Compensation Strategies to Attract, Retain and Motivate Millennials


compensation-9-18-17.pngDistinguishing between retirement plans for a bank’s older executives and other key high performers and shorter-term incentives for its younger millennials, who are the bank leaders of the future, continues to be an important strategy for boards of directors. Compensation committees are willing to provide some type of mid-term incentive plan as a retention strategy focused on their younger workers. Boards also want to have both short- and long-term, performance-driven plans in place that are aligned with shareholder interests and retaining their key officers.

As with most employees, effective compensation plans and performance management programs can help attract, retain and motivate millennials. Providing a competitive base salary may not be at the top of their priority list, but certainly being rewarded for performance is important.

The next generation of leaders have been impacted by the recession, both from watching their relatives endure job loss and financial stress and from experiencing the post-recession economy directly. They are also the largest group carrying student loan debt. As a result, money is very important to them and while they may not be worrying about retirement, they are focusing on shorter term financial needs.

While millennials have essentially the same financial needs as the generations preceding them, their time horizon to retirement can be 30-plus years or more, which is too far into the future for them to focus on when faced with immediate financial planning decisions, like retiring student debt, purchasing a home and providing for their children’s education.

Nonqualified benefit plans including deferred compensation plans can be an effective tool for attracting and retaining most key bank performers—both those focused on retirement as well as more interim financial needs—because of their design flexibility. According to the American Bankers Association (ABA) 2016 Compensation and Benefits Survey, 64.5 percent of respondents offered some type of nonqualified deferred compensation plan for top management (chief executive officer, C-Level, executive vice president).

For this next generation of leaders, boards should consider a type of plan that allows for in-service distributions timed to coincide with events such as a child entering college. Plan payments made to the participant while still employed can be made at some future point such as three, five or 10 years.

These plans could be used in lieu of stock plans with a similar time duration and are important to younger leaders looking to shorter, more mid-term financial needs in a long-term incentive plan. Plans with provisions linking plan benefits to the long-term success of the bank can help increase bank performance and shareholder value as well as to reward key employees for longer-term performance. Defined as either a specific dollar amount or percentage of salary, bank contributions are discretionary or dependent on meeting budget or other performance goals. Interest can be credited to the account balance with a rate tied to either an external index or an internal index such as bank return on equity.

The plan can also include a provision that the account balance, or a portion thereof, is forfeited if the key employee goes to a competitor. In addition, it is typical to see events such as a change in control or disability accelerate vesting to 100 percent.

Let’s look at two examples, one for a retirement-based plan and the other for an in-service distribution to help pay for college expenses.

Assume that the bank contributes 8 percent of a $125,000 salary for a 37-year-old employee each year until age 65. At age 65, the participant will have $1,370,000 in total benefits, assuming a crediting rate equal to the bank’s return on assets, with an annual payment of $130,000 per year for 15 years. This same participant could also have had part of the benefit paid for out via in-service distributions to accommodate college expenses for two children. Assume there are two children ages three and seven and a desire to have $25,000 per year distributed for four years, for each child. Thus, these annual $25,000 distributions would be paid out when the employee was between the ages of 49 and 56. The remaining portion available for retirement would be an annual benefit of $78,000 for 15 years beginning at age 65.

Regardless of the participant’s distribution timing goals, both types of defined contribution plans can be tied to performance goals. The bank contribution percentage to each participant’s account could be based on some defined performance goal. Again, the ABA’s 2016 Compensation and Benefits Survey results showed that bonus amounts were based on several factors including: 85.6 percent bank; 74.9 percent individual; and 26 percent department/group. Aligning the bank’s strategic plan goals with the participant’s incentive plan provides a better outcome for both shareholder and participant.

In addition, many banks have implemented defined benefit type supplemental retirement plans as a way to retain and reward key executives. These plans can also be structured as performance based plans.

Regardless of a participant’s time horizon, it is important to reward both your older and younger leaders with compensation that is meaningful to them and will help them accomplish their personal financial objectives, while balancing the long-term interests of shareholders.

Nine Strategic Areas Critical to Your Bank’s Future


strategy-6-30-17.pngHow should banks determine the best way to proceed over the upcoming quarters? While no one can predict the future, there are several critical developments that anyone can keep an eye on. These are the areas that are most impactful to banks and for which they need to strategize and position themselves.

Rising Rates: Obviously, rates are rising but by how much? Banks should position for moderate hikes and a slower pace of hikes than the Fed predicts. The Fed predictions on rate hikes have been overstated for several years running. The yield curve for the 10-year Treasury is flattening as of late, which also indicates fewer hikes are needed. A reduced duration for assets and reduced call risk makes the most sense; but practice moderation and don’t overdo it. Too many banks had their net interest margin crushed by being too asset sensitive and waiting for rates to increase while we had eight years of low rates. Check your bond portfolio against a well-defined national peer group of banks with similar growth rates, loan deposit rates and liquidity needs. Very few banks perform this comparison. They just use uniform bank performance reports or a local peer group. Every basis point matters, and there is no reason to not be a top quartile performer.

Deposits: Buy and/or gather core deposits now. Branches provide the best value. Most banks overestimate what deposits are core deposits, meaning they won’t leave your bank when rates rise. Like capital, gathering core deposits is best done when it is least needed.

Mergers and Acquisitions: If you are planning on selling in the next three years, sell right now, as optimism and confidence are at 10-year highs. If you are a long-term player, go buy core deposits, as they are historically cheap and you are going to need them. They are worth more now than perhaps ever before.

Get Capital While You Still Can: Solve your capital issues now. Investors are probably overconfident, but banks have done well the last seven years and finally, they aren’t taboo anymore. Investors want to invest in banks. That always happens before something bad in the economy occurs, so get it while you can.

Real Estate Carries Risk: With regulators mindful of capital exposure and real estate deal availability being spotty, it’s best that banks be wary of deals in this area. Commercial real estate linked to retail is more and more being viewed as extremely risky. There is an all-out war being waged on store retailers by online retailers. Since retail is a huge sector of the U.S. economy, investment will follow the online trend. Industrial real estate has become “retail extended” with the least amount of real estate risk.

Beware of Relying on Credit Scores: Banks need to be careful of the credit cycle. Consumers are loaded full of debt. Cars and homes are too expensive relative to wages and affordability. Credit scores probably don’t capture the downside risk to the consumer.

Get Ahead of Your Risks: Cyber-risk is a major and very real risk. Get ahead of the curve. Two other areas bearing risk are 401(k) plans and wealth management areas as they are especially exposed to litigation and are a nightmarish mess to be addressed. 401(k)s are overloaded with too many choices, fiduciary risk, performance issues, excessive fees and conflicts of interest. Get help now or you may be painfully surprised.

Marketing: Your bank had better get creative with digital marketing opportunities for your website as well as mobile devices. Why? Billions are being invested into financial technology companies and it’s easier for fintech to learn about banking than it is for bankers to learn about fintech.

Millennials: Surveys from The Intelligence Group and others show that finding young, motivated workers, and then retaining them, may be a challenge.

  • 45 percent of millennials believe a decent paying job is a right, not a privilege.
  • 64 percent would rather make $40,000 at a job they love versus $100,000 at a boring job.
  • 71 percent don’t obey social media work policies.
  • Millennials are proving to be more loyal to employers than previous generations, and are better at multi-tasking than previous generations.

Hopefully, some of these items provide bankers strategic ideas to incorporate over the next two or three years.

Now is the time to chart your course.

Creating Next Generation Cultures to Attract Next Generation Talent


recruitment-5-12-17.pngMany directors believe it’s important for their institutions to address the shortage of younger financial services talent, yet there’s often a lack of urgency around working on this future problem. Consider this: About 40 percent of the community banking workforce will consist of millennials within the next five years. In order to stay relevant, community banks not only need to ensure they are attracting and retaining millennials as customers, but also as employees. It’s no secret that for millennials, banking isn’t exactly the sexiest industry for employment opportunities. The good news is that as a service industry, banking has ample opportunity to exercise some creativity in its culture. There are five key areas to address now that will help attract and retain millennials to the community banking world.

Embrace cognitive diversity in the workplace. The bottom line is that millennials embrace diversity; not only in the traditional sense, but they also seek cognitive diversity within the workplace. This means that they want to be included and accepted for their thoughts and opinions. This group seeks a collaborative environment where they can impact work, bring value to the organization, and be recognized—through compensation and other means—for their efforts and ideas. Consider ways to bring employees into the decision-making fold at all levels. This approach actually has a secondary benefit: by allowing the broad workforce to feel empowered to create and implement ideas, banks can also begin to address the need for innovation and the need to develop competitive differentiation in order to remain successful.

Focus on social responsibility. It’s well known that millennials focus on a company’s social responsibility when evaluating them as an employer. It is also known that ethics and integrity are important criteria, and that millennials are skeptical of the financial services industry in the wake of the mortgage crisis and the Wells Fargo scandal. Community banks in particular have ample opportunity to take meaningful action in the communities they serve and allow millennials to participate in socially beneficial causes they believe in. Allowing for input and ideas in determining what the organization will focus on and offering non-cash benefits like time off to volunteer can make this generation feel good about the work they’re doing and may help change the perception of banking as a career choice.

Invest in career development. Millennials want to take control and actively lead their career development. Banks can provide a multitude of opportunities to strengthen skills and allow millennials to develop as leaders. Millennials are looking for a coach, rather than a “boss,” which they define as someone who is invested in their success. Establishing mentorships and leadership programs, provide on-the-job training and reinforce the company’s commitment to individual growth.

Increase Transparency. Transparency is vital to establishing trust and loyalty with this generation and it’s a key to longer job tenure. An employer can provide transparency by ensuring millennials understand how their role contributes to the bank’s success and how success is rewarded. It is important to collaborate to establish short- and long-term goals and detail the path to reach these goals, including training and opportunities for development. Millennials thrive on feedback and consistent dialog. Providing an avenue for two-way communication will help ensure success in this area and keep everyone engaged.

Align total rewards and performance management programs. As with most employees, effective compensation plans and performance management programs can help attract, retain and motivate millennials. Providing a competitive base salary may not be at the top of their priority list, but certainly being rewarded for performance is important. In conjunction with regular feedback, recognition and incentive awards should also be a part of the compensation framework. Instead of annual performance reviews, it may be more prudent to provide frequent check-ins and real-time feedback. In addition, millennials welcome the opportunity to receive input on performance from peers and others in the organization.

The bottom line is that banks must create an engaging workplace culture where millennials feel welcomed, valued and rewarded. Many banks have taken the lead on creating advisory boards consisting of millennials (both employees and people from the community) to ensure that they’re doing the right things to attract and retain this generation as customers and as employees. Any bank that can be successful in achieving this will have created a competitive advantage in the marketplace.

How USAA and Nuance are Helping Millennials Save Money


USAA-Nuance-v3.png

Serving over 11 million members, USAA has been providing financial services to military members and their families in the United States since 1922. And with baby boomers retiring in increasing numbers, USAA is using fintech innovation to better serve the next generation of millennial service men and women coming through the ranks.

According to Moody’s Analytics, U.S. adult millennials ages 35 and younger have a savings rate of negative two percent. Compare that with the 45-54 age bracket, which saves around 3 percent, or people 54 and older, who save 13 percent. For some millennials, serving in the armed forces may be their first real job. Or a millennial’s first experience with USAA might occur when a teenager is opening their first savings account and their parents are members.

USAA is recognizing the need to help millennials achieve their financial goals, and is leveraging technology innovations (and innovators) to do just that. What the company has done is partner with language and voice recognition software company Nuance to develop an app called Savings Coach to help millennials sock away more money.

With over 14,000 employees spread across 75 countries, Nuance is one of the larger players in voice and language technologies. Products like Dragon translation software, and now the Nina multilingual virtual assistant, are used by nearly two-thirds of Fortune 100 companies. Nuance’s Nina technology creates a virtual assistant that can communicate and respond to customers via voice or text. Companies create these assistants, tailored to their own industry, brand and customers utilizing Nina for the underlying architecture. That’s why it made sense for USAA to partner with Nuance to develop Savings Coach, one of the first proactive virtual banking assistants that is specifically designed to help Millennials save money. In fact, USAA was already working with Nuance on a separate virtual assistant initiative utilizing Nina technology when it decided to partner for Savings Coach.

Savings Coach interacts with users through a fun mascot called Ace the Eagle, which can speak and formulate certain responses, effectively creating a basic conversation with users. On the back end, Savings Coach crunches financial data and recommends a daily amount of money that users should have in their savings. It also gamifies the process of saving, something that can hook millennials—a generation that grew up on video games—into the process. For example, Savings Coach will reward users with a badge for completing certain money saving tasks, like cooking at home instead of spending more money ordering pizza delivery.

In a four-month trial pilot, USAA says that Savings Coach helped a cohort of 800 participants save a total of nearly $120,000. One of the things that makes Savings Coach both unique and effective is that Ace interacts and negotiates with users. Didn’t transfer that $100 to savings that you were supposed to this month? Ace might pop up and ask why you forgot, or even suggest transferring $90 if money is tight for that month. One strategy to help millennials save more money is to provide constant re-enforcement of good behaviors, using technology nuanced enough to recognize (and react to) all the small daily decisions that affect one’s ability to save money.

From Nuance’s perspective, the company is now able to explore the application of Nina technology in the financial services industry and hopefully gain a foothold in the future of artificial intelligence as customer facing entities. Savings Coach, unlike most financial apps, is a proactive virtual assistant. And that’s the wave of the future in fintech customer experience— technology that is both personalized and able to anticipate future needs or scenarios. For example, Savings Coach can predict what days a user will buy coffee based on past behaviors, and reward them with a badge or move money into savings when it sees they’ve shown restraint and skipped a day.

The successful partnership between USAA and Nuance to bring Savings Coach to market illustrates a broader trend of financial institutions focusing more than ever on the customer experience. And in today’s digitally dominated world, customer experience is nearly impossible to separate from technology. What makes Savings Coach so effective is that it combines great technology with a focus on personalizing the experience for each customer as much as possible.

Going forward, fintech bots (apps that perform automated tasks) and assistants are likely to broaden in functionality. Future apps will evolve to offer even more customized, proactive financial literacy and advice. The millennial consumer faces many challenges unique to that generation, like low savings, high student loan debt and housing prices that are beyond the reach of many of them. What USAA and Nuance realized is that by applying new thinking to existing problems and technologies, they’re providing millennials with their own personal savings coach, which could be their Ace in the hole.

This is one of 10 case studies that focus on examples of successful innovation between banks and financial technology companies working in partnership. The participants featured in this article were finalists at the 2017 Best of FinXTech Awards.

Digital is in Our DNA


DNA.png

Once your most basic needs in the first two levels of Abraham Maslow’s famous hierarchy of needs have been covered—including food, shelter, security and the like—what do you need then?

According to Maslow, the next three levels of need are Belongingness and Love, Esteem and Self-Actualization. All of these needs are fulfilled in one way or another by various forms of digital media: blogs, emails, twitter and LinkedIn.Combined, the digital mobile world we live in today plays to our basic psychological and self-fulfillment needs, which is why it is so addictive.

According to the Bank of America Corp.’sannual researchinto mobility, millennials spend more time interacting on their phone than with their partner, family, friends and colleagues.

Perhaps this is why many of us are so addicted to selfies and using the camera to stream our daily routines non-stop.It is also why some joker added WiFi and a battery to Maslow’s well known pyramid. (And if Maslow was alive today, he would no doubt agree.)

When we don’t have our phone, we often feel anxious and bored with a fear of missing out on what’s going on. We even walk and talk differently when we are using a mobile phone. The University of Bathfound that people who text had developed a protective shuffle that prevents them bumping into obstacles, or tripping over hazards. This means that it takes those texting 26 percent longer to complete a walking task compared to those who were not distracted by their phones, and it is really annoying. You know, you’re walking along the pavement and someone is shuffling slowly in front of you with that hunched over look that signals they are playing with their mobile phone. You kind of want to hit them in the back of the head and tell them to get out of the way, but don’t because you know you do it yourself. This is the world today, and the reason whysome citiesare introducing texting and non-texting sidewalks.

Before we look at banks, a little test. Turn off your mobile phone and seehow many minutes or hours you can wait before turning it back on again. Do this when you’re not in a meeting or sleeping and have ready access to your phone. I bet none of you last more than an hour.

The reason for giving this insight into the mobile digital age being part of our DNA is that, if our relationships are with and through our digital devices, how does a bank become part of that world? That’s a difficult question. Most bankers think that mobile and digital generally are projects to invest in, not the representation of a cultural transformation.But this dependency on our devices is a cultural transformation. The very fact that we have gone from a phone being a mere communication device to being at the very center of our lives in just one decade is incredible, but true.

Meanwhile, what banks are offering the best mobile experience? In the U.S., it’s JP Morgan Chase & Co.’s Chase retail banking unit, according toMagnify Money. Chase was voted the best mobile banking app in the country for a large bank, and applauded by users for a combination of design and functionality. The app has a lot of the features deemed most important by consumers, which includes fingerprint sign-on, mobile check deposit and the ability to see images of deposited checks. Consumers want to be able to do everything on the app, and Chase has been adding functionality throughout the year to keep people satisfied.

Forrester ranked the world’s best retail mobile banking services and benchmarked the retail mobile banking services of 46 large retail banks across four continents on 40 criteria, and found the average bank scored 65 out of 100.

Australia’s Westpac outstripped the average bank by being strong in every category. The bank earned the highest score in the transactional features category and did particularly well in its range of touch points, account and money management, and marketing and sales. It is one of the few banks to offer contactless mobile payments capability using near-field communication technology. The bank has also rolled out innovative features such as letting customers take pictures of their credit cards to activate them.

Of theother banks reviewed, nine stood out from their peers for their impressive mobile banking capabilities: CaixaBank in Spain, Canadian Imperial Bank of Commerce and Scotiabank in Canada, Garanti in Turkey, Bank of America and Wells Fargo & Co. in the U.S., Bank Zachodni WBK in Poland and Lloyds Bank in the U.K.

Why Community Banks Need to Embrace Social Media


social-media-3-10-17.pngSocial media allows banks to appeal and engage with millennials, who constitute a quarter of the U.S. population.

Banks are actively stepping into the social media game by creating Facebook pages, Twitter accounts and YouTube channels to reach the masses with company updates, money management tips and education. IBM suggests that banks need to use social media not only for outreach—but customer service as well. The tech giant notes that millennials are more apt to air their grievances via social media than call a bank directly and wait on hold. Banks can use their twitter accounts as a customer sounding board and to address issues directly?thus, keeping customers happy and their money in the bank.

Social Media Data for Underwriting
It is projected that in 2015, there were 26 million credit invisible consumers in the United States alone. About 8 percent of the adult population in the country have credit records that can’t be scored based on a widely used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.

While large financial institutions are heavily focused on serving the credit-eligible population across the country, community banks play a critical role in the welfare of those left beyond the borders of eligibility. The opportunity to expand access to financial services in communities with an ineligible population is a critical step towards financial inclusion in those communities.

Social media channels are gaining an important role as alternative sources of data on credit eligibility. Who you know matters (especially in defined communities), and companies like Lenddo, FriendlyScore, ModernLend and credit scoring solution providers are leveraging this idea with the use of non-traditional sources of data to provide credit scoring and verification along with basic financial services. Social media also gives lenders an insight into how an applicant spends their time, which can be used as an alternative way to indicate someone’s financial trustworthiness, expanding opportunities for banks to reach new categories of customers.

While loan officers at megabanks apply impersonal qualification criteria without regard to individual circumstances, community banks are initially better positioned to benefit from the use of social media channels to get to know their customers even closer than they already do.

As emphasized by the team at Let’s Talk Payments, a source of information and research online about emerging financial services and payments, the following are some of the tangible opportunities for banks embracing social media data for creditworthiness assessment:

  • The opportunity to capture a new customer segment
  • Differentiated customer experience
  • Strengthening the existing underwriting process
  • Enhanced fraud prevention
  • Stronger engagement with the community

Given the scale of credit invisibility in the country, an innovative approach to potential customer profiling in communities where banks operate could serve as a competitive edge for those banks. Social media data can be used to extend loans to previously ignored groups in the population, improving household resilience and building stronger ties between community banks and their immediate communities.

Social Media is About Relevancy and Accessibility
There are two elements to relevancy and accessibility: an opportunity to gather feedback to improve products and services and the opportunity to increase accessibility and transparency to customers.

“Customer feedback is indispensable for any business that wants to grow, and the same holds true of community banks. Social media interactions are your doorway to customer conversations and feedback, which can help you fine tune your business. Tapping into online conversations on social media should shed light on customer problem points, helping resolve issues before they escalate,” said Jay Majumdar, vice president of sales at ICUC, a social media management services company.

Ignoring conversations about your bank on social media is a dangerous path—it removes control over the message and brand image, and it damages your reputation as a customer-centric business. It’s especially damaging for community banks that are dependent on community loyalty and long-standing relationships with customers. Jill Castilla, president and CEO of Citizens Bank of Edmond, echoes this point, saying that “social media is not about putting a message out there and leaving it. It’s a conversation.” She also emphasizes that “social media is about relevancy and the accessibility that you expect from your hometown community bank. It’s a tangible way that our community can see we’re living up to be the community bank you used to think about. That’s what social media allows us to achieve.”

Hiring a Chief Technology Officer



Bob DiCosola, executive vice president of Old Second Bancorp, a $2.2 billion asset holding company in Aurora, Illinois, talks with Bank Director digital magazine Editor Naomi Snyder about hiring a chief technology officer with a business background and what the bank will need going forward.

DiCosola briefly touches on the following:

  • What types of information technology people the bank needs
  • Using an in-house advisory team of millennials
  • The bank’s new IT business plan

This video first published in Bank Director digital magazine’s Tech Issue in December.

Want to Attract Millennials? Just Ask Them What They Want


millennials-1-11-17.pngHarrisburg, Pennsylvania-based Centric Bank, with $463 million in assets, wants to attract young customers to do business with the bank, and the up-and-coming talent needed for its future success. To make that happen, CEO Patricia Husic and her team are going straight to the source by partnering with a local young professionals’ organization.

In early 2016, Husic addressed Harrisburg Young Professionals (HYP), a civic organization with members averaging 25 to 35 years old, as part of a breakfast series that brought in CEOs from the community to speak to the group. Soon after, she and Derek Whitesel, HYP’s executive director, met at Husic’s request to discuss how the two organizations could partner to create an advisory board to help the bank understand the unique qualities of the millennial generation.

“It’s such an important piece for us, as a community bank, to look at how we make ourselves relevant to the millennial group” as clients and potential employees, says Husic.

On paper, the millennial generation should be a boon for the banking industry. Working millennials in the U.S., at 53.5 million, surpassed Generation X (52.7 million) and the baby boomers (44.6 million) in the 1st quarter 2015, according to Pew Research, which defines millennials as those born after 1980. The financial needs of millennials are growing, as they balance record levels of student loan debt with traditional desires like home ownership. But the first digital generation is also more open to up-and-coming mobile providers to meet its financial needs and has been reticent to work for the traditional banking industry, whose reputation has taken a beating since the financial crisis.

Centric isn’t the first bank to establish a millennial advisory group. Since 2009, Minneapolis-based U.S. Bancorp has selected millennial employees to provide input on various company initiatives, from mobile app design to employee benefits. Nearby Mid Penn Bancorp, in Millersburg, Pennsylvania with $1 billion in assets, formed its own millennial advisory board in 2016 to better meet the needs of younger customers. Like Centric, the group is comprised of employees and local professionals.

Centric’s millennial advisory board held its first meeting in November 2016. Each member has committed to a two-year term and will meet quarterly for one to two hours to discuss what millennials want and need from financial institutions and employers, and to outline strategies to attract and retain millennial customers and employees. Eight members are bank staff—all millennials—and eight, including Whitesel, come from HYP. Different industries and skill sets are represented.

Two co-chairs—Nicole Cooper, a teller manager from Centric, and Trevin Shirey, an HYP member and business development manager at an internet marketing company—are responsible for organizing the meetings and setting the advisory board’s agenda. Millennials on the advisory board are uncompensated but will have direct access to Centric’s board of directors, with the co-chairs presenting quarterly updates to the board and leadership team that outline key initiatives and progress toward goals.

The partnership doesn’t just benefit Centric. “There [are] a lot of movers and shakers [on Centric’s board] that are highly involved in the Harrisburg community, so being able to connect those eight young professionals to those people directly is ultimately a great opportunity for them to network in the community and get to advance their professional careers,” says Whitesel. Husic adds that membership on the board should be a “great resume builder.”

The first task to be completed by the group has advisory board member Cody Wanner—the co-founder of video production company CAP Collective—documenting the bank’s online account opening process. The group will review the footage and offer its input. “We’re all going to sit together and watch,” says Husic. “If we don’t hear the unfiltered feedback, how do we make ourselves a better bank?” Next, the group plans to focus on the bank’s mobile app, again recording the experience. Centric also plans to bring in companies identified as leaders in mobile app development for demonstrations.

Husic plans to measure the success of the millennial advisory board’s recommendations, and the bank’s implementation of them. Is Centric moving the needle when it comes to acquiring millennial accounts? Are more young job seekers interested in working at the bank? Currently, 15 percent of Centric’s employees are millennials. Husic wants to get closer to 30 percent, and for Centric to gain a reputation as an “employer of choice” for younger workers.

Attracting millennial employees is important to the long-term sustainability of the bank, Husic says, and she’s open to the advisory board’s input—even if it takes her a little out of her own personal comfort zone. “They said, ‘did you ever think about getting a dodgeball team together?’” says Husic, who is open to the idea but reticent to play herself. “I’ll bring the snacks,” she says.

A Quicker Way to Get Debit and Credit Cards to Your Customers


credit-cards-11-30-16.pngAs consumers continue to embrace online and mobile banking channels, financial institutions are reevaluating the branch’s role in modern banking. Historically, branches have served at the forefront of the financial institution and customer relationship. Even though digital account solutions provide new levels of convenience and flexibility, the branch remains a vital channel facilitating interpersonal interactions between financial institution and customer, and fosters greater in-depth communication between the two.

Instant issuance is establishing itself as a proven program to attract more customers to the branch. Instant issuance systems allow financial institutions to print credit and debit cards on-demand inside the branch, for new customers or when an existing customer needs a replacement card. When branches enable on-demand printing of credit and debit cards, both issuers and customers win. Banks that take the additional step in providing permanent payment cards on the spot realize a much stronger return on investment in terms of customer acquisition, satisfaction and loyalty.

New programs, like instant issuance, draw customers, especially millennials, because it reduces the wait time in receiving access to their funds. Contrary to common perception, cash is a large draw for millennials. According to a GoBanking Rates survey released in 2016, 60 percent of millennials still prefer to be paid in cash, which means the millennial reliance on debit cards will remain strong, presenting a natural opportunity to actively engage millennials more effectively in their branches.

While millennials may appear to operate much differently than prior generations, their core expectations are much the same. They seek convenience and want their financial institutions to provide new and innovative technologies that keep pace with the technologically driven world in which they live.

In today’s world, where bank customers are subject to card data breaches with alarming regularity, protecting customer data is paramount to the success of any financial institution initiative. Instant issuance provides an opportunity for financial institutions to lead the conversation around EMV® integration and security. EMV provides heightened security by embedding microprocessors inside debit and credit cards, replacing the magnetic stripe card.

Financial institutions that implement scalable, cost-effective solutions that are EMV-enabled are better able to educate customers on changes to the transaction process. As EMV adoption has been a source of uncertainty and concern for financial institutions, retailers and consumers alike, instant issuance provides a convenient method for providing much-needed knowledge around the shift.

Instant issuance proves to be a secure and affordable way for financial institutions to realize the value of their branch investment. By drawing customers into the branch and getting credit and debit cards to market quicker, issuers are keeping payment cards top-of-wallet and increasing interchange revenue.

As the branch continues to reassert itself as a strategically important banking channel, financial institutions that leverage instant issuance as a strategic differentiator and recognize its role in driving customer activity within their branches will be better positioned to exceed customer expectations.

To learn more about millennial payment trends, download the whitepaper, “What Small-to-Midsize Financial Institutions Can Learn From Millennials.”

EMV® is a registered trademark or trademark of EMVCo LLC in the United States and other countries.

Five Predictions About Banking’s Future


techonology-10-7-16.pngWhat does the future hold? As I referenced in an earlier article, I gave a presentation about the future of banking at Bank Director’s third annual Bank Board Training Forum in Chicago Sept. 29-30, and promised that I would share some of my thoughts with you after the conference. I might end up being completely wrong, of course, but here are my predictions and I’m sticking with them.

Technology
Going forward, I think we will begin to see the ascendancy of digital distribution channels in retail banking. Driving this change will be the continued digitalization across the entire economy, combined with the integration of millennials into the world of work, mortgages and parenthood at an accelerating rate. We occasionally refer to millennials as “digital natives” since they grew up on video games, cell phones and the Internet, and banks will have to provide a robust digital option if they want to keep them as customers. The bank branch isn’t dead, but I see it becoming increasingly less important over the next decade.

Disruption
The long-term future of the website lenders is unclear to me since they rely primarily on private equity investors and the capital markets for their funding, which is much less reliable over the course of an entire economic cycle than bank deposits. The question for them is whether they can take an economic punch in a recession. The payments competitors are here to stay because what they really want isn’t a banking relationship with customers so much as access to their data, including their financial data, because it enables them to bombard those customers with highly differentiated and customized offers on merchandise. And much of the technology of web site lenders and payments competitors will eventually be adopted by the banking industry. This is certainly true in the mobile space, but also in areas like commercial loan underwriting, which remains a laborious, people-intensive process. In this sense, the future of traditional banking is fintech.

Economy
This is probably one of the safer predictions that I made: There will be at least one recession between now and 2026. We are now in the seventh year of an economic expansion which, believe it or not, is the fourth longest going back to 1945. Nothing in this world lasts forever, and the current expansion won’t either.

Consolidation
This is probably my boldest (or craziest) prediction: There will be 4,558 banks as of December 30, 2026. Here’s how I got to that number. The annual consolidation rate over the last couple of years has been approximately 3 percent. There are a little over 6,000 banks today, and if you assume the industry will continue to consolidate at that rate for the rest of the decade, you get close to that 4,558 number. However, I factored in one more variable—one year in which a recession resulted in a consolidation rate closer to 5 percent to account for a spike on bank failures, assisted transactions through the Federal Deposit Insurance Corp. and relatively healthy banks hedging their bets by pairing up with a stronger merger partner. I’m sure I will be wrong about the exact number for banks in 2026, but there’s no question that there will be significantly fewer of them.

Demographics
By 2026, the last of the baby boomers will be heading towards retirement, most of the banks will have Gen X CEOs (the oldest of whom will be in their late 50s to very early 60s) and millennials will be moving into senior management positions. Gen X’ers and millennials are much more intuitive when it comes to digitalization issues generally, and I expect that their ascendance will only accelerate the digitalization of banking and personal finance. And of course, millennials will also be the single largest consumer demographic by 2026, so they will be eating their own cooking when it comes to digital banking.

Finally, I anticipate that something no one expects to occur (and therefore won’t predict) will end up having a huge impact on the industry. We had already seen the emergence of smart phones in 2006, but the ubiquitous iPhone wouldn’t be introduced until 2007, and 10 years ago how many people expected the mobile phone to revolutionize banking?

What do you think the next big thing will be?