Understanding Customers’ Finances Strengthens Relationships

As the current economy shifts and evolves in response to inflationary pressures, and consumer debt increases, banks may encounter an influx of customers who are accruing late charges, overdue accounts and delinquencies for the first time in nearly a decade.

Banks have not been accustomed to seeing this level of volume in their collections and recovery departments since the Great Recession and have not worked with so many customers in financial stress. To weather these economic conditions, banks should consider automated systems that help manage their collections and recovery departments, as well as guide and advise customers on how to improve their financial health and wellbeing. Technology powered with data insights and automation positions banks to successfully identify potential weakness early and efficiently reduce loan losses, increase revenue, minimize costs and have the data insights needed to help guide customers on their financial journey.

Consumer debt increased $52.4 billion in March, up from the increase of nearly $40 billion the previous month. Financial stress and money concerns are top of mind for many households nationwide. According to a recent survey, 77% of American adults describe themselves as anxious about their financial situation. The cause of the anxiety vary and stem from a wide range of sources, including savings and retirement to affording a house or child’s education, everyday bills and expenses, paying off debt, healthcare costs and more.

While banks traditionally haven’t always played a role in the financial wellness of their customers, they are able to see patterns based on customer data and transactional history. This viewpoint enables them to serve as advisors and help their customers before they encounter a problem or accounts go into delinquency. Banks that help their customers reduce financial stress wind up strengthening the relationship, which can entice those customers into using additional banking services.

Using Data to Understand Customer’s Financial Health
By utilizing data insights, banks can easily identify transaction and deposit patterns, as well as overall expenses. This allows banks to assess their customer risk more efficiently or act on collections based on an individual’s level of risk and ability to pay; it also shows them the true financial health of the customer.

For example, banks can identify consumers in financial distress by analyzing deposit account balance trends, identifying automated deposits that have been reduced or stopped and identify deposit accounts that are closed. Banks can better understand a consumer’s financial health by collecting, analyzing and understanding patterns hidden in the data.

When banks identify potentially stressed customers in advance, it can proactively take steps to assist customers before loans go delinquent and accounts accrue late fees. Some strategies to accommodate customers facing delinquency include offering free credit counseling, short-term or long-term loan term modifications, and restructuring or providing loan payment skip offers. This type of assistance not only benefits the financial institution — it shows customers they are valued, even during tough economic times.

Data enables banks to identify these trends. But they can better understand and utilize the data when they integrate it into the workflow and apply automation, ultimately reducing costs associated with the management of delinquencies, loss mitigation and recoveries and customer relationship management. A number of banks may find that their outdated, manual systems lack the scalability and effectiveness they’ll need to remain competitive or provide the advice and counsel to strengthen customer relationships.

Banks are uniquely positioned to help consumers on their journey to improve their financial situation: They have consumer information, transaction data and trust. Banks should aim to provide encouragement and guidance through financial hardships, regardless of their customers’ situation. Augmenting data analysis with predictive technology and automated workflows better positions banks to not only save money but ensure their customers’ satisfaction.

Identifying Customer Needs, Sans Small Talk

For such a seemingly trivial aspect of social gathering, small talk has provided significant economic value to banks over the years.

Transactions allowed bank staff to interact with customers and to learn about their lives, anticipate their needs, provide information or a listening ear, or to offer a well-timed referral to a personal banker or loan officer. Even when those conversations didn’t result in new business, they still cultivated a relationship and trust.

Consumers Stop Conversing
The pandemic hastened what was already a longtime trend: Consumers want a bank with a branch nearby, but most prefer not to visit that nearby branch unless they must.

In 2020, the cohort of customers who still preferred the branch received a new incentive to begin using their bank’s mobile app — safety. Branch sign-up lists and capacity caps only made using a branch that much more inconvenient. Although some customers have returned to visiting the branches, the pendulum shifted for many who are now acclimatized to digital banking.

Customers now also clearly prefer to do digital research on banking products, according to 600 banking customers polled by Total Expert.
They say they’re nearly twice as likely to search for a lender online versus contacting a lender directly. They are four times more likely to search online rather than ask a real estate agent for a referral for a mortgage lender. And they go to their financial institution’s website first when they have a new financial need.

Web activity, however, is not a two-way conversation. Unlike a teller who can ask follow-up questions, interpret customer responses and make referrals to a personal banker or mortgage loan officer, knowing what customers need depends on their activity: applying, initiating a chat, filling out a form or contacting a banker. Customers are increasingly “going dark” on small talk; where they do show interest, the bank must wait for them. Bank leaders should be wondering how to revive two-way, active conversations.

But where to start? Consumers can sense sales quotas in a branch. And they can’t be forced to fill out a form on a website any more than they can be forced to volunteer their financial needs. Banks must look to another way of conversing: data.

Data as Conversation Starter
Customers volunteer opportunities to serve them every day through their data. As account holders and borrowers, they provide significant information to their bank in exchange for financial services.

Understanding and using this data, though, has long seemed too intricate for local, community-focused banks. Advances in technology have changed that; using data to inform and to initiate customer engagement is far more attainable than ever before. Banks are moving back into active engagement because data allows them to intuit needs not vocalized by customers.

For example, every bank has an address for their retail depositors’ home. But when does that matter? It’s central to selling a home; when a customer’s home goes up for sale, the address is listed on a Multiple Listing Service (MLS), and it sends a signal to their bank. Customers selling a home often buy a new one, or they need to safely invest the proceeds of the sale. The MLS listing is the customer vocalizing a set of possible needs. Once a bank catches that signal, technology can allow staff to advise, interpret, engage or refer, depending on the bank’s strategy.

Even outside of mortgages, knowing a customer is selling a home can be both a revenue and relationship opportunity. The National Association of Home Builders found that customers are more than 2.5 times more likely to make large purchases within a year of buying a new home — items like appliances, furniture and home improvements — compared to consumers who did not. Would these customers appreciate savings through credit card rewards? Do they want to use their equity to buy appliances? Were they waiting until their new mortgage closed to purchase a commuter car? Even simple, widely available data points can become the basis for highly engaging and productive interactions between a bank and its customers.

Eighty-four percent of Americans report stress about their finances, according to a recent ValuePenguin survey; bank customers want help reaching their financial goals. Banks may not be able to stop the decline in small talk, but they can revive and even surpass it with new tools made for banking. There are so many more opportunities for banks to use their data to anticipate needs and to engage customers about their desired outcomes. The upside is lifelong loyalty within each customer relationship.

Filling the Gap of Wealth Management Offerings to Grow Wallet Share

Americans need personalized financial and wealth management advice more than ever, but don’t know where to look.

The coronavirus pandemic negatively impacted personal finances for more than 60% of Americans, according to recent data from GOBankingRates. Many of these Americans have relationships with regional and community banks that could be a trusted partner when it comes to investing and planning for the future, but these institutions often lack adequate financial advisory resources and options. This drives customers to social media and other providers, such as fintechs or large national institutions, for wealth management needs — when they actually would prefer a personal, professional relationship with their bank.

The current need for stronger wealth management offerigns, coupled with advances in easy-to-deploy technology, means that community banks can now offer more holistic, lifecycle financial advice. These offerings have the potential to create new revenue streams, engage people earlier in their wealth-building and financial planning journey, deepen and fortify existing customer relationships and make financial advice more accessible.

But while many banks have a strong depositor base and a customer base that trusts them, the majority don’t have the expertise, resources or digital engagement tools to offer these services. Modern technology can help fill this gap, empowering institutions to offer more robust financial advisory services.

Banks should meet customers where they spend the majority of their time — within digital channels. Intuitive, self-service digital options presents a valuable way to engage customers in a way that’s not complex or requires additional staff in branches. First steps can include a digital calculator within the bank’s mobile app so individuals can compute their financial wellness score, or presenting simple options to customers to invest a nominal sum of money, then adding a way to monitor its progress or dips. It can also include a digital planning discovery tool to help customers organize their accounts online.

More meaningful success lies in leveraging customer behavior data to understand changes and designing processes so that individual can seamlessly move to the next phase of the financial advice lifecycle. This might include flagging when a customer opens additional accounts, when someone has a high cash balance and frequent deposits, or when a younger individual accrues more wealth that simply sits. If banks fail to proactively monitor this activity and reach out with relevant hooks, offers and insights, that individual is almost guaranteed to look elsewhere — taking their money and loyalty with them.

Banks should provide options for customers to reach out for guidance or questions around next steps — including knowledgeable financial advisors at the ready. While people are increasingly comfortable with (and establishing a preference toward) managing money and investments digitally, there is still a critical need for direct and quick access to a live human. Banks can integrating matching capabilities and staffing regional centers or branches with designated experts, but there should also be options for customers to contact advisors remotely through video or chat. This allows individuals to receive relevant advice and support from anywhere, anytime.

But building the infrastructure that can properly serve and support clients throughout every stage and situation can be prohibitive and cumbersome for most community and regional institutions. Fortunately, there are strategic technology partners that can offer a modern, end-to-end platform that spans the entire advisory lifecycle and offers integrated digital enablement right out of the box.

A platform, in lieu of a collection of bespoke software features from multiple vendors, can act as a single point of truth and provides a centralized ecosystem for customers to receive a holistic snapshot of their financial situations and plan. Look for platforms with open APIs to facilitate seamless integration to complement and maintain the front, middle and back office while offering a full range of functionality for bank customers. Plus, having one platform that can accommodate every stage of the financial advisory lifecycle makes interactions easier and more efficient for the institution, and more familiar and friendly for the customer.

Community and regional institutions have always served as a beacon of trust and support for their communities and customers. They don’t have to experience customer attrition over wealth management options and functions. Those that do so will be able to form even stickier, more profitable relationships, while helping customers broaden their opportunities and improve their overall financial wellness.

Innovation Spotlight: BankWest Community Bank


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Vincent Tyson
Deposit Accounts Manager, BankWest

Vincent Tyson oversees deposit generation and retention for the South Dakota-based bank, including product development and process changes. He works closely with branch managers, the regional president and CFO on rate changes and deposit pricing. In this interview, he discusses the practical dynamics of staying relevant and assessing customer needs outside of the traditional bank environment.

How have you been able to stay innovative at BankWest?
We have a dedicated project team that works with our vendors to integrate vendor solutions into our product mix when we believe that our markets are ready for it. We aren’t bleeding edge, but sometimes we will be first in our markets. For a South Dakota bank, we’ve been able to stay innovative with the remote solutions we offer our customers. With such a large agricultural customer base, our products and services need to be in the fields, barns and on the ranches where our customers are. Despite our 127-year history, our innovation is the ability to remain relevant in our customers’ lives, no matter where they work, live or play.

When it comes to implementing a fintech solution, would you rather buy, build or partner?
At this point, we’d rather partner. We’re not big enough to buy and don’t have enough resources to build. Like most banks of our size ($1 billion in assets), we prefer to —buy in’ to new technology and roll it out as part of another service/sales channel. Investing too heavily could be dangerous, and bringing in resources for development could be hit and miss.

As consumer expectations in banking change, how do you stay engaged with this audience?
Lots of research, especially among our existing customers. We also invest heavily in staff education, keeping key personnel up to date with relevant technology and making sure all of our staff members are trained and ready to launch new technology as it becomes available. South Dakotans tend to be up-front with their needs, vocal about their opinions and pretty focused on where they see value from their bank. We make sure that we hear their voices by keeping in touch, making sure that we are in the places where our future customers are learning and asking our existing base what they’ll need tomorrow. This is done through engaging face-to-face meetings, either in our branch network or out at the customer’s property or place of work. We have many touch points, as well as surveys that allow us to track trends and focus resources where needed.