates compare to their in-house offerings, how to choose a CD maturity date, and how to answer common concerns about rates.
This shift allows our client bankers to proactively engage their customers and change the discussion from order-taking to consultation.
It sounds so simple, yet many banks don’t have a process to help their frontline staff engage with customers in this way.
Leverage your customer knowledge
Banks maintain a substantial inventory of customer data that could be used to provide a range of new, value-added services for their customers, helping them do more with their money. With the resources banks have and the technology that could be applied, there is a lot that banks could do.
The evolution of a maturing economy is to go from manual things—for example, much of the labor force used to get paid for factory assembly jobs—to automated processes. Today most of the labor force generally does not get paid for physical effort, but for understanding, designing, and utilizing processes to unlock more value. And I think community banks are in a perfect position to unlock more value.
On the other hand, if a bank is simply executing a process like handling debit card transactions, then good luck; they had better be the low-cost provider.
I propose that today it’s safer to be a nontraditional banker than it is to be in the traditional-banking mode because non-traditional bankers are discovering new opportunities and differentiating their institution to their customers. Non-traditional bankers have the real potential to be noticed and rewarded because they create value for the benefit of the customer and the bank.
Opinions are those of the author and do not necessarily reflect the views of Promontory Interfinancial Network, LLC or its affiliates
Neil Stanley is president of Bank Performance Strategies, an Omaha, Nebraska-based consulting firm offering a web-based retail deposit pricing and sales platform. He can be reached at Neil@Bank-PS.com.