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.

Three Steps to Building a Post-Pandemic Payments Strategy

The Covid-19 pandemic spotlighted contactless payments. To stay competitive with the future of payments, community banks must offer multifaceted options, like virtual cards, P2P payments and digital wallets.

But building a digital and contactless payments strategy goes beyond just offering digital wallets — though that can be a key tool. To become their customers’ primary transactional relationship, community banks need a strategy to make credit and debit payments easy in any digital channel.

Digital banking and contactless payment adoption accelerated during the coronavirus pandemic. A Mastercard survey conducted last year found that contactless transactions grew twice as fast as traditional checkout methods at grocery and drug stores between February and March. Additionally, Juniper Research found that spend in digital wallets is projected to increase 83% by 2025 due to adoption of digital payments during the pandemic. Three key steps for community banks looking to construct a card strategy are to audit your payments capabilities and gaps, use digital to become the passive provider of choice and diversify your card and payment portfolio.

Audit Payments Capabilities, Gaps
Before bank leaders can roll out new card programs, they must evaluate where their bank’s existing programs are and if any service gaps exist. Common questions every manager should evaluate are:

  • How much revenue is the current card program driving, and is it increasing or decreasing?
  • What is the wallet share of the bank’s current cards and is it increasing or decreasing?
  • Who are customers using to make payments outside your network?
  • What payment options can you support? Options should encompass virtual cards, P2P payments, purpose-driven cards that are targeted to specific audiences and needs and digital wallets.

From here, bank leaders can figure out where their greatest opportunities lie. It might be in building a set of niche card programs to meet a specific need, such as teen card accounts, gig worker cards or a virtual card offering. It could also be expanding card options to include prepaid programs, bringing debit cards in-house or adding card controls to enhance the customer experience.

Become the “Passive Payment” Provider of Choice
Once bank leaders understand their opportunities, they need to build strategies that help their cards become the “passive payment” provider of choice. Taking security as a given, customers care most about convenience. They will use the payment option that is the easiest for their chosen channel of commerce.

Digital wallets and contactless are becoming table stakes for banks; they are no longer “nice-to-have” products that will differentiate your institution from your competitors. The rise in e-commerce means that banks must make it easy for their customers to fulfill those purchases with their preferred payment option virtually.

Additionally, customers are increasingly demanding instant access to new accounts. Instant digital card issuance enables customers to issue or reissue a credit or debit card digitally and on demand for immediate use.

Banks should also work to ensure that their cards are able to integrate with existing digital wallets, allowing customers to “push-provision” their cards into their preferred wallet or app, rather than manually entering their card information.

Diversify the Card, Payment Portfolio
A diverse payments strategy is more than just offering a general-purpose debit or credit card. People increasingly want purpose-driven cards that meet their specific needs and situations. Families love accounts that provide the parents control over funds while giving their teens the ability to learn how to manage their money and spend with some autonomy. A dedicated business card can make paying vendors and other bills easy to manage without staff in the office to run a traditional accounts payable team. In addition, many businesses want “team” or “disbursement” cards they can issue to employees and monitor the transactions in real-time while retaining some control over how the funds are spent. The combinations are endless — elderly care accounts, affiliations with membership organizations and gig worker cards are other popular options.

To determine which products a community bank should focus on, leaders need to analyze customers’ spending behaviors by channel, using transaction data to look for trends. Then, they can build campaigns to target the most profitable or most engaged customers.

The additional revenue sources will be vital to community banks’ survival, given continually low interest rates. By building a comprehensive digital, contactless and physical card payments strategy, institutions can positioned themselves to remain the bank of choice for their communities.

The Corporate Banking Conundrum and the Massive Digitization Opportunity

Corporate banking makes up nearly a third of the average bank’s total lending operations. So, it is surprising that institutions don’t consider it among their core banking activities, especially given the need to digitize their front and back-end processes.

Corporate banking encompasses a large portfolio of services, including cash management, trade finance, risk management, transaction services and corporate finance services. At some banks, nearly 20% of their underlying book value is dedicated entirely to corporate banking activities. There are many moving pieces, which can make it difficult to optimize and digitize, especially for banks with a large number of corporate clients.

Corporate onboarding is an important and highly complicated process, with unique complexities for each bank. From the corporate customer perspective, the time needed to onboard, resolution turnaround time and customer experience are the most valuable areas — and require the most improvement. According to a recent Fenergo survey, 81% of bank C-suite executives believe poor data management lengthens onboarding and negatively affects customer experience. Improving how banks onboard corporate clients has a variety of benefits.

  • Reduce Time-to-revenue: Banks are keen to onboard new customers quickly to maximize income and profit. A faster setup means greater potential for revenue generation through various lending products.
  • Improve Customer Experience and Loyalty: An efficient customer onboarding process is crucial to secure loyal, lifelong relationships with corporate clients.
  • Streamline and Standardize Compliance: Anti-money laundering, Know Your Customer and other regulatory compliance obligations can be effectively automated internally and cross-country.

From a bank’s perspective, getting the right information, accounting for risk, and managing customer lifecycles is not only important – it is a differentiator. But we still find, right from the start of the customer journey, that tasks are excessively manual and turnaround time is alarmingly long: lacking even the most basic digital optimization, it can take between 90 and 120 days for corporate customer onboarding.

In corporate banking, a key area of concern is time. The traditional model of account onboarding and relationship management is far too labor intensive: collecting documents and navigating through tedious elements of their bank’s internal process flows, among other tasks. This time could be used for  meaningful and insightful interactions with the clients and enabling transaction for the customer.

Digitizing onboarding processes allows RMs more time to interact with clients. Digital channels can provide additional ways to connect with and closely serve clients. Applying artificial intelligence (AI) and machine learning (ML) to administrative and analytical tasks not only improve RM productivity, but provide a new perspective on customer service.

Digitized information leads to digitalization of the entire corporate onboarding process. Relationship portfolio management is the glue that holds it all together.

How to Attack the Corporate Banking Behemoth

Step 1: Adopt a digital technology framework to deliver end-to-end digitalization across customer lifecycle. This allows the bank to capture information from unstructured and structured sources using optical character recognition software (OCR), among other software solutions. As a result, making this information available digitally across stakeholders.

Step 2: Remove the friction between bank data sources, then automate the process flow with lean principles. This helps ease data enrichment by addressing any adverse or inadequate information upfront.

Step 3: Be proactive and manage risk.

Risk management has changed substantially over the past decade. Regulations that emerged from the global financial crisis and levied fines triggered a wave of change in risk functions. These included more detailed and demanding capital, leverage, liquidity, and funding requirements, as well as higher standards for risk reporting.

For risk functions to thrive during this period of fundamental transformation, banks need to proactively rebuild them. To succeed, banks must start now with a portfolio of initiatives, such as digital underwriting, the incorporation of AI and machine learning techniques and interactive risk reporting, that align short-term business cases with the long-term target vision. These improvements should be complemented by a shift in recruiting toward more technology-savvy profiles or the introduction of data lakes.

Prioritize natively integrated systems and gain deep insight into the portfolio with real-time metrics reflecting transactions, positions and risk exposure data. Slash costs by simplifying legacy systems, taking SaaS beyond the cloud, and adopting robotics and AI. Build technological capabilities that force the bank to be more intelligent around customers’ needs. Look for more advanced analytic tools with best-in-class road mapping and reporting functionality.

Banks are scrambling to catch up to the emerging demands of consumers in this digitally driven and rapidly evolving ecosystem. The commercial banking space has been buzzing around advancements in digitizing and automating processes, with clear benefits to boast. It’s time corporate banking joined them.

By 2025, risk functions in banks will need to be fundamentally different than today. The next decade in risk management may be subject to more transformation than the last one. Unless banks act now and prepare for these longer-term changes, they will continue to find themselves overwhelmed by new requirements and emerging demands.

Three Things Bankers Learned During the Pandemic

It’s been well documented how the pandemic lead to the digitization of banking on a grand scale.

But what bankers discovered about themselves and the capabilities of their staff was the real eye-opener. Firms such as RSM, an audit, tax and consulting company that works with banks nationwide, saw how teams came together in a crisis and did their jobs effectively in difficult circumstances. Banks pivoted toward remote working, lobby shut-downs, video conferencing and new security challenges while funneling billions in Paycheck Protection Program loans to customers. The C-suites and boards of financial institutions saw that the pandemic tested their processes but also created an opportunity to learn more about their customers.

Overall, the pandemic changed all of us. From our discussions with the leaders of financial institutions, here are three major things bankers learned about themselves and their customers during the pandemic.

1. Customers Want to Use Technology
Banks learned that customers, no matter their generation, were able to use technology effectively. Banks were able to successfully fulfill the needs of their customers, as more devices and technologies are available to banks at all price points and varying degrees of complexity. Post-pandemic, this practice will continue to help increase not only internal efficiencies but convenience for customers. As banks compete with many of the new digital providers, this helps even the playing field, says Christina Churchill, a principal and national lead for financial institutions at RSM US LLP.

Did you have a telemedicine appointment during the pandemic? Do you want to go back to driving to a doctor and sitting in a waiting room for a short appointment, given a choice? Probably not. Nor will bank customers want to come to a branch for a simple transaction, says Churchill.

The pandemic made that all too clear. Banks had to figure out a way to serve customers remotely and they did. Digital account opening soared. Banks stood up secure video conferencing appointments with their customers. They were successful on many counts.

2. Employees Can Work Remotely
The myth that bankers were all working effectively while in the office was exposed. Instead, some found employees were more effective while not in the office.

Technology helped bridge the gap in the existing skill set: Bankers learned how to use technology to work remotely and used it well, says Brandon Koeser, senior manager at RSM. Senior leaders are finding that getting employees back to the office on a strict 8 a.m. to 5 p.m. schedule may be difficult. “Some bankers have asked me, ‘do we return to the office? Do we not go back?’” says Koeser. “And I think the answer is not full time, because that is the underlying desire of employees.”

After surveying 27,500 Americans for a March 2021 study, university researchers predicted that Covid-19’s mass social experiment in working from home will stick around. They estimate about 20% of full workdays will be supplied from home going forward, leading to a 6% boost in productivity based on optimized working arrangements such as less time commuting.

Still, many senior bank leaders feel the lack of in-person contact. It’s more difficult and time-consuming to coach staff, brainstorm or get to know new employees and customers. It’s likely that a hybrid of remote and in-person meetings will resume.

3. Banks Can Stand Up Digital Quickly
Banks used to spend months or years building systems from scratch. That’s no longer the case, says Churchill. Many banks discovered they can stand up technological improvements within days or weeks. Ancillary tools from third-party providers are available quickly and cost less than they did in the past. “You don’t have to build from scratch,” Koeser says. “The time required is not exponential.”

Recently, RSM helped a bank’s loan review process by building a bot to eliminate an hour of work per loan by simply pulling the documentation to a single location. That was low-value work but needed to be done; the bot increased efficiency and work-life quality for the bank team. A robotic process automation bot can cost less than $10,000 as a one-time expense, Churchill says.

Throughout this year, senior bankers discovered more about their staff and their capabilities than they had imagined. “It really helped people look at the way banks can process things,” Churchill says. “It helped gain efficiencies. The pandemic increased the reach of financial institutions, whom to connect with and how.”

The pandemic, it turned out, had lessons for all of us.

How FIs Can Take the Speedboat or Extensibility Approach to Digital, Accelerated Financial Services

In a post-pandemic world, legacy financial institution must accelerate their digital processes quickly, or risk ceasing to be relevant.

With financial technology companies like Chime, Varo Money, Social Finance (or SoFi) and Current on the rise, change is inevitable. Alongside the nimble fintech competition, banks face pressure to rapidly deliver new products, as was the case with the Small Business Administration’s Paycheck Protection Program loans. While most legacy institutions try to respond to these business opportunities with manual processes, companies like Lendio and Customers Bank can simply automate much of the application process over digital channels.

Legacy institutions lack the access to the latest technology that digital challengers and fintechs enjoy due to technology ecosystem constraints. And without the same competitive edge, they are seeing declining profit margins. According to Gartner, 80% of legacy financial services firms that fail to adapt and digitize their systems will become irrelevant, and will either go out of business or be forced to sell by 2030. The question isn’t if financial institutions should evolve — it’s how.

To fuel long-term growth, traditional banks should focus on increasing their geographic footprint by removing friction and automating the customer’s digital experience to meet their needs. Millions of Generation Z adults are entering the workforce. This generation is 100% digitally native, born into a world of vast and innovative technology, and has never known life without Facebook, Snapchat, TikTok or Robinhood. In a couple of years, most consumers will prefer minimal human interaction, and expect fast and frictionless user experience in managing their money, all from their smartphone.

Some solutions that traditional banks s have undertaken to enhance their digital experience include:

  • Extending on top of their existing tech stack. In this scenario, financial institutions acquire digital/fintech startups to jump-start a move into digital banking. However, there are far fewer options to buy than there are banks, and few of the best fintechs are for sale.
  • Totally transforming to modern technology. This option replaces the legacy system with new digital platforms. It can come with significant risks and costs, but also help accelerate new product launches for banks that are willing to pay a higher initial investment. Transformations can last years, and often disrupt the operations of the current business.
  • Using the extensibility approach. Another way forward is to use the extensibility approach as a sub-ledger, extending the legacy system to go to market quickly. This approach is a progressive way to deliver fit-for-purpose business capabilities by leveraging, accelerating and extending your current ecosystem.

Institutions that want to enter a market quickly can also opt for the speedboat approach. This includes developing a separate digital bank that operates independently from the parent organization. Speedboats are fintechs with their own identity, use the latest technology and provide a personalized customer experience. They can be quickly launched and move into new markets and unrestricted geography effortlessly. For example, the Dutch banking giant ABN AMRO wanted to create a  fully digital lending platform for small to medium enterprises; in four months, the bank launched New10, a digital lending spinoff.

A speedboat is an investment in innovation — meant to be unimpeded by traditional organizational processes to address a specific need. Since there is a lot of extensibility, the technology can be any area the bank wants to prioritize: APIs, automation, cloud and mobile-first thinking. Banks can generate value by leveraging new technology to streamline operations, automate processes and reduce costs using this approach.

Benefits include:

  • Being unencumbered by legacy processes because the new bank is cloud native.
  • The ability to design the ideal bank through partners it selects, without vendor lock-in.
  • Easier adaption to market and consumer changes through the bank’s nimble and agile infrastructure.
  • Lower costs through automation, artificial intelligence and big data.
  • Leveraging a plug-and-play, API-first open banking approach to deliver business goals.

By launching their own spin-off, legacy banks can go to market and develop a competitive edge at the same speed as fintechs. Modern cloud technology allows banks to deliver innovative customer experiences and products while devoting fewer resources to system maintenance and operational inefficiencies.

If a financial institution cannot make the leap to replace the core through a lengthy transformational journey and wants to reach new clients and markets with next-generation technology, launching a speedboat born in the cloud or opting for the extensibility approach opens up numerous opportunities.

How an Online-Only Bank Powers Its Platform

If Radius Bank was going to succeed as a digital-only bank, it needed to offer customers an incredible digital experience.

By 2016, the Boston-based bank had closed most of its branches to focus solely on digital channels — a strategy that hinged on offering consumers and small business customers a superior experience without needing physical locations to resolve problems or open new accounts. Part of a suite of financial technology partners that powered this strategy was Narmi, a digital banking platform provider. Radius found success with its strategy, so much so that it became a natural acquisition for another online lender: In February 2021, LendingClub Corp., a San Francisco-based marketplace lender, closed its acquisition of Radius Bank and renamed the company LendingClub Bank.

Radius has been a long-time adopter of Narmi’s platform, and success stories like theirs helped Narmi secure the top spot in both the customer experience category and as the “Best of Connect” — the best overall among the category winners — in Bank Director’s 2021 Best of FinXTech Awards. Finalists included NCR’s open-technology-based Digital Banking Platform and Velocity Solutions’ Account Revenue Solution, which offers customers rewards to increase engagement. You can read more about Bank Director’s award methodology and judging panel here.

Radius partnered with Narmi about three years ago to refresh its online and mobile platforms, says Mike Butler, the former CEO of Radius Bancorp. Narmi offered “a drastic change” in the look, feel and functionality of the consumer banking platform. The platform also helps banks reduce both fraudulent account openings and account opening abandonment.

“Three years ago, if you visited the site, you’d see a traditional bank. Today, you’d see a more user-friendly experience,” he says. “[Narmi is] more than just technology people who say, ‘Tell me what you want and I’ll do it.’ From a fintech perspective, they give us their views of how they think the customer experience should operate. It’s like an added management team to us.”

Change can be jarring to customers used to the previous layout of a site. Butler acknowledges some initial dips in the bank’s net promoter score, which it uses to measure the platform’s success via the willingness of a customer to recommend the product. But Radius Bank’s score rebounded to above 50 within three months — a level that is considered to be “very good” for a bank, he says.

The platform features a “marketplace” where Radius introduces clients and customers to other products and services outside of banking that can improve their financial health. The implementation went so well, and subsequent customer reaction was so positive, that Radius decided to use Narmi again to launch a small business digital banking platform in 2020 — a product launch that helped the bank address a segment under intense pressure because of the coronavirus pandemic, and whose needs are often left out of bank offerings. Butler says Narmi was able to meet the bank’s implementation deadlines, clearly communicating the work required to make adjustments, and laying out options and alternatives in cases where the bank risked missing its timeline.

“Having our small business launch in 2020 in the middle of the pandemic was a big boost to our small business clients,” Butler says. “We’ve had a huge uptick in our acquisitions of small business clients — you have to throw Narmi into the mix of reasons why.”

Five Blind Spots to Avoid When Implementing Digital Technology

Digital tech implementations have moving parts that require up-front focus and planning to avoid costly fixes and delays.

Implementations can be thrown off track by blind spots that add costs and time, and result in a lack of confidence in the overall solution. At Bridgeforce, we routinely help clients identify blind spots and take steps to ensure a smooth implementation. Here is our list of the top five of 10 critical blind spots to watch for — all of which can be managed and avoided if you take action early.

Top Five Blind Spots to Watch for When Implementing Digital Technology

1. “Out of the Box” Descriptions

The vendor’s generic screen text and customer journeys are written for all clients. You’ll need to customize it for your organization with unique messaging and copy, customer journey flows, branding and opt-in/opt-out experiences. The blind spot risk is that customization and development adds to your timeline and costs.

Steps to take:
Secure Involvement: Engage compliance, customer experience and marketing teams when vendors are providing demos so each group can ask the appropriate questions to ensure that they get what they need from this solution.

Identify SME Assessment: Before vendor selection is complete, require that each business partner assess the work effort and resource needs to make required changes. Then you can determine the impact on the project timeline and budget. This sets expectations and informs effort and subsequent timelines.

2. Not Using Vendor’s Service Providers

Think twice before taking a pass on your vendor’s selected providers. There are four major integrations that must be considered: payments, SMS, emails and letters. Generally, using the vendor’s partners will be an easier onboarding experience with less required customization. The blind spot risk is that difficulty with onboarding and customization adds to your timeline and costs.

Steps to take:
Interrogate During Vendor Demos: Discuss available integrations during vendor demos so that you can make an informed assessment. This way, you can weigh trade-offs of using vendor partners against internal or enterprise solutions. The output of this key decision has a direct impact on your timeline and budget.

3. Lack of Source System Knowledge

You’ll need small and medium enterprises that have in-depth knowledge of all the affected source systems to properly map data for placement files and return files. The blind spot risk is that not having the source system familiarity could add weeks and months to the deployment timeline, depending on how many systems your bank uses.

Steps to take:
Plan Ahead: Determine early in the process what data will be passed to the vendor in the daily placement file. Ensure that you know how the data that is returned to the source systems will be mapped. Then, begin sourcing those items.

4. Counting on the Vendor for Operationalization

Operationalizing the digital solution falls entirely within your bank, because a software company defines a completed installation only as “deployment of the software.” Vendors aren’t focused on your operations — but you should be. The blind spot risk is you slow progress if you’re slow to recognize the need to operationalize, which can extend your timeframe and add costs if the vendor has to pause activity.

Steps to take:
Build Operationalization into Your Timeline: Ensure that your implementation plan considers time for strategy design and coding, messaging content creation and deployment, reporting design, procedure updates, integration with control self-assessments and analytics. Vendors may provide some light support in configuring the application parameters, but anything else beyond that is not their core business model.

Create Workflow in Advance: Predetermine your processes and workflows. For example, is the goal of digital collections to drive more self-service, or to improve interaction that ultimately connects to an agent? The end-to-end internal operational experience and external customer experience is unique to each organization—yours is no exception.

5. Timeline Based on Vendor’s Standard Deployment

The vendor will assume that several key dependencies have been finalized by your organization, such as strategy design. This can create unrealistic, often ambitious timelines. The blind spot risk is the danger of setting false expectations across the organization. The necessary adjustments that you’ll need to make to an unrealistic timeline will lengthen the completion time and could negatively influence staff perceptions.

Steps to take:
Determine Current State Readiness: Standard deployment schedules are achievable if your organization is ready. To ensure readiness, complete an initial working session and assessment.

Tackle these and five more blind spots head on before they negatively impact your implementation. Click here to see the all 10 blind spots and their fixes.

Digital Transformation From a Branch Perspective

If you ask five bankers to define what constitutes a successful digital transformation, you will receive five different answers. However, organizations can employ a few measures to help them succeed, including establishing priorities, assessing capabilities and creating a digital road map.

Meeting current challenges
Many financial institutions were in no rush to transform prior to March 2020. However, the Covid-19 pandemic accelerated the implementation of digital-first models. It also put pressure on organizations to battle-test alternative business models supporting remote operations and service delivery. Most notably, banks had to activate remote working models while simultaneously figuring out how to service and support face-to-face customers.

Now in 2021, the initial challenges posed by the pandemic have mostly been addressed. At the same time, bankers acknowledge that branch traffic levels might never recover to pre-pandemic levels.

Establishing priorities
First, organizations should establish priorities. The average mid-size, full-service retail office has annual operating expenses exceeding $350,000 a year — real money that could be repurposed to build a competitive digital service. Unleashing this capital and using it more effectively is key to initiating an effective digital transformation.

One initial objective should be to rank branch locations in terms of profitability and other performance metrics to identify the bottom 20%. In most cases, that percentage represents the locations that have been habitual low performers, or that might be in declining markets or suboptimal locations. It’s important to determine if these locations are leased, and if so, if there is a clear path to exit the lease. These details affect the timeline required to exit and any write-offs or write-downs related to each location.

Digital channels do not work in a vacuum. Experience tells us that community bankers do not like to lay off staff who live and work in these markets, and organizations should consider redeployment of these employees. Reassigned branch personnel can support new customers and existing users as they navigate organization websites and online product applications.

Once organizations understand the exit strategy and cost impact for low-performing locations, they can create plans that outline the timing and potential resources that could be freed up from physical branches and funneled into the digital channel.

Assessing capabilities
After determining the digital transformation budget, organizations should make an honest assessment of their existing capabilities and identify gaps or weaknesses. One goal should be to fix what is broken or not optimal, then prioritize the spend and deployment timeline for true enhancements.

Selecting digital enhancements involves many options, dependencies and complexities, which can slow down decision-making about digital transformation initiatives. Fixing obvious problems first and then investigating enhancements will take time, so organizations don’t need to close low-performing branches immediately.

Executives need to fully understand the features of potential enhancements, what is lacking from current capabilities, what is additive to current capabilities, enhancement release timelines and costs associated with each improvement. They also should consider the roll-out of these features and the impact on existing and future customers.

Creating a digital road map
Creating a digital road map can enable banks to set expectations about when changes to digital services will occur. Doing so requires honest introspection about where the organization is positioned on the digital transformation continuum.

For example, banks might think they have effective online account opening processes, but they should ask: Is it truly an automated, end-to-end process that works at all times under all conditions? Or do deposit operations personnel need to manually move data or paper along to make sure accounts can get set up? Organizations should fully understand where and how their existing customers might be affected, and where and how new customers will be serviced as they open accounts online.

While creating their digital road maps, banks also should take a look at the digital features they’ve already deployed. Are they useful and easy to adopt? Do they drive the user toward desired actions? Do the customers really use the available digital features? Are there benefits to users? If the answers to any of these questions is “no,” organizations should consider removing problematic features or improving processes.

Teeing up for success
Keeping tabs on customer usage trends and optimizing the customer experience should be top priorities in a digital transformation. Banks that make necessary changes can help improve the entire digital experience. To learn more about digital transformation from a branch perspective, view this video.

 

How Banks Kept Customers During the Pandemic, Even Commercial Ones

Digital transformation and strategy are examined as part of Bank Director’s Inspired By Acquire or Be Acquired. Click here to access the content on BankDirector.com.

Despite closed branches and masked interactions, the coronavirus pandemic may have actually improved customers’ relationships with their banks. They have digital channels to thank.

That’s a shift from the mentality pervading the industry before the pandemic. Business lines like commercial lending seemed firmly set in the physical world: a relationship-driven process with high-touch customer service. The Paycheck Protection Program from the U.S. Small Business Administration completely uprooted that approach. Banks needed to deliver loans “as fast as possible” to their small commercial customers, says Dan O’Malley, CEO of data and loan origination platform Numerated during Bank Director’s Inspired By Acquire or Be Acquired. More than 100 banks are currently using the platform either for PPP applications or forgiveness.

The need for rapid adoption forced a number of community banks to aggressively dedicate enough resources to stand up online commercial loan applications. Sixty-five percent of respondents to Bank Director’s 2020 Technology Survey said their bank implemented or upgraded technology due to the coronavirus. Of those, 70% say their bank adopted technology to issue PPP loans. This experiment produced an important result: Business customers were all too happy to self-service their loan applications online, especially if it came from their bank of choice.

“Self-service changes in business banking will be driven by customer demand and efficiency,” O’Malley says, later adding: “Customers are willing to do the work themselves if banks provide them the tools.”

Digital capabilities like self-service platforms are one way for banks to meaningfully deepen existing relationships with commercial borrowers. Numerated found that borrowers, rather than bankers, completed 84% of PPP loan applications that were done using the company’s platform, and 94% of forgiveness applications. That is no small feat, given the complexity of the application and required calculations.

Those capabilities can carve out efficiencies by saving on data entry and input, requesting and receiving documentation, the occasional phone call and the elimination of other time-consuming processes. One regional bank that is “well known for being very relationship driven” was able to process 3,000 “self-service” PPP loan applications in a morning, O’Malley says. Standing up these systems helped community banks avoid customer attrition, or better yet, attract new customers, a topic that Bank Director magazine explored last year. Already, banks like St. Louis-based Midwest BankCentre are reaping the gains from digital investments. The $2.3 billion bank launched Rising Bank, an online-only bank, in February 2019, using fintech MANTL to open accounts online.

The impetus and inception for the online brand dates back more than three years, says President and CFO Dale Oberkfell during an Inspired By session. Midwest didn’t have a way to open accounts online, and it wanted to expand its customer base and grow deposits. It also didn’t want to replicate the branch experience of opening an account — Midwest wanted to compress the total time to three minutes or less, he says.

Creating the brand was quite an investment and undertaking. Still, Rising Bank has raised $160 million in deposits — as many deposits as 10 branches could — with only two additional employees.

“We didn’t spend the dollars we anticipated spending because of that efficiency,” Oberkfell says.

Midwest BankCentre is exploring other fintech partnerships to build out Rising Bank’s functionality and product lines. The bank is slated to add online loan portals for mortgages and home equity lines of credit — creating the potential for further growth and efficiencies while strengthening customer relationships. He adds that the bank is looking to improve efficiencies and add more tools and functionality for both customers and employees. And how are they going to fund all those technology investments?

Why, with the fees generated from PPP loans.

Why Banks Should Scrap Their Digital Strategy

The last thing banks need when they pursue a digital transformation is a digital strategy.

Not too many banks get this right. Rather than create a digital strategy, companies instead need one cohesive enterprise strategy for how to be the best in serving their clients’ needs.

Setting up distinct channel strategies, or a digital strategy that runs outside of your bank strategy, only generates a bunch of disparate go-to-market ideas. That siloed approach puts your bank on a road to failure by generating and instigating conflicts, as teams vie for differentiated levels of support and resources to strengthen now-competing channels.

Instead of standing on its own, digital should shape and drive your single banking strategy. You are striving for integrated omnichannel delivery, which will translate into the best experience no matter how customers engage with you. Even if you want customers to handle the overwhelming percentage of their banking online, many will continue to walk into branches, particularly for complex transactions like mortgage applications, and call you with questions.

Granted, safer-at-home guidance in response to the coronavirus pushed digital adoption forward, more by necessity than desire. In July, nearly five months after the pandemic started, 91% of consumers conducted banking online, mostly to deposit checks or review account balances. Even more striking: 40% of consumers reported using their bank’s mobile app more often. But bankers shouldn’t take these adjustments for granted or consider them permanent.

Customers don’t care that different teams manage your digital, branch and telephone channels. They want to trust you to meet them wherever they are, and not have to explain who they are and what they want every time they interact with your bank. Digital allows you to walk that fine line with insights to follow their electronic footprints to specific products that match their financial needs.

Digital Is a Tool, Not a Product
This is so important that I need to repeat it: Digital is a tool, not a product.

I already know some folks are saying, “But, yes, it is. We produced a mobile app.” That’s not the same. You created that app for its own purpose. It also needs to be connected to something else — your banking systems — and deliver a real solution.

Granted, your bank needs digital visionaries who can envision powerful, engaging capabilities and stay ahead of customers. But these leaders must start with your banking strategy and weave their innovative ideas into that bedrock. Your team should be constantly stepping up its capabilities and services, and positioning them in a near-linear fashion alongside the customer journey so that customers can get what they want, when they need it.

And while you should never have a distinct digital strategy, you do need a dedicated team to monitor and track performance in this channel and identify new customer needs and opportunities. This is the essence of digital transformation, as you continue iterating your offerings and migrating more customers and transactions into your digital channel.

Changing the Internal Mindset
Digital transformation is about changing who you are as a bank and bringing that to your customers. The starting point is always your enterprise strategy, which anchors your value propositions on how you serve customers and your role in the community.

Every bank associate will have a role in achieving the future vision defined in that strategy. Be clear on how digital connects to your bank strategy and communicate expectations so that everyone from the call center team to the C-suite understands where they fit in. Even as your bank inches forward, it remains on a treadmill: continuing to advance to stronger performance that outpaces the competition but never crossing the finish line.

As you develop your bank’s enterprise strategy, establish and monitor metrics upfront to gauge success and maturity, including in the digital channel. Some metrics to consider include improved efficiency, the amount of customers adopting digital behaviors and successfully escalating the right transactions in your digital channel.

Be sure to measure progress in three dimensions: Are you getting more efficient as customers migrate to higher digital usage? Are you freeing up funds to invest in other initiatives? And are you maintaining the customer experience that defines your bank?

Because if you lose that in the long run, you’re going to lose your customers.