4 Reasons to Build a Digital-Only Brand

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Digital transformation offers many long-term benefits for community banks. But it can also pose strategic challenges, such as how to test new products and services without affecting the identity of an institution’s core brand.

One solution is to launch a digital-only brand that is distinct from the bank’s current brand. Developing a digital brand can drive powerful results that might otherwise be inaccessible for community banks that are looking to innovate but may be hesitant to make too many changes too quickly. In this piece, we explore how developing a digital-only brand can benefit banks, and which strategies are key to ensuring their success.

1. Build a New Tech Stack and Test Alternative Providers
The legacy banking technology that community banks typically rely on doesn’t always make it easy to roll out new products or customize offerings. Fortunately, new platforms can streamline the process and give them the power to easily change rates and marketing copy in real time. A digital-only brand is a great way to test out new technologies like online account opening before expanding them to the bank’s core brand.

One community bank in Missouri is doing just that. In 2019, Midwest BankCentre, based in St. Louis, Missouri, launched its digital-only brand, Rising Bank. Rising gave the 115-year-old bank a way to explore new technologies, test digital marketing methods and measure how the market would respond to product changes. In its first five months, Rising Bank experienced:

  • An average conversion rate of 48% on online applications.
  • Average initial deposits of over $55,000.
  • Net-new deposits of more than $100 million.

Launching Rising allowed Midwest to de-risk innovation efforts and test new approaches to digital transformation. The community bank was then able to take these insights and drive similar results for its core brand.

2. Attract Customers in New Markets
The right tools allow community banks to deliver great service, no matter the channel. A digital-only brand can help smaller institutions compete with megabanks’ online offerings and unlock untapped market share. Unlike a brick-and-mortar institution, a digital brand is accessible to customers anytime, anywhere. This means a bank can expand the geographic reach of its business and target new markets without building new branches.

3. Uncover Opportunities for Hyper-Personalization
Hyper-personalization means using data and analytics to develop a deep understanding of customers’ interests, expectations and gaps in service. Using these insights, banks can develop hyper-personalized products that address the needs of specific demographics, communities, profession, and underserved groups. By targeting these audiences, banks can carve out a successful niche and maintain sustainable growth.

Data collected through a digital-only brand — through online interactions, geolocation data, aggregated payments behavior and so forth — will reveal to your bank where the opportunities are. For instance, a bank could launch an online-only brand that caters to healthcare workers or the LGBTQ+ community.

4. Develop New Products Without Fear of Cannibalization
One of the concerns banks may have about developing new banking products or strategies is the potential to cannibalize existing business. It’s key that the digital brand is distinct from the core brand — while still supported by the bank’s experience and brand recognition. When the new brand and existing brand serve different purposes and appeal to different customer bases, the risk of cannibalization is low.

For example, Rising Bank and Midwest BankCentre’s core brand achieve different goals for the institution. As a digital-only brand, Rising appeals to younger demographics and has raised significant deposits from a national customer base, while Midwest is community-focused and excels at building relationships in-market. Further, Midwest and Rising avoid cannibalization given their varying interest rates. Yet both brands have achieved considerable success on digital channels.

“This year alone, Midwest BankCentre’s digital-only brand and our core brand’s online channel held the No. 1 and No. 2 spots, respectively, in most accounts opened across our organization,” says Erin Erhart, Midwest’s executive vice president of bank and digital operations.

A digital-only brand can complement the bank’s core brand in a targeted way. This large-scale digital transformation project may seem overwhelming, but vendors can help banks find the right approach and determine how to achieve the best results with a digital brand.

How Legacy Systems, Tech Hold Bank Employees Back

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The recent explosion in financial technology firms has allowed banks to make massive strides in improving the customer experience.

The most popular solutions have focused on making processes and services faster and easier for customers. For example, Zelle, a popular digital payments service, has improved the payments process for bank customers by making transfers immediate — eliminating the need to wait while those funds enter their checking account. There are countless examples of tools and resources that improve the bank customer experience, but the same cannot be said for the bank staffers.

Bank employees often use decades-old legacy systems that require weeks or months of training, create additional manual work required to complete tasks and do not communicate with each other. Besides creating headaches for the workers who have to use them, they waste time that could be better spent meaningfully serving customers.

The Great Resignation and tight labor market has made it difficult to find and retain workers with adequate and appropriate experience. On top of that, bankers spend significant amounts of time training new employees on how to use these complicated tools, which only exacerbates problems caused by high turnover. The paradox here is that banks risk ultimately disengaging their employees, who stop using most of the functionality provided by the very tools that their bank has invested in to help them work more efficiently. Instead, they revert to over-relying on doing many things manually.

If bank staff used tools that were as intuitive as those available to the bank’s customers, they would spend less time in training and more time connecting with customers and delivering valuable services. Improvements to their experience accomplishes more than simply making processes easier and faster. As it stands now, bank teams can spend more time than desired contacting customers, requesting documents and moving data around legacy systems. This manual work is time-consuming, robotic and creates very little profit for the bank.

But these manual tasks are still important to the bank’s business. Bankers still need a way to contact customers, retrieve documents and move data across internal systems. However, in the same way that customer-facing solutions automate much of what used to be done manually, banks can utilize solutions that automate internal business processes. Simple, repetitive tasks lend themselves best to automation; doing so frees up staff to spend more of their time on tasks that require mental flexibility or close attention. Automation augments the workers’ capabilities, which makes their work more productive and leads to a better customer experience overall.

There are good reasons to improve the experience of bank employees, but those are not the only reasons. Quality of life enhancements are desirable on their own and create a greater opportunity for employees to serve customers. When deciding which tools to give your staff, consider what it will be like to use them and how effectively they can engage customers with them.