Customer Loyalty and the Competition for Stable Funding

It’s more important than ever for banks to compete on value and increase client loyalty.

Banks are increasing loan loss reserves to counteract eroding credit quality at the same time they are also contending with competitors’ high-yield savings accounts, which pay more than 0.60% APY in some cases. August’s consumer savings rate was 14%, albeit down from a high of nearly 34% in April.

It’s easy to lose sight of the importance of competing on value in this environment, even as cost-effective ways to retain funding are more necessary than ever.

When I managed cash and investment products for banks and brokerage firms, I was regularly asked to increase the interest rate we offered our clients — often because a large client was threatening to leave the firm. My response then is still relevant today: A client relationship is more than an interest rate. In fact, multiple research studies I’ve sponsored over my career showed that when it comes to their cash deposits, the majority of clients rank safety, in the form of deposit insurance protection, first; access to their cash when they need it second; and interest rate third.

It’s a given that the majority of banks are members of the Federal Deposit Insurance Corp. and have debit cards linked to savings accounts, making clients’ funds accessible. According to the FDIC, the current average national savings rate at the end of October was 0.05% APY.

I ask potential bank partners the following key questions to understand what their strategy is to retain the excess deposits as long as possible on their balance sheet.

  • Does your bank create value with relationship pricing?
  • Does your institution have an easy-to-navigate website and app?
  • Can clients easily open an account online?
  • Does your bank offer a broad range of flexible products that meet clients’ cash needs?
  • When was the last time your institution launched an innovative savings product?

We’ve learned a lot about building more value for customers from successful consumer technology over the last few decades. Decisive points include that product attributes should be intuitive for use by front-line sales, be easily incorporated into a bank’s online experience, and allow clients to co-create a banking experience that meets their individual needs.

What would tech-inspired, easy-to-use, personalized products look like in retail banking?

Example 1:
A savings ladder strategy can meet clients’ needs for safety and access to their cash. This approach gains crucial additional value, however, when a bank deploys technology linking all the steps in the ladder into one account. Clients want to see what they’re getting in advance too: to test different inputs and compare potential strategies easily prior to  purchasing. Implementing new, individualized products should be as easy as clicking on the Amazon.com “Buy” button.

Example 2
In the face of economic uncertainty and job losses, many clients may look for flexibility. Some consumers will want to readily access cash for their already-known needs — for instance, parents with college-age children, small businesses, or homeowners with predictable renovation schedules. Advanced software lets banks meet these needs by creating customizable, fixed-term deposits with optimized rates that allow for flexible withdrawals.

Banks can consider adding value to their product offering beyond rate with time-deposit accounts that are easy for clients to implement and designed to meet their specific cash needs and terms. A product with such attributes both meets clients’ individualized needs and creates value in a competitive field.

Example 3
If a client prefers safety with some exposure to the market upside, a market-linked time deposit account also helps banks offer more value without increasing rate. An index or a basket of exchange traded funds can be constructed to align with your client’s values, which is especially attractive in today’s market. Consider the appeal of a time deposit account linked to a basket of green industry stocks, innovative technology companies, or any number of options for a segment of your clients. Offering products that align with your client’s broader worldview allows you to build a more holistic, longer-lasting relationship with them.

The ability to create customer value beyond rate will ultimately determine the long-term loyalty of banking clients. Fortunately, we can look to technology for successful models that show how to add value through simple, intuitive, and individual products. At the same time, tech already has many solutions, with software and IT services that banks can access to meet their clients’ personal needs, even at this challenging moment. Innovation has never been more relevant than now — as banks need to secure their communities, their client relationships, and their funding in a cost-effective manner.

The Promise, and Peril, of Risk Technology

The pandemic has underlined how essential risk technology is for proactive and responsive financial institutions.

Prior to the coronavirus outbreak, bank risk managers were already incorporating such technology to manage, sift and monitor various inputs and information. The pandemic has complicated those efforts to get a handle on emerging and persistent risks — even as it becomes increasingly critical to incorporate into day-to-day decision-making.

Data, and getting insights from it, has always been central to how risk managers have worked. That hasn’t changed,” says Sandeep Mangaraj, an industry executive at Microsoft who focuses on digital banking transformations.

Prior to the pandemic, concerns about operational risk had increased “somewhat” or “significantly” among 51% of CEOs, chief risk officers and directors responding to Bank Director’s 2020 Risk Survey, which was completed just before the pandemic. More than half also revealed heightened concerns around cybersecurity, credit and interest rate risk, and strategic risk.

That survey also found respondents indicating there was room for technology to improve their compliance with Bank Secrecy Act and anti-money laundering rules (76%), know your customer (50%) requirements, and vendor management requirements.

One way executives and risk managers can keep up is by incorporating risk technology to help sift through reams of data to derive actionable insights. These technologies can create a unified view of risk across exposure types and aggregation levels — product, business line, region — so executives can see how risk manifests within the bank. Some of these solutions can also capture and provide real-time information, supplementing slower traditional sources or replacing end-of-day reports.

But the pandemic led more than half of respondents to Bank Director’s 2020 Technology Survey to alter or adjust their technology roadmaps — including 82% of respondents at institutions with more than $10 billion in assets. Two-thirds said they would upgrade existing technology; just 16% planned to add technology to improve regulatory compliance.

Artificial intelligence holds a lot of promise in helping banks more efficiently and effectively comply with regulations and manage risk. Many banks are still early in their risk technology journeys, and are working to identify areas or situations that can be serviced or assisted by risk technologies. Forty-six percent of respondents to Bank Director’s Technology Survey say they are not utilizing AI yet.

Those that have are applying it to situations like fraud monitoring, which generates large amounts of data that the bank can correlate and act on, Mangaraj says. Others have applied it to process intelligence and process improvement, or used it to enhance the control environment. Key to the success of any AI or risk-technology endeavor is finding the right, measurable application where a bank can capture value for heightened risk or capabilities.

“We have a client who uses AI to monitor trader conversations that can proactively flag any compliance issues that may be coming up,” he says. “There are lots and lots of ways in which you can start using it. Key is identify cases, make sure you have clear measurement of value, monitor it and celebrate it. Success breeds success.”

The addition and incorporation of innovative risk technologies coincides with many banks’ digital transformations. While these changes can often complement each other, they can also make it difficult for a bank to manage and measure its risk, or could even introduce risk.

A strong management team, effective controls and active monitoring of the results are essential keys to a bank’s success with these technology endeavors, says James Watkins, senior managing director at the Isaac-Milstein Group. Watkins served at the FDIC for nearly 40 years as the senior deputy director of supervisory examinations, overseeing the agency’s risk management examination program.

“It’s time for a fresh look of the safeguards and controls that banks have in place — the internal controls and the reliability of the bank system’s and monitoring apparatuses. All of those are extremely important,” he says.

Bank executives and boards of directors must have the processes and procedures in place to ensure they’re using this technology and contextualizing its outcomes in a prudent manner.

“I think the importance of general contingency planning, crisis management strategies, thinking strategically — these are all areas that boards of directors and senior management really need to be attuned to and be prepared for,” Watkins says.

Banks, Fintechs Uniting for Bottom-Line Wins

Banks have been losing consumer market share to fintechs for more than a decade. But in the middle of a pandemic, their focus has shifted to expediting consumer loan opportunities for balance sheet and bottom line wins. Why?

For one thing, deposit growth is well outpacing loan growth this year, according to the Federal Deposit Insurance Corp.’s Quarterly Banking Profile. At the same time, tech companies like Apple and Amazon.com are dipping their big toes into the consumer finance industry. With less of a need to focus on growing bank deposits and an ever-growing list of competitors entering the lending market, banks should take — and are taking — more-calculated risks to maintain their relevance with digitally savvy customers at their points of financial need. To connect with prospective customers where they want to be reached, banks will need to rely on partners that can help them scale their offerings in a fast, frictionless and secure manner.

The easiest way for banks to lower customer acquisition costs and reach more prospective customers with loan opportunities is to use relevant plug-and-play technologies from fintechs. It’s hardly a new concept at this point; most leading banks have already adopted this methodology as the way to unlock more revenue. Per the Global Fintech Report, 94% of financial services companies said they were confident that fintechs would help grow their company’s revenue over the next two years; 95% of technology companies said the same.

The banks struggling to justify the need to partner are missing the big picture: growth opportunities and low-hanging fruit. Take business clients as an example. Far too many banks wait for a business to become frustrated at competitors before competing to win their business. A fintech partnership can help banks go on the offensive and create a strategy that positions businesses as the face of financing by offering point-of-need lending to consumers, driving revenue for the business and improving the bottom line at the bank.

“Coming together is a beginning, staying together is progress, and working together is success.” – American industrial and business magnate Henry Ford

Being open-minded about fintech partnerships allows banks to offer valuable and attractive services to business clients and consumers, especially at a time when both are faced with a life-altering pandemic and natural disasters. Consumers need quick access to credit at reasonable rates; in the face of excess liquidity from deposits and a continued low-rate environment, banks should be look to provide better loans for their customers than their online finance competitors.

Banks that choose not to use fintechs partners may find themselves lacking the ability to get embedded into consumer loan deals and unable to offer consumers a frictionless experience during the process. They can’t leverage alternative data, machine learning and artificial intelligence to get a more-accurate portrayal of a consumer’s creditworthiness outside of their FICO credit scores. Accessing value-add technology and creative solutions allows banks to innovate rapidly to improve efficiencies and meet the future needs of businesses and consumers.

Fintechs have demonstrated their ability to meet banks’ third-party standards. Banks sitting on the partnership sidelines are cautioned to set aside their “sword and shield” mentality in favor of an approach that’s more inviting and open to collaborative innovation. Today’s current economic environment can act as a catalyst for this change.

Banks have proven they are capable of being highly responsive to meet business and consumer needs during recent challenges. This is an opportunity for them to think differently and invest in partnerships to quickly offer new experiences as demand for financial products and services increases.

Coronavirus Makes Community Count in Banking

In the face of an economic shutdown triggered by the coronavirus pandemic, small banks stepped up in a big way to ensure local businesses received government aid.

Over the past 50 years, the American community bank has become a threatened species. Yet these institutions rose to the occasion amid the coronavirus-induced economic shutdown. The Small Business Administration reported that 20% of loans made in the first round of the Paycheck Protection Program, were funded by banks with less than $1 billion in assets, and 60% were funded by banks with less than $10 billion in assets. In total, the first round of lending delivered $300 billion to 1.7 million businesses.

There were just 5,177 bank or savings institutions insured by the Federal Deposit Insurance Corp at the end of 2019 —a fraction of the 24,000 commercial banks in the U.S. in 1966. The majority of these institutions were local, community banks, some with only a single branch serving their market. But over the past 25 years, the banking industry has increasingly become the domain of large conglomerates that combine commercial banking, retail banking, investment banking, insurance, and securities trading under one roof.

Technology has accelerated this consolidation further as consumers select the institutions they can most easily access through their smartphone. Deposit market share tells this story most starkly: in 2019, over 40% of total assets were held by the four largest banks alone. From 2013 to 2017, total deposits at banks with assets of less than $1 billion fell by 7.5%.

Despite that erosion, small banks were willing and able to help hurting businesses. After the dust settled from the initial round of PPP loans, many of the nation’s largest banks faced lawsuits alleging they prioritized larger, more lucrative loans over those to small businesses with acute need.

Community banks filled in the gaps. USA Today reported that a food truck business with a long relationship with Wells Fargo & Co., but couldn’t get a banker on the phone during the second round of PPP. Instead, Bank of Colorado, a community bank in Fort Collins, Colorado, with about $5 billion in assets, funded their loan.

Another one of those banks, Evolve Bank & Trust, an institution with about $600 million in assets based in Memphis, Tennessee, answered the calls of customers and non-customers alike. Architecture firm Breland-Harper secured a loan through Evolve; firm principal Michael Breland the called the funds “crucial in meeting payroll.” Special education program The Center for Learning Unlimited was turned away at 15 banks for a PPP loan. Evolve funded their loan within days.

The coronavirus pandemic has proven two things for small financial institutions. First, community still counts — and it may expand beyond a bank’s local community. A bank’s willingness to work with small businesses and organizations proved to be the most important factor for many businesses seeking loans. Small banks were willing and able to serve these groups even as the nation’s biggest bank by assets, JPMorgan Chase & Co., reportedly advised many PPP loan applicants to look elsewhere at some points.

As big banks grow bigger, their interest in and ability to serve small businesses may fade further. The yoga studio, the restaurant and the small business accounting firm, may be best served by a community bank.

Second, community banks were empowered by technology. Technology is a lever with which big banks pried away small bank customers, but it was also crucial to small banks’ success amid the PPP program. Because of the pandemic many small banks accelerated innovation and digital solutions. During the crisis, Midwest BankCentre, a community bank in St. Louis with $2.3 billion in assets, fast-tracked the implementation of digital account openings for businesses, something they did not have in place previously.

By tapping tools created by fintech companies, small banks can use technology to support their efforts to assist the nation’s small businesses during and beyond these uncertain times.

Three Reasons to Take Banking to the Cloud

Bankers challenged by legacy technology can leverage a low-cost workaround as a way to keep up with the latest innovation.

Today’s marketplace is challenging bankers to keep pace with the rate of technology innovation and provide a level of functionality and service that meets — or hopefully, exceeds — their customers’ expectations. Many find, however, that they must first overcome the limitations of existing legacy technology in order to deliver the customer experience that will keep them competitive.

A revolution of sorts has been developing within the computing world: a shift to internet-based, cloud services has introduced a more cost-effective, scalable and reliable approach to computing. With essentially no or little cost to join and access to on-demand platforms and application programming interfaces (APIs), users are empowered to leverage virtually unlimited resources while paying on a metered basis. An additional benefit of the cloud is its ability to support transformation over time, providing options to configure services based on users’ specific needs as they evolve — which has a direct application for bankers.

Many banks have already learned that a move to the cloud not only helps them increase efficiencies and reduce operational costs, but can drive innovation where it matters most: the customer experience. The inherent advantages of the cloud are being applied within retail banking to provide a modern banking experience for customers through services that are offered in a scalable, “pay-as-you-go” format that grows and evolves over time.

Most importantly, the cloud helps bankers build off of their existing technology infrastructure to more easily create new services and experiences for their customers, particularly in three ways:

Faster innovation. The cloud breaks down the barriers to innovate across departments, eliminating a disintermediated, “spaghetti” architecture and allowing banks to go to market faster. Projects that may have taken months or years to implement before can now often be completed through a click and initiated within days. Much like an appstore, the cloud allows banks to subscribe, try and launch new products almost instantly, as well as delete applications that no longer serve their account holders.

More cost savings. Compared to the expense of enterprise and on-premises solutions, the cloud minimizes the need for costly investments, like physical infrastructure or storage and maintenance fees. Instead, banks pay only for the specific applications they use. Services that were once available only through binding, long-term contracts are now accessible entirely within the cloud on a metered basis, removing the significant upfront costs associated with legacy technology.

Improved flexibility. The number of resources and tools available within the cloud environment is growing daily, which drives growth in the developer community as a whole. This leads to more participants who are creating and contributing even better offerings. Banks benefit through the ability to implement new products or services quickly and easily in response to market demand or the specific banking needs of account holders. If the bank finds a certain application does not provide enough value, the cloud offers the flexibility to try other services until it identifies the product with the best fit for its unique situation.

For too long, too many banks have simply settled for “good enough” from an innovation perspective, hamstrung by their legacy technology’s complex infrastructure. In most cases, banks’ core technology investments have been sound ones — the technology is stable, secure and reliable and has a proven track record. But it can create limitations when it comes to flexibility, ease and speed to deploy new capabilities. With cloud computing, bankers can effectively extend the value of their core technology investments by leveraging all of the benefits that they provide, while cost-effectively supporting a more innovative approach to providing customers with a true, modern banking experience.

2020 Technology Survey Results: Accelerating the Drive to Digital

The Covid-19 pandemic has bankers reexamining the value of their branches.

While branch networks remain vital, their preeminence as a delivery channel has been diminished through the coronavirus crisis.

Bank Director’s 2020 Technology Survey, sponsored by CDW, finds that bank executives and directors indicating that the digital channel is most important to their bank’s growth (50%) outnumber those who place equal value on both the digital and branch channels (46%).

In last year’s survey, those numbers were essentially flipped, with 51% indicating that the two channels were equally important, and 38% prioritizing mobile and online channels.

This accelerates the evolution that the industry has undergone for years. Nearly all respondents — 97% — say their bank has seen increased adoption and use of digital channels due to Covid-19.

The survey was distributed in June and July, after a period of time when many banks upgraded their technology to better serve customers digitally, facilitate remote work by their employees and respond to the high demand for Paycheck Protection Program (PPP) loans. Sixty-five percent say their bank implemented or upgraded technology due to the coronavirus crisis. Of these respondents, 70% say their bank adopted technology to issue PPP loans.

These executives and directors also report installing or upgrading customer-facing virtual meeting technology and/or interactive teller machines (39%), or enabling customers to apply for loans (35%) and/or open deposit accounts digitally (32%).  

Yet, just 37% sought new technology providers as a result of the pandemic.

The survey also reveals that fewer banks rely on their core provider to drive their technology strategy forward. Forty-one percent indicate that their bank relies on its core to introduce innovative solutions, down from 60% in last year’s survey. Sixty percent look to non-core providers for new solutions.

Key Findings

Focus on Experience
Eighty-one percent of respondents say improving the customer experience drives their bank’s technology strategy; 79% seek efficiencies.

Driving the Strategy Forward
For 64% of respondents, modernizing digital applications represents an important piece of their bank’s overall technology strategy. While banks look to third-party providers for the solutions they need, they’re also participating in industry groups (37%), designating a high-level executive to focus on innovation (37%) and engaging directors through a board-level technology committee (35%). A few are taking internal innovation even further by hiring developers (12%) and/or data scientists (9%), or building an innovation lab or team (15%).

Room for Improvement
Just 13% of respondents say their small business lending process is fully digital, and 55% say commercial customers can’t apply for a loan digitally. Retail lending shows more progress; three-quarters say their process is at least partially digital.

Spending Continues to Rise
Banks budgeted a median of $900,000 for technology spending in fiscal year 2020, up from $750,000 last year. But financial institutions spent above and beyond that to respond to Covid-19, with 64% reporting increased spending due to the pandemic.

Impact on Technology Roadmaps
More than half say their bank adjusted its technology roadmap in response to the current crisis. Of these respondents, 74% want to enhance online and mobile banking capabilities. Two-thirds plan to upgrade — or have upgraded — existing technology, and 55% prioritize adding new digital lending capabilities.

Remote Work Permanent for Some
Forty-two percent say their institution plans to permanently shift more of its employees to remote work arrangements following the Covid-19 crisis; another 23% haven’t made a decision.

To view the full results of the survey, click here.

Eliminate Customer Friction to Unlock Your Bank’s Growth

Why don’t your target customers want to join your bank? Because they’re not impressed.

Banks often sabotage their own attempts at success through their siloed, disjointed, out-of-touch and unimpressive approaches to doing business that leave small-to-medium businesses, private wealth clients, upwardly mobile millennials and even commercial customers underwhelmed by their service delivery.

Eliminating customer friction must be your guiding policy
For 10 years, the rallying cry of the C-Suite has been “invest in technology to stay relevant.” The next 10 years must be defined by a singular, focused, and undeviating devotion to eliminating the friction of doing business with your institution.

Fixing customer friction will be challenging and expensive, but it will also offer the best return for your shareholders. Your bank must organize teams around this mission. Executives need to evaluate resource and budget requests against a simple criterion: How much friction will this reduce, compared to the cost of funding it? Every budget request should be accompanied by a detailed user story, a list of friction points, and a proposed solution that describes the customer experience. Every touchpoint is an opportunity to reinforce your brand as customer-friendly or customer-hostile. Your bank should move quickly through these three steps:

  1. Get aligned. Your bank needs support from your board, your C-suite and even your investors to pivot to this focus. Once you have the buy-in and mission statements crafted, it’s time to designate the priority projects.
  2. “Shovel-ready” projects come first. Rescore projects that were previously denied funding or resources because they were too difficult to execute or didn’t cross a financial hurdle on a simple 2×2 matrix that evaluates improvement in customer experience and reduced friction vs. cost and complexity to implement. The projects in the top-right corner should be your initial list of funded initiatives.
  3. Deliver quick wins and results that measurably drive customer engagement. This will define success for the next 10 years. Re-engineer how you extend customer offers and execute pricing for standard and relationship clients. Your investment in tech will pay off if you accelerate this function.

For a fast return on investment, examine how your bank prices on base versus relationship status and rewards customer behaviors. Segmenting customers into single-service households, small to medium-size businesses, commercial, or mass-market and tying rewards or pricing adjustments to their categories can mean the difference between retaining or losing target customers. One-size-fits-all pricing, or even pricing by geography, will leave customers feeling like they do today: you don’t understand them or price according to their life stage or needs.

Aim for high-frequency iterations so you can test and learn everything before you scale it. Imagine being able to execute 100 or more micro-campaigns and evergreen trigger-based offers annually, with multivariant testing. Drill down to specific customer personas, identify specific trigger events, and act on intelligence that demonstrates to your customers that your bank understands them.

Get in the habit of defining a user story, designing a process and executing an offer or pricing schema in a sprint. I was astounded how quickly banks moved on preparing their infrastructure to administer Paycheck Protection Program loans. Imagine being able to consistently move at that speed — without the associated late nights and headaches.

Lastly, installing an agile middleware layer will unshackle your bank from the months-long cycles required to code and test customer offers and fulfillment. High-speed, cloud-based offer management that crosses business lines and delivers omni-channel offer redemption will be a game changer for your institution.

Installing a high-speed offer and pricing engine may seem like science fiction for your bank, but it’s not. It will require investments of time and money, coordinated efforts and lots of caffeine. But the results will allow your financial institution to prove success, build a model and inspire your teams to get serious about bulldozing customer friction.

The financial rewards of executing better offers, engaging more customers and delivering relevant, optimized pricing will give your bank the financial resources to remain independent while your competitors shop for merger partners.

Five Questions to Ask When Weighing Banking Software

A contract for banking software should be the start of a working relationship.

When your bank purchases a new banking system, you should get more than a piece of software. From training to ongoing support, there’s a tremendous difference between a vendor who sells a system and a true partner who will work to enhance your banking operations.

But how do you know which is which? Here are some questions that could help you determine if a vendor is just a vendor — or if they could become a more-meaningful resource for your bank.

Do they have real banking expertise?
A software vendor that lacks real-world banking experience will never have the institutional knowledge necessary to serve as a true partner. The company may have been founded by a banker and their salespeople may have some cursory knowledge of how their solution works in a banking environment. However, that is not enough. You need a vendor that can offer expert insights based on experience. Ask salespeople or other contacts about their banking background and what they can do to help improve your bank.

Do they want to understand your issues?
A vendor won’t be able to help solve your problems if they aren’t interested in learning what they are. You should be able to get a sense of this early in the process, especially if you go through a software demonstration. Does the salesperson spend more time talking about features and system capabilities, or do they ask you about your needs first and foremost? A vendor looking to make a sale will focus on their program, while a true partner will take time to find out what your challenges are and what you really want to know. Look for a vendor who puts your needs above their own and you’ll likely find one who is truly invested in your success.

How quickly do they respond?
Vendors will show you how much they care by their turnaround speed when you have a question or need to troubleshoot a problem with your banking system. Any delay could prove costly, and a good partner acts on that immediate need and moves quickly because they care about your business. It can take some companies weeks to fully resolve customer issues, while others respond and actively work to solve the problem in only a few hours. Go with the software provider who is there for you when you need them most.

Do they go above and beyond?
Sometimes the only way to address an issue is to go beyond the immediate problem to the underlying causes. For example, you might think you have a process problem when onboarding treasury management customers, but it could actually be an issue that requires system automation to fully resolve.

A vendor that can identify those issues and give you insights on how to fix them, instead of bandaging the problem with a quick workaround, is one worth keeping around. This may mean your vendor proposes a solution that isn’t the easiest or the cheapest one, but this is a good thing. A vendor that is willing to tell you something you may not want to hear is one that truly wants what’s best for your organization.

Do they continue to be there for you?
Some software companies consider the engagement over once they’ve made the sale. Their helpline will be open if you have a problem, but your contact person there will have moved on to new targets as you struggle with implementation and the best way to utilize the software.

Find a vendor that plans to stick with your institution long after agreements have been signed. They should not only provide training to help facilitate a smooth transition to the new system, but they should remain accessible down the road. When a new software update becomes available or they release a new version of the system, they should proactively reach out and educate you on the new features — not try to sell you the latest development. Although you won’t know how those interactions will go until after you’ve made your purchase, it pays to evaluate the service you’re getting from your vendors at every stage of your engagement.

Finding a software vendor that you trust enough to consider a partner isn’t always easy. But by looking for some of the characteristics discussed above, you can identify the most trustworthy vendors. From there, you can start building a relationship that will pay dividends now and into the future.

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.