I originally sat down to write an article about the community banks that were leading the charge into the digital future. As I began to research it however it became pretty obvious to me that I was asking the wrong question. I found no evidence that the early adopter banks were gaining deposits or market share as a result of their whiz bang tech offerings. It occurred to me that the right question to ask was not who were the best early adopters, but rather how are the best banks using financial technology to make themselves even better?
I write about and invest in community banks and talk to a lot of bankers as part of my daily routine. I reached into my research stack and picked out two community banks that I think are doing an excellent job of executing their game plan and offering a higher level of service to their customers. I then spent some time reviewing how they use financial technology to make themselves more competitive in today’s market.
One of the very best community banks is Home Bancshares of Conway, Arkansas. Chief Executive Officer Johnny Allison and his team have taken a one branch bank with about $25 million in assets they purchased in 1998 to a leading community bank with $9.5 billion in total assets and over 140 branches in four states. They have an efficiency ratio of just 35.8 percent, which is well below the industry average of 58.49 percent, so they are getting pretty much the maximum profit from each dollar that comes in the door.
Home Bancshares approach to technology could be summed up this way: Just because we can does not mean we should. The bank has mobile offerings along with all the usual deposit and payment products that customers expect today. Senior executives there feel like their mobile offerings on both the commercial and consumer side are on par with anyone in the industry. Customers are satisfied with the current mobile products and are not beating down the door for some new high tech offering. Banking is shifting towards mobile and this bank has stayed on top of the trends and developed the products they need to keep their customers happy.
Home uses technology on the underwriting side but still relies on the personal touch to develop and process loans. Only 15 percent of the bank’s loan portfolio is in single-family mortgages and in my opinion the commercial lending process is still more people driven. While technology can help get the deal done quicker, it still takes a lot of face-to-face contact to get loans originated and closed.
Home Bancshares stays on top of trends in technology. Their people go to many of the technology conferences and talk to the sales people. They are constantly communicating with their current vendors about their offerings and what vendors see developing in the financial technology space. They listen to their customers about what type of high-tech and mobile offerings they would like to see in place. If they find financial technology products that promise to make the bank more efficient and meet a growing demand, they will consider adding it. If it is untested, unproven and doesn’t benefit the overall banking experience on a profitable basis, they do not.
Another bank CEO who clearly “get’s” financial technology is Jill Castilla at Citizens Bank in Edmond, Oklahoma. Castilla, who has been widely recognized as one of the top CEOs in the industry, joined Citizens in 2009 at the request of her stepfather who was then chairman. Like so many other institutions at the height of the last banking crisis, Citizens was struggling with bad loans and was eventually placed under a regulatory order. Tough decisions and changes had to be made to get the bank back on track. Castilla was a huge part of the turnaround having served as chief credit officer, chief operating officer and chief financial officer during that process. The regulatory order was lifted in 2012 and the focus shifted to growing the bank and preparing for the future.
Castilla was named CEO in 2014 and took on the task of running and growing the bank. One of her biggest tools to restore the bank to profitability was social media. She took to Twitter, Facebook and other social media outlets to spread the bank’s marketing message. She used YouTube videos to boost employee morale and attract customers. She has said that social media allows the bank to interact more favorably with consumers and has even helped the bank attract new talent who want to be a part of Citizen’s culture.
Although the bank is relatively small at just $248 million in assets, Castilla and her team have embraced financial technology. Citizen’s mobile payment and deposit products are on a par with much larger competitors. Castilla has closed money losing branches and replaced them with what she calls interactive teller machines, which allow customers to transact with tellers via video. She has embraced new technology that can enhance the customer experience, attract new customers and make her bank more profitable and it is working very well.
The best banks and best bankers are embracing financial technology that helps them serve their customers more efficiently and more profitably. For the most part they are not reaching for the cutting edge products that generate all the buzz and attention. Banks want to be sure the product works and all the bugs and kinks have been worked out before offering them to their customers. Increasingly, it looks like financial technology is a big part of the future but not the future in and of itself.