Doing More In Branches With Less

Frugality breeds innovation, which means right now is a prime opportunity for change.

Budgets are tight and resources are stretched thin for banks. The good news is that they can do more with less by implementing a universal associate model with the right enabling technology. When executed optimally, this model can help reduce staffing costs, reduce technology costs, and increase advisory conversations at the same time. A win all around, especially in these times.

Many banks will say they already have this model in place, but we find that a true universal associate model is rare.

Leadership typically believes they already have deployed a universal banker model, but when we break it down for them and go through what each associate should be able to deliver at every touchpoint, it becomes clear that they are far from a universal banker,” says Krista Litvack, director of Professional Services, the training and banking consulting arm at DBSI.

Universal associates are cross-trained employees who can fulfill nearly every task and transaction type within the branch, including the workload of tellers and the majority of the platform staff responsibilities. This model can reduce teller costs and eliminate the need for specialized roles and customer hand-offs. At the same time, universal associates are often experts at transitioning high-cost, low-value transactions — like a check deposit or withdraw — to low-cost channels such as self-service or mobile.

Universal associates are a way for banks to turn every interaction into an advisory or sales conversation using their depth and breadth of product knowledge. For example, a universal associate might offer a college savings account to a customer with new or young children. These types of advisory conversations can improve the customer experience significantly. According to a J.D. Power consumer study, customer satisfaction doubled when they received higher-level interactions that led to either additional savings or improved financial journey products, such as retirement planning.​

Training is an important component, but the missing link to a true universal associate model is often technology. A universal banking model with the right technology and process in place can save up to $92,412 per branch, per year. That’s a massive cost reduction worth considering. There are three key areas banks should address to create a seamless integration of technology, people and process.

Cash Automation
Universal associates can’t operate efficiently without removing the largest distractions that a traditional teller has: balancing.​ Staying in balance, counting each individual transaction three times and the cumbersome end-of-night processes all distract from building relationships that secure long-term patronage. Teller cash recyclers are a step in the right direction and help shift the focus from balancing and counting cash to advising and helping the customer. When designed and located properly, these devices eliminate stress, allow for open branch design by increasing security and make overall cash management more effective.​

Technology Optimization
Cash recycler limitations keep many branches from achieving full automation because they limit access for two staff members at a time. This disrupts the customer experience and the workflow of the associates if a third associate needs to use the machine. Instead of investing in more machines, banks can use technology such as remote transaction assist. It helps optimize recylers by allowing cash transactions to be sent from any part of the branch to any recycler or dispenser, pulled down from a queuing system that uses a unique identification number once the associate is at the device.​ One recyclers can now easily be shared among multiple staff members, greatly reducing technology costs and creating more convenience.

Banks can optimize their cash recycler investments even further with kiosks to handle all types of transactions to more-efficient channels while tablet-equipped associates advise customers. This opens up recyclers for associate and customer use.

Tablet-Equipped Associates
The in-branch experience doesn’t have to be tied to a desk or an office: Imagine a universal associate who can help customers from anywhere in the branch to create a unique experience that maximizes branch square footage. Tablet-based teller applications that connect associates to cash automation machines or even self-service kiosks is the final piece in creating a frictionless customer experience and a true universal associate model.

Break down the teller line and remove the need for a hand-off entirely with a tablet that has teller transaction functionality and empower universal associates. Banks that want to implement a universal associate model will need the right design, technology, and process to make the shift. Now is the time to make those investments and position your bank for its post-pandemic future through lowered costs and better customer experiences.

A New Opportunity for Revenue and Efficiency

Intelligence-Report.pngIn 2017, Bank Director magazine featured a story titled “The API Effect.” The story explained how banks could earn revenue by using application programming interfaces, or APIs, and concluded with a prediction: APIs would be so prevalent in five years that banks who were not leveraging them would be similar to banks that didn’t offer a mobile banking application in 2017.

Today, the banking industry is on a fast track to proving that hypothesis.

Banks are hurtling into the digital revolution in response, in no small part, to the outbreak of Covid-19, a novel coronavirus that originated in China before spreading around the globe. The social distancing measures taken to contain the virus have forced banks to operate without the safety nets of branches, paper and physical proximity to customers. They’re feeling pressure to provide up-to-the-minute information, even as the world is changing by the hour. And they’re grappling with ideas about what it means to be a bank and how best to serve customers in these challenging times.

One way to do so is through APIs, passageways between software systems that facilitate the transfer of data.

APIs make it possible to open and fund new accounts instantly — a way to continue to bring in deposits when people can’t visit a branch. They pull data from call centers and chat conversations into systems that use it to send timely and topical messages to customers. And they enable capabilities like real-time BSA checks — an invaluable tool for banks struggling to process the onslaught of Paycheck Protection Program loans backed by the Small Business Administration.

All those capabilities will still be important once the crisis is over. But by then, thanks to the surge in API adoption, they’ll also be table stakes for banks that want to remain competitive.

In short, there’s never been a better time to explore what APIs can do for your bank, which is the purpose of this FinXTech Intelligence Report, APIs: New Opportunities for Revenue and Efficiency.

The report unpacks APIs — exploring their use cases in banking, and the forces driving adoption of the technology among financial institutions of all sizes. It includes:

  • Five market trends driving the adoption of APIs among banks
  • Actionable API use cases for growing revenue and creating efficiencies
  • A map of the API provider landscape, highlighting the leading companies enabling API transformation
  • An in-depth case study of TAB Bank, which reimagined its data infrastructure with APIs
  • Key considerations for banks developing an API strategy

To learn more, download our FinXTech Intelligence Report, APIs: New Opportunities for Revenue and Efficiency.

Fixing What’s Broken In Bank Product Pitches

There’s a better way to sell pens: Don’t start with the pen.

A classic teaching example for sales hands a shiny new pen to someone with the instruction, “Sell me this pen.” Typically, the student takes the pen and begins to describe it, attempting to use the looks and features of the pen to sell it. The would-be salesperson often struggles to “sell” the pen, because they fail to discover if the person needs a pen to begin with.

This is often how banks sell products and services to their customers. But the search for a solution to this sales dilemma has led to new and advanced ways to sell pens (and everything else) the wrong way.

A better way to sell the pen is to put it in your pocket and, instead, ask the customer questions. The goal is to discover the customer’s needs and help them realize that a pen — the one you happen to have in your pocket — is what will meet their needs.

Artificial intelligence companies and fintech platforms want banks to pay enormous sums of money to help identify products and services for customers. Having given away all manner of financial tools, products and advice, they’re now pursuing bank customers by offering demand and savings deposits, mortgages and loans. Some of the biggest names in technology are joining the fray as well: Facebook, Apple, Alphabet’s Google and Uber Technologies, among others.

Customers aren’t necessarily getting more savvy, but technology is.

A venture capital firm we work with that invests in fintechs was very clear that most online financial tools are merely marketing devices used to poach customers and grow assets. Often these tools expose a problem in a customer’s existing account and offer an immediate remedy if the customer transfers accounts to them. This isn’t necessarily good for the customer, but can be devasting to a bank.

Pushing product is difficult; providing solutions is far more rewarding — and efficient.

Recently, we met with a regional bank that has over 80 retail branches and offers wealth management as part of their service model. They have only 17 financial advisors to service customers in their home state. They confessed that of only 27% of their wealth management clients have a retirement account with the bank.

Only 27%. How is this possible? Is it because they don’t sell retirement accounts? Or is it because they don’t know their customers? After all, who doesn’t need a retirement account?

Another bank we work with wondered if they should start offering business credit cards. They didn’t understand their customers’ needs well enough to decide what products would address those needs or wants, so they opted to pitch a credit card offered by a vendor.

One of the industry’s largest digital banks confessed to us they are considering adding a human element to their arsenal, seeing a need for a digital/human hybrid approach. They’ve realized that society is moving to digital, but also recognize there is not enough value in digital alone.

The COVID-19 crisis will accelerate the shift to digital. If brick and mortar banks are going to survive, and even thrive, they need a digital component that complements their human element. Throwing money at new technology that pushes products that customers may or may not want or need will only lead to costly and disappointing results.

Banks need tools that develop and deepen customer relationships and make it possible to offer real solutions, as opposed to pushing products they hope will increase revenue.

Accenture recently released a study with five key findings about customer expectations. They are:

  1. They want integrated propositions addressing core needs.
  2. They want a personalized offering.
  3. They are willing to share data with providers in return for better advice and more attractive deals.
  4. They want better integration across physical and digital channels.
  5. Their trust in financial institutions is increasing.

Essentially, customers want personal offerings that serve their core needs and delivered in the medium they choose. Banks that want to grow revenue and increase retention shouldn’t continue to “push the pen.” They should find and offer digital/human hybrid models to help customers self-discover solutions.

Three Retail Strategies for the Post-Coronavirus Branch

Technology is key to providing a near touch-free experience in the branch and digitally, but many banks are not ready. Less than 50% of organizations believe they are prepared for competitive threats, customer expectations or technological advancements, according to the 2019 “State of Digital Banking Transformation” report.

It’s a daunting task to take on digital transformation. Financial institution didn’t need a crisis to learn that banking from anywhere is a priority for customers, but it has highlighted the slow rate of mobile adoption. Only 17% of financial institutions believe they have deployed digital transformation at scale, with larger organizations being the most advanced, according to the Digital Banking Report. Even after the coronavirus pandemic has settled down, consumers will value banks that make the investment to provide services digitally.

Onboard Customers to Digital Resources
Transacting from anywhere is important, but that’s not the entire branch experience — banks need to provide highly personal financial education and advisory services from anywhere. Focus marketing and communications on educating customers with resources like blogs, social media posts, financial healthcheck tools or webinars on relevant topics like financial planning in an emergency. Content explaining the details and next steps on payment deferrals, personal loans, and programs like the Paycheck Protection Program are especially helpful during this time. Ensure your compliance officer looks over everything before it’s posted.

Offering tools and resources now will position you as an advising partner rather than a product-focused institution. And video banking gives your customers more access to experts. These platforms put face-to-face interactions in the palm of your customers’ hands by allowing them to connect with a banker right from their phone, securely sign and share documents such as photo IDs, documents for new accounts, loans, and other urgent needs.

Give Customers Access to Experts
Banks also need to invest in technology that allows their experts to work from anywhere — including the corporate campus or headquarters too. These investments allow them to work from anywhere makes transitioning to remote easy; they can also improve productivity when they are in the office.

Adding flex spaces in your headquarters allows you to reduce the number of desks provided to full-time employees while improving productivity, the flex space allows your employees to have a space to focus when they need to, collaborate, and it can be used by others when that employee is remote or off-campus.

Your experts will need to have a well-thought-out space where they can perform their remote expert duties. A clean backdrop, technology, and quiet location are all necessary to make sure your experts can handle any question and transaction. However, the space doesn’t have to be expensive or elaborate. Take an Instagram-versus-reality approach to creating the perfect remote expert set-up. Meaning, focus design dollars on what is on camera instead of spending on the entire space. Offer your experts best practices for video conferencing so your exceptional customer service standards are not altered when your associates are working remotely.

Prepare Your Branch for the Post-Coronavirus Consumer
This is truly the time to prepare your branches for the future and provide an even-better experience than before. Consumers post-coronavirus will be more aware of being in confined spaces, such as private offices. A “service spot” offers a unique workspace for associates that is visibly less “confining” but still private, potentially increasing the appeal of getting advisory services in the branches. Ideally, the spots would be set at counter or bar height.

Teller towers are a retail-friendly twist on the old-school teller line. They remove queue lines and create more distance between customers, while providing a better interaction experience with staff.

Easy-to-clean surfaces for furniture, flooring and more will be the way of the future. Brian Silvester, Head of Design at DBSI, offers several examples of easy to clean and green finish options:

  • Stain-resistant surfaces and PFOA-free upholstery are easy to clean and reduce health concerns linked to PFOA.
  • Easy-to-clean laminate instead of wood veneer offers a realistic natural wood-look without having to worry about scratches and special cleaning procedures.
  • Groutless flooring like luxury vinyl tile reduces maintenance over time. There are even options that are carbon neutral.

The post-coronavirus consumer may be hyperaware of germs on everything they touch, and may not be interested in communal brochure racks to gather information. Digital and interactive signage with hand sanitizer nearby in an option that is easy to clean and update. Interactive digital signage allows customers to still obtain the information they want while collecting emails and data for customer insights. Touch-free screens are a great way to showcase your products and services with virtually no risk of community spread.

To create the perfectly prepared retail strategy that can attract and retain customers in any situation, banks need to fuse design, technology and process. Branch transformation, at any level, is both an art and a science.

Coronavirus Underlines Digital Transformation Urgency

The passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act means up to $350 billion in loans guaranteed by the Small Business Administration is set to flow to small businesses by the June 30 funding deadline.

Community and regional institutions are, of course, the logical partners for distribution of this capital. But a challenge remains: How will those financial institutions reach out to the market when their lobbies may not be open, and businesses may not be comfortable with face-to-face interactions?

Banks have done little to change the way they interact with their business customers in the digital age. In good times, this lack of transformation allowed large technology companies like Amazon.com, PayPal Holdings and Square to siphon customers away. The current environment complicates efforts for banks that have not already transformed to be responsive to their customers immediate needs.

Customers prioritized convenience — now banks will be forced to. Even prior to social distancing, consumers prioritized speed and convenience, whether it came to new technology or where they banked.

Winning at business banking was always going to require banks to offer business customers a frictionless experience. But the ability to operate business banking functions digitally has taken on new meaning — from defining quality service to becoming a necessity during a pandemic.

Three Critical Points of Friction in Business Banking
Now more than ever, it should be every institution’s goal to make working with businesses as easy as possible, especially when distribution of SBA dollars is at stake.

To meet this moment, banks need to remove three critical friction points from their business banking experience:

  • The Application: Paper applications are long and tedious, and the process is even more difficult for SBA 7(a) loans. To remove friction, institutions need to focus on data and access. They should use available data and technology to pre-fill applications as much as possible, and provide them digitally either for self-service or with banker assistance.
  • The Decisioning: Underwriting loans is a labor-intensive process that can delay decisions for weeks. An influx of Paycheck Protection Program loan applications will only compound the inefficiencies of the underwriting process. Banks need to automate as much of the underwriting and decisioning process as possible, while keeping their risk exposure in mind. It’s critical that banks select companies that allow them to use their own, unique credit policies.
  • The Account Opening: Banks also need to think about long-term relationships with the businesses they serve during this time. That means eliminating common obstacles associated with opening a business deposit account. For example: If a business has already completed a loan application, their bank should have all the information they need for a new account application and shouldn’t ask for it twice. They need to ensure businesses can complete as much of this process remotely as possible.

At Numerated, the sense of urgency we hear from bank leaders is palpable. Our team has been working overtime — remotely — to provide banks with a quick-to-implement CARES Act Lending Automation solution. Banks have been working just as fast to understand the current environment and build strategies that will help them meet their customers’ rapidly shifting needs.

In many ways, the COVID-19 pandemic has forced banks to consider digital transformation as a solution to this problem. Still, many firms have held off for any number of reasons. Institutions that have focused on digital transformation will be the most successful in improving the business banking customer experience and will lead the way during this pandemic as a result.

From Eastern Bank Corp. in Boston that used digital lending to become the No. 1 small to midsized business lender in their competitive market, to First Federal Lakewood, in Lakewood, Ohio, that is using digital experiences to retain and grow strategic relationships, institutions of all sizes have launched new digital capabilities, better positioning them to face what’s ahead.

As the nation’s businesses grapple with this new reality, these financial institutions are examples for others exploring how to serve business customers when they can’t see them face to face. Doing so will require a reimagining of the way we do business banking.

Banks Ignore Credit Administration at Their Peril

Not long ago, I asked the CEO of a mid-sized bank how he makes funding decisions when looking to add new technology or software systems. He told me that when it comes to spending money on software, he only listens to two people: the CEOs of other banks, and “Whatever my chief lending officer says.”

The question that immediately popped into my head was, “Why doesn’t the chief credit officer have a say?”

This situation is not unique. For a long time, credit administration has taken somewhat of a back seat when it comes to resource prioritization within banks. But this mindset can be dangerous for banks; if executives don’t give credit administrators the budget they need, it can come back to bite their institutions in several ways. Bankers would be wise to take a second look at how they allocate resources and consider three reasons why credit administration should be a bigger priority.

The resource disparity
It’s not hard to understand why credit administration can sometimes get overlooked. The lending side of the house gets the most investment because it brings in the revenue. When push comes to shove, the money makers are the ones who will receive the most attention from management.

It’s not as if credit administrators have been completely forgotten: Bank CEOs usually understand the importance of managing the loan portfolio. But the group often doesn’t receive funding priority, while it often feels like the lending team has a blank check. Credit administration is just as important as loan production; closing the resource gap can decrease risk and increase efficiency for your bank.

Limiting credit risk
The biggest reason banks should invest more in their credit administration department is risk mitigation. When credit administration systems are ignored, spreadsheets can run rampant. This opens the door to numerous risks and errors, including criticism from auditors and examiners.

Outdated systems can open your bank up to risk because administrators are unable to gather and analyze data in a coherent way. They are left using multiple systems and spreadsheets to create a complete view of a loan — a fragmented process that makes it easy to miss important risk indicators. Credit administrators require powerful tools that increase a loan’s visibility, not limit it. To mitigate risk, banks should invest in systems that make it easier for credit administrators to see the complete picture in one place.

Increasing operational efficiency
Investing in credit administration also improves operational efficiency for your bank’s employees. Clunky, outdated systems impede credit administrators from accessing important information in succinct ways. Fumbling through multiple systems and screens to find key data points increases the time it takes to perform even the most routine tasks. Performing a simple data extraction will often involve IT, wasting multiple employees’ time. What could be a simple and straightforward loan review process has turned to a slow, cumbersome and ultimately expensive process.

Outdated software can also negatively impact your team’s overall job satisfaction. Poorly designed systems can be frustrating to use; upgrading other departments’ systems could create a perception that credit administrators aren’t valued by the organization. This could hurt your company culture and lead to costly turnover down the road. Investing in new software and giving credit administrators tools that make their jobs faster and easier is a way that banks can demonstrate their support, keep employees happy and improve the efficiency of their work — potentially improving overall profitability.

Credit administration and loan production are two sides of the same coin, but resources have been weighted significantly toward the lenders for too long. It’s time for a change. Reassessing how your bank can support its credit administration team can mitigate risk, improve operations and ultimately save your bank money.

AI: The Slingshot for Small Banks

Regional and community banks are struggling with growth and profitability in the face of competitive pressure from large national banks and fintech startups. Executives at these institutions are instructed to invest in technology, and to leverage data and artificial intelligence to compete more effectively.

While that sounds good, smaller banks are often constrained by a dependence on legacy core vendors that limits their IT potential, encounter difficulties in accessing their own data, lack skilled data scientists, and have no clear vision on where to start.

This conundrum came up during Bank Director’s 2020 Acquire or Be Acquired conference in Phoenix. I rubbed shoulders with fellow conference attendees over the course of three days, sharing ideas about the state of the banking sector and how community banks could leverage data and AI to drive business results. The talent gap was a frequent topic. Perhaps unsurprisingly, only a miniscule number of community banks have hired data scientists. The majority of banks have not prioritized data science capabilities; the few who are actively recruiting data scientists are struggling to attract the right talent.

But even if community banks could arm up with data scientists, what volume of data will they be working on to derive insights to fuel their business strategy? A $1 billion asset bank may have 50,000 to 75,000 customers — not a lot of data to start with. Furthermore, a number of bankers point to the difficulties they encounter in accessing their data in their legacy core systems.

As we were having these discussions, conversations were raging about the need for smaller banks to prepare for an existential threat. At the World Economic Forum in Davos, attendees were assessing comments from Bank of America Corp. Chairman and CEO Brian Moynihan that the bank could double its U.S. consumer market share. Back-of-envelope calculations indicate that if Bank of America manages to accomplish that growth, more than 1,000 community banks could be out of business. Can technology enable these banks to retain their core customer base, grow and avoid this fate? I think so.

One promising area of AI application for community banks is loan and deposit pricing. Community banks have little or no analytic tools beyond competitive rate surveys; most rely on anecdotal feedback from customers and front-line bankers. But price setting and execution on both assets and liabilities is one of the most important levers a bank can use to drive both growth and improve its net interest margin. Community banks should take advantage of new tools and data to level the playing field with the big banks, which are already well ahead of them in adopting price optimization technology.   

Small banks can gain the upper hand in this “David versus Goliath” scenario because accessible cloud-based technology works in their favor. True, big banks have worked with price optimization technology and leveraged large amounts of customer behavioral data for years. But community banks tend to have stronger customer relationships and often better pricing power than their larger competitors. Now is the time for community banks to take control of their destiny by adopting new technology and tools so they can better compete on price.

There are three reasons why cloud computing and the power of AI will be the slingshot of these ‘David’ banks:

  1. Scalable computing power, instantly on tap. Cloud-based computing and pre-configured pricing solutions are affordable and can be implemented in days, not months.
  2. Big data — as a service. Community banks can quickly leverage AI-based pricing models that have been trained on hundreds of millions of transactions. There is no need to build their own analytic models from a small customer footprint.
  3. Plug-and-play IT. It’s much easier today to integrate cloud-based platforms with a bank’s core system providers, which makes accessing their own data and implementing smarter pricing feasible.

Five years ago, it would have seemed crazy to think that in 2020, community banks would be applying AI to compete against the nation’s top banks. But the first wave of early adopters are already deploying AI for pricing. I predict we’ll see more institutions embracing AI and machine learning to improve their NIM and increase growth over the coming years.

Developing a Future-Proof Bank

Banks are growing more fintech-friendly, giving them an avenue to strengthen their capabilities. In this video, Mbanq CEO Vlad Lounegov shares how traditional financial institutions can better compete with tech-savvy upstarts in the financial space.  

  • The Changing Relationship Between Banks & Fintechs
  • Examining Core Systems
  • Four Qualities of a Good Solution

Artificial Intelligence: Exploring What’s Possible

Banks are exploring artificial intelligence to bolster regulatory compliance processes and better understand customers. This technology promises to expand over the next several years, says Sultan Meghji, CEO of Neocova. As AI emerges, it’s vital that bank leaders explore its possibilities. He shares how banks should consider and move forward with these solutions. 

  • Common Uses of AI Today
  • Near-Term Perspective
  • Evaluating & Implementing Solutions

 

Staying Relevant In The Payments Revolution

A tremendous level of disruption is occurring in the payments space today — and few banks have a strategy to combat this threat, according to Michael Carter, executive vice president at Strategic Resource Management. In this video, he explains how smart home technology like Alexa and Google Home is changing how consumers interact with their financial institutions. He also outlines three tactics for banks seeking to achieve top of wallet status.

  • Today’s Payments Landscape
  • Technologies to Watch
  • How to Keep Wallet Share
  • Threats to Community Banks