How Digital Tools Can Create Consumer Confidence

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The coronavirus’ challenges offer banks an opportunity to reassure shaken consumers and help them reestablish a sense of control.  

Consumers are concerned about protecting the health of themselves and their families and, increasingly, the impact Covid-19 could have on their financial well-being. Unemployment is at its highest level since the Great Depression; approximately 50 million U.S. workers have filed for unemployment since March. One survey found that 38% of individuals report checking their account balances more frequently than before the pandemic — a clear sign of anxiety around finances.

Banks are uniquely situated, as already-trusted partners, to provide the peace of mind and assurances that consumers desperately seek during these anxious times. Consumers will build loyalty toward those institutions that help them feel aware and in control of what’s happening with their money, even in virtual spaces.

A few ways that banks can increase confidence as consumers increasingly rely on digital payments include transaction alerts, increasing contactless payment limits and giving spending insights, including recurring transactions.

Alerts and insights help consumers feel more in control of their financial situation. Consumers have shifted their spend toward debit cards and checking accounts as they seek to limit accidental overspending and avoid debt. Monthly insights can give them a quick view of their spending by merchant type and location. Making it easy to see where card data is stored online, and with which merchants, allows consumer to review their recurring transactions and easily remove cards from accounts and merchants they are no longer using. 

Increased credit limits help consumers feel like they have more options for safe and contactless payments. With rising infections, lockdown and social distancing causing a drop-off in travel, social events and eating out, online commerce and contactless transactions are increasingly replacing cash transactions.

While Covid-19 accelerated the uptick in the use of these digital payment methods, many Americans may continue these new habits post-pandemic. As many consumers remain reticent to venturing out of their homes for errands, visits to branches for service requests have migrated to bank contact centers. To manage this increase in the number of requests to call centers, banks should encourage consumers to handle everyday requests themselves through online and mobile self-service tools. Doing so will allow phone support to prioritize in-depth items that require personal support.

For example, providing precise and detailed transaction information to consumers on their mobile apps will reduce the numbers of queries and false disputes raised with contact center staff through misunderstandings or confusing transaction details. Other digital capabilities that banks can offer range from simple card controls — like turning a card on and off, or resetting a PIN — to more advanced features, such as disputing a transaction or applying for a new account.

Consumers now tend to expect similar easy-to-use experiences across all of their apps. With tech companies like Amazon.com and Google setting the bar high, it is essential that financial institutions also offer robust features and intuitive design. The past six months have brought with them a dramatic acceleration in digital payments, and financial institutions should grasp the opportunities to continue to be the trusted and reliable pillar on which their account holders lean.

COVID-19: A Make-or-Break Moment for Customer Loyalty

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It seems like the world is spinning faster these days. COVID-19 has caused dramatic shifts in the way people live their lives and manage their finances. Add record job loss to the mix, and you get a groundswell of people relying on their banks more than ever. It’s a make-or-break moment, as customers form new habits in response to their new reality.

Ryan Caldwell has a bird’s-eye view of how customers are relying on their financial institutions’ data and digital tools in this moment of crisis. As the CEO of MX, a Utah-based fintech, Caldwell helps financial institutions collect, analyze, present and act on data. Right now, the data is telling him this moment offers an opportunity for banks to cultivate loyalty. At the same time, it presents big risks for banks that don’t rise to the occasion.

In a recent interview, Caldwell told a story that serves as an interesting corollary for two approaches banks might take to navigate the crisis.

Driving down the streets of Lehi last week, Caldwell noticed construction in the parking lot of a Chick-fil-A. He was curious so, at the stoplight, he opened their app and placed an order. When he pulled up to the window, the Chick-fil-A manager confirmed his order and handed it over with sterile gloves. The receipt was in the app. It was an optimal, socially distanced experience.

Caldwell asked the manager about the construction. In a time when most restaurants are struggling to stay afloat, Chick-fil-A, Caldwell was told, is converting half its parking spots into mobile ordering stations. They’re experiencing exponential growth in mobile usage and, without customers spending 45 minutes in the store, they’re able to operate at redline capacity. They’re busier than ever.

Shortly after his Chick-fil-A experience, Caldwell had an experience that better aligns with refrains we’re hearing in the news about how restaurants are getting slaughtered without dine-in customers.

Caldwell’s family frequents a local pancake place, but the restaurant has no mobile app and a terrible website. Still, when your four-year old daughter has been cooped up in the house for weeks, you run out of options. So Caldwell placed a phone order and ventured out.

When he pulled up, the restaurant looked deserted. He parked and went inside to pay for the order — touching door handles and PIN pads along the way. The pancake place’s manager had a completely different problem from Chick-fil-A’s: without dine-in customers, they had virtually no business. Caldwell says everyone in town loves this place’s pancakes — a lot more than they like Chick-fil-A — but it didn’t matter how much people love it if they don’t have a safe, easy way to get to it.

The restaurant analogy easily applies to banks. The ones that provide a modern mobile experience are not only processing basic transactions for their clients, they’re using data to provide helpful insights and peace of mind in this crucial time. They’re able to increase engagement and help their customers figure out just how much is safe to spend on toilet paper stockpiles. They play a key role helping customers tackle daily struggles.

Banks that aren’t leaning into technology risk losing out on these opportunities. Worse, they may not see that loss until we’re on the other side of this crisis.

Banks without data aggregation have no way of knowing how their customers’ behavior is changing in response to this crisis. They can’t see it when social distancing and closed branches cause customers to download new apps, apply for a loan from a fintech or find a new way to move money.

“Banks are completely blind to changing consumer habits regarding digital banking if they don’t have aggregation,” Caldwell says. “So I think a lot of banks may think they’re going to come out of this at the end even stronger, but they are not realizing they’ve already lost a battle. It’s just a question of time before that lingering account dwindles down to the low balance, and then it either sits as a zombie account or it goes to zero.”

In times of rapid change, banks can’t afford to fly blind by using lagging indicators based on last month’s reports. Caldwell says leading indicators — the tiny tremors in behavioral changes that only artificial intelligence can detect — will be crucial in helping customers and de-risking the bank.

And banks need to get their data and digital experiences in place fast. The healthcare industry’s response to COVID isn’t to take 18 months building a new hospital from the ground up, Caldwell says. Healthcare administrators triage; they set up tents in parking lots and do whatever they have to do to provide help where it’s needed most.

It is possible for banks to play catch-up quickly. Fintechs have come out in droves to support banks with accelerated launches and discounted services. For MX’s part, they can set up a data-driven mobile app that sits alongside the bank’s existing app in a matter of weeks.

“You don’t have time to retrofit your ancient hospital,” Caldwell says. “If you want to take good care of your customers and not let them down, you need to launch something in the next few weeks. The world you live in right now is a world where that is not only possible, but it’s requisite.”

The Key To Creating A Profitable Deposit Strategy

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deposit-5-6-19.pngSmall and mid-size banks can leverage technology to retain and grow their retail relationships in the face of fierce competition for deposits.

Big banks like JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. continue to lead the battle for deposits. They grew their domestic deposits by more than 180 percent, or $2.4 trillion, over the past 10 years, according to an analysis of regulatory data by The Wall Street Journal. To survive and thrive, smaller institutions will need to craft sustainable, profitable strategies to grow deposits. They should invest in technology to become more efficient, develop effective marketing strategies and leverage data and analytics to personalize products and customer experiences.

Banks can use technology to achieve efficiencies such as differentiating net new money from transfers of existing funds. This is key to growing deposits. Traditionally, banks and their legacy core systems were unable to distinguish between new deposits and existing ones. This meant that banks paid out promotional interest and rewards to customers who simply shifted money between accounts rather than made new deposits. Identifying net new money allows banks to offer promotions on qualified funds, govern it more effectively, incentivize new termed deposits and operate more efficiently.

To remain competitive, small and mid-sized banks should leverage technology to create experiences that strengthen customer retention and loyalty. One way they can do this is through micro-segmentation, which uses data to identify the interests of specific consumers to influence their behavior. Banks can use it to develop marketing campaigns that maximize the effectiveness of customer touchpoints.

Banks can then use personalization to execute on these micro-segmentation strategies. Personalized client offerings require data, a resource readily available to banks. Institutions can use data to develop a deeper understanding of consumer behaviors and personalize product offers that drive customer engagement and loyalty.

Consumers deeply valued personalization, making it critical for banks trying to attract new customers and retain existing ones. A report by The Boston Consulting Group found that 54 percent of new bank customers said a personalized experience was “either the most important or a very important factor” in their decision to move to that bank. Sixty-eight percent of survey respondents added products or services because of a personalized approach. And “among customers who had left a bank, 41 percent said that insufficient personalized treatment was a factor in their decision,” the report read.

Banks can use data and analytics to better understand consumer behavior and act on it. They can also use personalization to shift from push marketing that promotes specific products to customers to pull marketing, which draws customers to product offerings. Institutions can leverage relationship data to build attractive product bundles and targeted incentives that appeal to specific customer interests. Banks can also use technology to evaluate the effectiveness of new products and promotions, and develop marketing campaigns to cross sell specific, recommended products. This translates to more-informed offers with greater response, leading to happier customers and improved bottom lines.

Small and mid-sized banks can use micro-segmentation and personalization to increase revenue, decrease costs and provide the kind of customer experience that wins customer deposits. Building and retaining relationships in the digital era is not easy. But banks can use technology to develop marketing campaigns and personalization strategies as a way to strengthen customer loyalty and engagement.

As the competition for deposits heats up, banks will need to control deposits costs, prevent attrition and grow deposits in a profitable and sustainable way. Small and mid-size banks will need to invest in technology to optimize marketing, personalization and operational strategies so they can defend and grow their deposit balances.

Grow Core Deposits Using Custom Rewards, Not Toasters

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deposit-12-20-19.pngOver the past three years, the Federal Reserve has raised interest rates nine times and created an environment where banks can earn more on their lending portfolios, but also a heated battle to win deposits.

Compounding the issue is technology, which has made it easier than ever for customers to shop around for competitive rates and switch banks.

To grow and retain deposits, financial institutions need to be proactive in providing the rates and benefits customers want. But it can be a challenge to offer those benefits in a way that increases the quality and quantity of all-important core deposits.

Many banks have structured rewards programs so they reward a new product purchase or behavior, but they don’t incentivize long-term changes in customer interactions with the bank.

Institutions have long offered incentives such as hundreds of dollars of cash back for new account openings, or extravagant gifts for scheduling a recurring transfer of funds. However, these arrangements can often backfire. Once the customer receives their cash back, the newly opened account can languish unused and transaction-less indefinitely.

The expensive gadget the bank gave away doesn’t make financial sense against the $10 monthly transfer the customer automated from their checking account to their savings account.

Institutions like Leader Bank, a $1.4 billion asset bank based in Arlington, Massachusetts, and Opportunity Bank of Montana, a $700 million asset bank based in Helena, have solved this issue by incentivizing behaviors that build the habits of an ideal core customer. As for the rewards, they provide benefits that can be easily administered because they tie into the bank’s existing business model.

The types of behaviors that create habits for bank customers—and profitability for the bank—should be focused on the continuous utilization of bank products.

Here are some examples:

  • Use the bank’s debit card for 10 or more transactions a month. This moves the bank’s debit card to top-of-wallet and increases interchange fee income. 
  • Sign up for a sizeable monthly direct deposit. Banks can require a direct deposit of $800 or $1,500—whatever amount makes sense in their local market. This behavior ensures that the account earning rewards becomes the customer’s primary account. 
  • Sign up for e-statements. Even a simple behavior like opting into e-statements will save the bank money.

When all of the activities above are bundled together, these requirements for qualifying for rewards could transform a customer into a valuable core depositor.

In return for the customer meeting the bank’s qualifications, banks should go far to provide return value. One-time gifts and prizes are often not enough to drive consistent, ongoing customer behavior; the rewards must be ongoing as well.

Practical, local, ongoing benefits will help a community bank stand out and compete against mega-banks.

Consider these options:

  • Reimburse ATM fees. One of the primary benefits that a mega-bank has over the typical community bank is its national footprint. Banks of any size can offer ATM fee reimbursement as a reward. Not only does this expand the bank’s footprint by giving customers access to their cash from anywhere, it also reinforces the customer’s new habit to use their debit card more frequently. 
  • Offer cash back on debit card transactions. Cash back signals to customers that your bank is grateful to have their business and mirrors offers by major credit card companies. Whether your bank can offer 1 percent or 3 percent, your institution can likely find a sweet spot for this attractive incentive that makes financial sense.
  • Provide discounts with local merchants. Leader Bank partners with more than 20 local merchants who provide discounts to the bank’s rewards customers when they shop at their businesses. This type of reward can help the bank integrate deeper into the local community. 
  • Offer higher yielding rates on companion savings accounts for core customers, but only if and when they meet the criteria.

Given that rising interest rates are a major driver in the battle for deposits, rates on savings accounts may be a key component to driving customer acquisition. But your bank may not have to pay that higher rate out every month.

With a technology solution, banks can manage their rewards in such a way that, unless a customer meets all of the criteria for rewards in a given month, they don’t earn rewards that month either. This feature optimizes savings for the bank and ensures that customers continue to engage with the bank like a core customer.

By playing to their strengths and rewarding the right behaviors, banks can create custom rewards programs that both make sense with their business model and provide the kind of marquee benefits today’s consumers are seeking.

Exclusive: An Interview with Brian Moynihan

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bank-of-america-2-14-19.pngBank Director’s writers and editors talk with the best bankers in the United States to inform the stories we publish on BankDirector.com and in Bank Director magazine. But these conversations often go deeper and extend beyond the subject matter of those stories, leaving a lot of immensely valuable information on the cutting room floor, so to speak.

With this in mind, we are making available—exclusively to our members—the unabridged transcripts of these conversations. It is our belief that the insights found within them can help bankers gain knowledge and improve their own institutions.

For the cover story in the fourth quarter 2018 issue of Bank Director magazine, Executive Editor John Maxfield interviewed Brian Moynihan, CEO of Bank of America Corp., at the bank’s New York City offices.

While the story focused on how Moynihan, who has led Bank of America since 2010, transformed the bank’s culture and performance, the conversation also delved into his views on growth, risk management and other topics of interest to bank leaders.

In this lengthy interview, which has been lightly edited for clarity and brevity, Moynihan shares:

  • The sources of his philosophy on banking
  • The principles that inform Bank of America’s revamped growth philosophy
  • How history informs his view of the future
  • Lessons learned from the financial crisis
  • How Bank of America deepens relationships with existing customers
  • Why operating leverage helps the bank better manage risk

Larry De Rita, Bank of America’s senior vice president of corporate communications, is also quoted in the transcript.

download.png Download transcript for the full exclusive interview

The Secret to Lifelong Relationships With Generation Z

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customer-12-14-18.pngGeneration Z consumers are positioned to be a significant force in the financial marketplace. This population group will soon begin graduating from college, earning disposable income, and making decisions about managing their finances.

This opportunity is of interest to many financial institutions that will compete for the loyalty of Gen Z customers for the next several years.

Banks that have been active in education lending have well-established relationships with the Gen Z market as customers already, which offers them an advantage. While being a trusted student loan provider is a start, financial institutions that wish to create lifelong customers must build on the initial relationship with technology-enabled products and individualized experiences the Gen Z consumer has come to expect.

The Gen Z Opportunity and Challenge
The impact of Gen Z on the financial services marketplace must not be underestimated. There were approximately 61 million members of Gen Z in the US in 2015, or about 19 percent of the U.S. population. This percentage is expected to grow to 25 percent by 2020.

While both the Gen Z and millennial generations have grown up in an environment shaped by technology, these groups are very different in their approach and use of financial services.

Gen Z has never known a world without smartphones, social media, or on-demand delivery of products and services. Adobe, Inc. has estimated that nearly half of Gen Z consumers are connected online for 10 or more hours per day and their preferences are strongly influenced by social media.

They are likely to conduct many of their daily activities on mobile devices. Also, while Gen Z members reportedly recognize that large financial institutions can offer products and services using advanced technology, they are less trusting of traditional banks than older customers. Approximately 75 percent of the Gen Z population surveyed said they trust traditional banks (as compared with digital payment solutions) – still a strong preference, but less than the 92 percent reported by baby boomers.

How To Win Gen Z Consumers
To win the loyalty of Gen Z, banks should focus on the following areas:

Invest in digital products and a best-in-class user experience. Gen Z consumers are accustomed to conducting business via mobile devices. So any services you offer—credit and savings products, investment services, or access to account information—it must be available online 24/7.

Some day, chatbots based on artificial intelligence (AI) will likely be an important way to connect with Gen Z consumers.

Focus on the right products. Understand which financial products and services resonate with Gen Z consumers. Research by Javelin, a strategy and consulting firm, shows 51 percent of Gen Z-ers do not plan to apply for a credit card, but they do start thinking early about retirement, according to a 2017 study by the Center for Generational Kinetics. For these reasons, your institution may make more headway by cross-selling savings accounts or retirement programs to your student loan customers.

Use social media. Gen Z members rely heavily on social media, so target your digital marketing to genuine influencers on those platforms like Twitter, Instagram, Snapchat, etc.

Foster a spirit of community. Research shows Gen Z members seek community. Being involved in your community through philanthropy, hosting career fairs and educational events are ways banks can appeal to Gen Z consumers.

Market in an age-appropriate manner. Make sure your marketing campaigns are designed and written in a way that will resonate with the Gen Z audience. Since Gen Z values experiences, one idea to consider is a travel rewards program layered on a promotion for a savings account or debit card.

Credit unions, banks and other financial institutions have originated approximately $90 billion in private student loans. That represents a lot of potential for Gen Z borrowers to become life-long customers if you build on those relationships with the right products and services, technology, social media and marketing.

Banks Need A Digital Advisory Dance Partner

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fintech-12-6-18.pngFor many consumers, their relationships with financial institutions can be highly personal. They often choose a bank because that’s where their family has done business, or because they’ve done their own due diligence and made a personal choice.

That gives people have a certain level of loyalty to their chosen organizations.

Due to the highly sensitive nature of financial relationships, trust is essential to maintaining them. But with the rise of technology, and the demand for financial organizations to adopt and adapt, many are faced with the risk of their own attention diverting from their core strength — building and maintaining customer relationships.

This is understandable for a few reasons. In order for banks to acquire new clients and retain their existing ones, they need to meet customers where they are, whether that means offering mobile apps or digital services beyond the core of a typical banking relationship.

A great example of this is the demand for digital wealth management. Consumers are increasingly looking for services that enable them to manage their wealth online, and the proof is in the numbers.

Assets on digital platforms stand at approximately $397 billion and are expected to more than triple, eclipsing $1.4 trillion by 2022, according to the data service Statista.

For financial institutions looking to capture a piece of this growth, speed to market is a vital differentiator. While many might consider designing and launching their own digital advisory platform in-house, the risks are significant both internally and externally. For consumers, in the time it might take for a financial institution to build its offering from start to finish, many might seek out a provider that can meet their needs immediately.

For institutions, asking staff to focus on work outside of their specialty might cause them to leave for more nimble firms that can leverage technology to empower and not distract their workforce.

The solution to both challenges? Outsource non-core technology capabilities, such as digital advisory services, to proven, enterprise-ready third parties that understand the banking space. This approach helps retain talent while simultaneously enabling banks to support a higher volume of higher value customers.

Done right, outsourcing to sophisticated digital advisory providers allows banks to retain existing customers while also focusing its efforts on attracting new ones. It opens new opportunities to deepen engagement and further monetize existing relationships through upselling. It also opens the possibility for growth into new market segments — the much talked about notion of increasing wallet share.

Offering digital advisory shouldn’t cost much to support. Sophisticated third-party solutions offer easy access to wealth management for digitally savvy customers, enabling them to self-serve with minimal assistance. These solutions, in turn, allow banks to service these types of clients with less overhead.

Choosing the right approach for offering a digital wealth platform comes down to institutional preparedness. Designing and developing a solution in-house takes time and money. Partnering with a third party that supports white-labeled technology allows for quick and easy implementation, allowing you to harness the provider’s talent as your own.

One thing to keep in mind when hiring a vendor is whether or not they have deep experience in both the wealth management and the banking spaces. This means finding trusted providers that have taken the time to integrate with multiple banking cores and custodians, as well as diverse payment systems and best-in-breed portfolio managers.

Having the right pipes in place ensures implementation flows seamlessly, without any clogs in the process.

Additionally, banking institutions entrenched with legacy systems can feel comfortable partnering with a third-party provider that is pre-vetted and has established relationships with core providers, the only way that new technologies can be deployed at the speed of customer demand.

The Formula for Building Customer Trust

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customer-11-9-18.pngDue to several recent data breaches and incidents of internal fraud at some of the world’s most recognizable financial brands, millions of consumers are impacted, loyalty is eroding, and risk is added to the bottom line. For banking leaders charged with driving the growth and managing that risk to their organizations, trust is a key to supporting both growth and financial performance.

A recent Carnegie Mellon study of customers of large banks showed those with fraudulent activity on their accounts were more likely to leave in the next six months. Following a series of internal scandals, a leading bank reported a 77 percent increase in unplanned operational expenses, a direct impact on performance.

These numbers tell a story of heightened risk in banking, but they also illuminate the critical role trust can play. Following risk incidents, every financial institution is impacted. The hard reality is trust and confidence in banks remain low across the industry, and have yet to recover to pre-financial crisis levels. In fact, 2018 Gallup polling data indicates only 30 percent of Americans have a “great deal” or “quite a lot” of confidence in banks, down from 41 percent before the crisis (2007). Risk is engrained in the banking industry’s DNA, and while recovery depends largely on a robust and adaptive risk management function, restoring trust with customers touches every area of the organization.

Banking leaders have an opportunity to rebuild trust by mobilizing their functional teams around Experience Design, or the entire experience a customer has with the bank. The benefits of taking an experience-led approach correlate directly to building trust in financial services. In fact, in the 2018 Edelman Trust Barometer, (1) user experience, (2) ease of human interaction, and (3) use of the latest technology were the top factors building trust in financial services—and all of these elements require the careful orchestration of human and digital touchpoints that Experience Design enables.

Banking services can no longer stand alone as customer decisions are being made around every interaction with the organization. There’s an opportunity for banks to differentiate and build trust by uncovering the gaps in their current experience engagement model, and designing experiences that align to customers’ needs and expectations.

To put Experience Design into action, banks must deeply understand their customers’ needs and preferences. Banks must identify the unifying experience they want to achieve through techniques such as Accelerated Service Design, which focuses on human needs and processes, as well as its systems and employees.

To trust a financial institution with deeply personal activities such as saving for retirement or managing credit and mortgages, customers need to feel the bank has their best interests at heart. Digital alone isn’t the answer to the trust challenge. Customers still value face-to-face interactions; one recent study by Celent found 93 percent of customers “still prefer at least some interactions” at a physical branch. In fact, according to the 2018 J.D. Power U.S. Retail Banking Satisfaction Study, digital-only and physical branch-only customers reported the lowest levels of satisfaction. What’s most important is developing an approach that intentionally weaves together human and digital touchpoints in a way that is authentic, smart and relevant.

As banking leaders shape a larger strategic vision around recovery from risk incidents, they should design consumer touchpoints with the Human Experience dimensions—relevance, ease, orchestration, and empathy—at heart. Those dimensions can be brought to life with a focus on embedding the following principles:

Human-centered: Organizations must center experiences and offerings on the human needs of their customers. This includes the services delivered, the processes used to deliver them, and the alignment of the organization and leadership behind that vision.

Co-created: Bank leadership must work with employees to build the internal foundation for a better experience. When trust is at a culture’s core, it permeates throughout the organization, and is felt by customers across all touchpoints.

Holistic: Experience must be viewed from an end-to-end perspective, similar to those provided by Airbnb and Uber. These companies orchestrate digital and physical experiences that seamlessly integrate with a customer’s lifestyle. In turn, these customers value the organization for the things it enables them to do, not the product or service provided. Examine how every touchpoint is influencing the customer experience, and how to better meet customer demand with a more seamless experience.

Iterative: Experience Design is not a “one and done” effort. Customer needs and preferences are always changing, and they are not making one-time transactions. Banks need to be a trusted partner to their customers throughout their relationship.

An experience-focused approach builds trust, and in turn, customer loyalty that drives the bottom line. By taking a comprehensive view of the customer experience, banks can build the trust that’s critical to sustainable risk incident recovery.

Rebuilding Trust Through Technology

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technology.png

After many years in banking, we have heard every kind of criticism leveled at banks by angry consumers and politically inspired public servants. Most recently, Wells Fargo & Co.’s cross-sell scandal threw another log on the fire of contempt that many consumers have for banks. Despite a few very bad ethical lapses, it is always shocking how many banks get painted as bad actors when consumers and communities benefit directly from their business models. This benefit is not limited to the beloved stories of the community bank setting up a scholarship fund or a day of caring painting crew, or even the billions of dollars committed to Community Reinvestment Act activities by the industry. As noble as those efforts are, they pale in comparison to what banks really do.

Millions of consumers use the banking payments rails for free. Keeping a very small amount of money in a checking account can allow a consumer to reap the benefits of direct payroll deposit, free bill pay, free remote deposit capture and free ATM access in their bank’s network. Amazingly, should the consumer face a loss of funds due to hacking, the bank (which is not being paid for this service) often makes the consumer whole. The day-to-day systems that most consumers use are remarkably affordable.

Still most Americans do not trust banks. The most frequent complaints tend to fall in one of three areas: a lack of transparency; slow and difficult user experiences; and the promotion of products that do not fit the need of that particular individual. There are ways technology can combat these common complaints and even help ameliorate the ethical lapses that have tarnished banking.

Paperless application and smart data technology can make the application easier and more convenient for consumers and businesses alike. They can also speed up the time that is required for approval. It is often the credit activities that get banks tarred and feathered. It is understood that consumers and businesses turned down for requested credit will feel the sting of that rejection—particularly when the banks takes an inordinate amount of time to deliver its decision. More prompt decision making is helpful for all consumers.

Sophisticated data and AI systems could be built into the technology that would guide bankers to a right-sized product offering in real time. They can even enable online comparisons of products that gives the consumer a better idea of the available options and how well they fit with the consumers’ long-term goals. A few rogue bank models worked better for the bank if the customer failed than if they succeeded have given consumers the right to question if the advice that is offered by their bank is in their best interest. Recently a bank CEO, off the record, compared that experience of some bank customers to his experience buying a cellular data plan for his family. “I kept on wondering it the plan [the salesman] was touting was the best for the phone company or for his commission or actually for me. Banking can’t be like that; we have to make this better.” Fortunately, there is technology that is already making it easier for banks to understand what their customers need and to serve that need more transparently.

Transparency is going to be key. Having a customer click the “I have read this box” will not work in the long term. Online tools including the use of video, chatbots and embedded quizzes can make disclosure easier for consumers.

Regulatory technology is just developing, but there is the possibility that regtech will lower compliance costs and streamline disclosure. Some of the new technologies will provide internal bumpers that can help prevent rogue behavior from an employee. What a bank has for its regulators it will also have for its internal risk management team. Detecting ethical breaches before they become systematic or catastrophic will be more possible.

Several banks are going a step further towards building consumer trust. They are using their online platforms to support their customers financial health. Bank of America Corp. just rolled out a spending aggregation tool that allows consumers to see where their money goes and budget for the future. It even allows consumers to add data from non-Bank of America accounts. It is a smart way for Bank of America to get a better understanding of their customers while providing a useful tool that requires no effort to use.

It is easy to see fintech providers as competitors. Looking at online lenders and digital investing platforms as the enemy because they compete directly with banks is a common perspective. It is also possible to think of these companies as innovators that will help us rethink how to make our customers trust us again. Many of these fintech innovators are eager to work with banks that want to provide better banking experiences. These innovations may be the way banks return to delighting their customers and building loyalty.

How Do You Build/Grow A Business…By Growing Loyalty

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You’re a community bank and your customers love you, right? So why do bankers worry that customers–and deposits–will flee to high-yield online accounts when rates rise? Or maybe it’s the possibility of disruptive technologies that has so many bankers nervous. In this session from Bank Director’s 2016 Growing the Bank Conference, Joe Bartolotta, executive vice president and director of strategic partnerships at Eastern Bank, headquartered in Boston, explains the activities that undermine customer loyalty and expose banks to startups and other institutions that could threaten their bottom line.

Highlights from this video:

  • The Value of Loyalty
  • Examples of “Banks Behaving Badly”
  • How Banks Create Loyalty

Presentation slides