How to Deliver a Full Customer Experience Over Mobile Banking


mobile-8-21-19.pngWith most banking activity taking place on mobile, banks must innovate in order to deliver the full customer experience straight to customers’ fingertips.

With more people using their phones to access banking services, banks cannot afford to miss out on the massive opportunity to go beyond transactions and offer the sales and service customers seek. A Citigroup study found that mobile banking is among the top three most-used applications on a consumers’ phone, increasing 50% from 2017 to 2018.

Many banks still have a siloed mindset, considering in-branch, mobile and online experiences as separate and distinct entities. But their customers don’t differentiate between channels; they view banking as an omni-channel experience.

Their expectations are the same, whether they go to a branch, visit their bank’s webpage at home or open an app on their phone. If they have questions, they expect the ability to ask their bank within the mobile app just as easily as they would in branch. And if they are interested in learning about savings accounts or loan rates, they expect to easily find that information within the mobile banking space.

Banks have long thrived by delivering seamless transactions, competitive and unique products and outstanding service. They have responded to the growing popularity of mobile banking by investing in technology to build out robust transactional experiences for their customers. From mobile deposit to transferring funds to bill pay, the ability to conduct fundamental banking transactions is available to and frequently used by customers.

Where bank mobile apps are lacking, however, is in providing the sales and service that they excel at delivering in their branches to the mobile devices of their customers. This is a huge opportunity many banks are missing. Based on our data, there are about 2,000 opportunities per every 25,000 accounts where a customer expresses an intent to inquire about how to do something or how to adopt a new product that is entirely uncaptured in mobile banking.

With the advent of digital transformation and more activity moving to mobile channels, the sales and service aspects of banking have gradually become more diluted. Banking has become less sales and service oriented and increasingly more transactional.

There is only one direction for banks to go: give consumers what they want and demand. Banks need to offer customers the ability to connect with them on their phone anytime, anywhere, and to receive the same level of sales and service they do at a branch. Mobile banking provides a plethora of opportunities to do just that.

Banks need to do more to provide the same support and service in their mobile channels as they do within their branches. There are three easy ways they can begin to leverage mobile banking to go beyond transactions to deliver sales and service to their customers.

1. Embed a robust help center within mobile banking.
Make finding and accessing digital support a breeze. Embed support content from your website within your mobile banking application to allow customers easy access to help content like resetting passwords and fund transfers. Make sure the most frequently asked questions are answered in a manner that answers the questions, provides additional information and creates a call to action.

2. Utilize chatbot to further engage customers.
Add live chat or an automated chatbot for an additional avenue to engage with your mobile customers. Banks can use chat to suggest relevant content or products and services, help point customers in the right direction and to learn more about their financial goals and needs.

It’s not uncommon for chat usage to double once it is added to mobile banking, which can put a sizeable strain on contact centers. Use support content in the form of a chatbot to allow customers the ability to self-answer common support questions, and offer live chat for more complex questions and issues.

3. Provide clear, concise product information.
Customers no longer consider mobile banking to be purely transactional. They think of it as an extension of a branch, where they’ve come to expect support and sales information. Providing links to your key products within mobile banking can encourage customers to explore your offerings.

When banks fail to go beyond transactions in mobile banking, they miss out on a vast opportunity to provide sales and service through the channel customers are the most present. The consequences of not doing so can result in greater contact center volume, and missed opportunities to increase wallet share.

Does Your Digital Strategy Include the “Last Mile?”


strategy-3-20-19.pngThe “last mile” is a ubiquitous term that originated in the telecommunications industry to represent the final leg of delivering service to a customer. Most of the time it referred to installing copper wire that connected the local telephone exchange to individual landlines.

More recently, the term represents what can be the final and most challenging part of a consumer interaction. Generally, it’s the point at which a broad consumer service interacts with an individual customer to deliver a personalized experience.

In banking, this is most often in the form of digital documents created to meet the exact specifications and compliance requirements of an individual transaction that allow a loan or deposit to be booked.

The last mile concept is changing the way financial institutions approach their digital strategy. Previously, many banks focused on digital services to a broad customer base that allowed end users to access account information, pay bills and transfer funds. Lesser in the strategy was the ability to originate a loan or deposit transaction through a digital channel, and even less likely to be contemplated was the customer experience while documenting and booking these types of transactions.

Often, what would begin as a digital experience through a mobile device, tablet or PC would quickly revert to a less accessible process that concluded with a customer coming to a branch to manually sign an agreement.

Banks today are recognizing that a shift in their digital strategy is required. Increasingly, institutions are reshaping their digital presence to focus on the “last mile” – the hardest part of the customer journey that requires an individualized experience. Building a foundation focused on this critical customer touchpoint requires banks to deploy technology that documents, in a fully compliant manner, consumer and commercial loan and deposit transactions while at the same time supporting a fully digital customer experience.

In seeking fintech partners that can support this digital strategy shift, institutions are identifying essential attributes and capabilities to enable effective execution:

  • Integrated Capabilities: Disparate systems require data to be imported and exported to avoid data conflict. A single system of record, integrated with digital document capabilities and a two-way data flow, supports data integrity while eliminating the need to access separate solutions.
  • In-house Compliance Expertise: Documenting transactions in a compliant manner is essential. State and federal mandates change frequently. In-house compliance expertise supported by unique research capabilities ensures the documented words are accurate and up to date.
  • Electronic Closing Enabled: The ability to leverage technology from origination to customer signature without deploying manual workarounds or static forms.
  • Reinvestment in Technology: Digital capabilities continue to evolve. Gone are the days of generic templates and static documents. A partner that’s focused on both current and future capabilities ensures an institution isn’t left behind the times.

As your bank begins to formulate a digital strategy or if you’re revising your existing strategy, ask yourself if you’ve contemplated the “last mile.” If not, focus on this part of the customer interaction first to deliver a comprehensive, compliant, and digitally enabled experience.

This Bank Is Winning the Competition for Deposits


deposits-3-15-19.pngFrom the perspective of a community or regional bank, one of the most ominious trends in the industry right now is the organic deposit growth at the nation’s biggest banks.

This trend has gotten a lot of attention in recent years. Yet, the closer you look, the less ominous it seems—so long as you’re not a community or regional bank based in a big city, that is.

The experience of JPMorgan Chase & Co. serves as a case in point.

Deposits at Chase have grown an average of 9.4 percent per year since 2014. That’s more than twice the 4.6 percent average annual rate for the rest of the industry. Even other large national banks have only increased their deposits by a comparatively modest 5.3 percent over this period.

This performance ranks Chase first in the industry in terms of the absolute increase in deposits since 2014—they’re up by a total of $215 billion, which is equivalent to the seventh largest commercial bank in the country.

If any bank is winning the competition for deposits, in other words, it seems fair to say it’s Chase.

But why is it winning?

The answer may surprise you.

It certainly helps that Chase spends billions of dollars every year to be at the forefront of the digital banking revolution. Thanks to these investments, it has the single largest, and fastest growing, active mobile banking base among U.S. banks.

As of the end of 2018, Chase had 49 million active digital customers, 33 million of which actively use its mobile app. Eighty percent of transactions at the bank are now completed through self-service channels, yielding a 15-percent decline in the cost to serve each consumer household.

Yet, even though digitally engaged customers are more satisfied with their experience at Chase, spend more money on Chase-issued cards and use more Chase products, its digital banking channels aren’t the primary source of the bank’s deposit growth.

Believe it or not, Chase attributes 70 percent of the increase in deposits to customers who use its branches.

“Our physical network has been critical in achieving industry-leading deposit growth,” said Thasunda Duckett, CEO of consumer banking, at the bank’s investor day last month. “The progress we’ve made in digital has made it easier for our customers to self-serve. And we’ve seen this shift happen gradually across all age groups. But even as customers continue to use their mobile app more often, they still value our branches. Convenient branch locations are still the top factor for customers when choosing their bank.”

This bears repeating. Despite all the hoopla about digital banking—much of which is legitimate, of course—physical branches continue to be a primary draw of deposits.

Suffice it to say, this is why Chase announced in 2018 that it plans to open as many as 400 new branches in major cities across the East Coast and Mid-Atlantic regions.

Three of Chase’s flagship expansion markets are Boston, Philadelphia and Washington, D.C. This matters because large metropolitan markets like these have performed much better in the ongoing economic expansion compared to their smaller, nonmetropolitan counterparts.

The divergence in economic fortunes is surprising. A full 99 percent of population growth in the country since 2007 has occurred in the 383 urban markets the federal government classifies as metropolitan areas. It stands to reason, in turn, that this is where deposit growth is occurring as well.

Chase isn’t the only big bank expanding in, and into, large metropolitan markets, either. Bank of America Corp. is doing so, too, recently establishing for the first time a physical retail presence in Denver. And U.S. Bancorp and PNC Financial Services Group are following suit, expanding into new retail markets like Dallas.

The point being, even though the trend in deposit growth has led analysts and commentators to ring the death knell for smaller community and regional banks without billion-dollar technology budgets, there’s reason to believe that the business model of many of these banks—focused on branches in smaller urban and rural areas—will allow them to continue prospering.

Zelle Costs Bankers Money, Venmo Can Make Bankers Money


payments-11-29-18.pngZelle, the personal payments platform developed by a consortium of large banks, is poised to become the most used P2P app by the end of the year—outpacing PayPal’s Venmo service, according to the market research company eMarketer.

But does that make Zelle a must-offer capability for the banking industry? Not necessarily.

eMarketer projects the personal payments market to grow nearly 30 percent in 2018, to 82.5 million people—or about 40 percent of all smartphone users in the U.S.

Zelle was developed by the likes of JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. to compete with Venmo, Square Cash, also known more simply as just “the Cash app,” and other up-and-coming third-party P2P services.

You can think of Zelle as the banking industry’s containment strategy—just like France’s vaunted Maginot Line in World War II that was supposed to keep out the German army.

The network of banks offering Zelle has grown to 161, but is a closed system where consumers at participating banks can send personal payments—for free, and in real time—to anyone at another Zelle bank.

One factor that probably accounts for Zelle’s fast growth was the decision to include it in each participating bank’s mobile app. So, if a customer’s bank belongs to the Zelle network, they are automatically a potential user.

While Zelle is a weapon that banks can use to beat back Venmo and Square Cash, the third-most frequently used P2P app, it does have its drawbacks. While Zelle is both free to the user and instantaneous, it costs the participating bank between $0.50 to $0.75 per transaction. So as Zelle’s transaction volume increases, so will each bank’s costs.

Charging users a transaction fee to offset that cost probably isn’t realistic since Venmo and Square Cash are free, although Venmo does charge $0.25 for instant transfers. A good analogy is online bill pay. It costs banks something to offer that service, but most banks don’t charge for it. They offer it for free because all their competitors do, and because it’s a hassle for customers to disentangle their finances from one bank’s online bill pay service and connect with another bank’s service, which can be a disincentive to switching.

Free online bill payment has become table stakes in retail banking, and P2P may go that way as well. But P2P transaction volume has yet to build to such levels that there’s a sense of urgency for all banks to offer Zelle today, lest they find themselves at a competitive disadvantage.

“Urgency means I immediately need to get Zelle. I don’t necessarily think that’s the case,” says Tony DeSanctis, a senior director at Cornerstone Advisors. “Why am I better off offering a product where I’m going to pay 50 to 75 cents a transaction to move money … and also pay the fixed costs to [integrate] it?”

There is, in fact, an argument to offering Zelle and Venmo, or maybe just Venmo. If a bank allows its consumers to include the Venmo app in their digital wallet and prefund the account, Venmo will pay them an interchange fee on every transaction. So while Zelle costs its participating banks money, Venmo offers them a small revenue opportunity to offset their costs.

Zelle is also a private network (which means other people can’t see your transactions) that is marketed to all demographic groups. Venmo, on the other hand, is a social payment network popular with younger generations who are among its biggest users. Richard Crone, CEO of Crone Consulting LLC, says banks are missing out on an important opportunity in social payments.

“A social network is not about [being] social,” says Crone. “It’s a marketing platform and it’s the most effective marketing out there because it’s word-of-mouth. It’s a referral. It’s peer pressure. And that’s how Venmo grows virally.”

Embracing Zelle and other non-bank payments options like Venmo, Square Cash, Apple Pay Cash and Google Pay could be described as a ubiquity strategy. Both DeSanctis and Crone argue that banks should accommodate a variety of payment options within their mobile apps that are linked to their debit and credit cards, just to stay relevant in the evolving payments space.

The problem is that when it comes to payments, most banks really don’t have a strategy. And hiding behind a virtual Maginot Line probably isn’t going to work.

Indeed, history is instructive. The invading German army easily flanked the Maginot Line, which now serves as a metaphor for a false sense of security.

Correction: An earlier version of this article stated that transfers sent over the Zelle app do not occur in real time. This is incorrect. We regret the error.

Four New Revenue Streams for Banks


revenue-10-10-18.pngCreating a healthy bottom line is the biggest goal for most financial institutions. If your bank can’t consistently turn a profit, you’ll quickly be out of business.

Maintaining a profitable bottom line requires a consistent flow of revenue. This can be difficult, especially for financial institutions that rely on both retail banking and enterprise customers to generate revenue.

Why is that? Because 40 to 60 percent of all retail banking customers are not profitable, according to a report by Zafin. Combined with the fact enterprise customers are consistently asking for a more robust product suite with high-tech payment options, turning a profit becomes difficult. Banks can alleviate the pressure by finding new ways of generating revenue that will improve the organization’s profitability.

Here are four ways you can create new revenue streams:

1. Reloadable Cards
If revenue has stagnated, it may be time to reinvigorate your product offerings. A good place to start for retail customers is reloadable cards. A report published by Allied Market Research, titled, “Prepaid Card Market – Global Opportunity Analysis and Industry Forecast, 2014 – 2022” predicts the global market for reloadable cards will reach $3.6 billion in 2022.

The benefits customers receive from reloadable cards are exceptional—fraud protection, no credit risk, and spending limits—and the profits financial institutions can reap are even better.

With reloadable cards, financial institutions can charge customers a variety of fees, including a fee to purchase and use the card, and a fee to withdraw funds for PIN-based transactions. Reloadable cards can also provide depository income.

2. White Labeling
White labeling can be a great way to generate new revenue streams by letting bank treasury departments resell funds disbursement platforms to their business customers. This makes payments more convenient for customers by speeding up and streamlining the process.

By reselling the right platform, banks can gain a competitive advantage by offering multiple emerging payment methods, such as virtual cards and real-time payments, to business customers. These high-tech payment methods are becoming more and more popular, helping financial institutions win new customers and retain established accounts.

3. Mobile Device Payments
The demand for mobile payment capability has been steadily growing since early 2000. Now, with digital natives like Gen Z entering the workforce, financial institutions have an opportunity to create mobile payment strategies that focus on customer satisfaction and retention.

This is a still an emerging space, but one that holds many possibilities for delivering products and services customers want and need. White labeling and reselling a funds disbursement platform, including mobile payment options, can help treasury clients in this area.

4. Improve Data Analytics
While not a revenue stream per se, analyzing data more effectively can help you identify new ways of increasing revenue unique to your business. For instance, if your analytics reveal many of your customers are small businesses struggling with treasury management, consider launching products and services that help.

The more you know about your consumers and the way they interact with your organization, the better equipped you’ll be to address their needs. Advanced customer data analytics will allow you to improve performance and add products in multiple areas of your financial institution, including:

  • Credit revolvers
  • Credit cards
  • Lending programs

Thoroughly analyzing customer data can also improve your ability to target new services and products to customers who want them.

Find New Products and Services that Appeal to Your Customers
Use your data and experiences with current customers to find areas where they’re struggling. Can you step in with a new offer that solves their problems? Options for improvement with existing customer accounts are the best new revenue streams for your financial institutions.

We’ve seen many banks succeed specifically by optimizing fee collections, delivering white-labeled products to improve customer convenience, and taking advantage of emerging payments technology. Use these revenue streams as a starting point, customizing them for what’s right for you and your customers.

Your Digital Transformation Is Not Just About Technology


technology-9-3-18.pngFor an increasing number of consumers, the primary means of interacting with their financial institution is the mobile banking app on their smartphone. This number will continue to grow, as will the number of ways they want to use digital devices to interact with their financial institutions. Though oft-criticized for their risk-averse natures, especially when it comes to new technology, banks understand and are responding.

The success of their initiatives will depend on how well each can navigate the complexity associated with effectively closing the digital gap. Establishing competitive parity in the digital race requires more than simply selecting a new digital banking platform to replace the legacy, disparate system. Banks must navigate the digital challenge holistically. To achieve the goals desired, digital transformation must encompass many aspects of an institution’s operations.

Shift the Org Chart From Vertical to Horizontal
Technology is an important part of any digital transformation, but too often banks rush to make a choice in this area before considering basic elements in their own operations that play a profound role in in its success or failure. For example, the organizational charts of most banks is built on a vertical, “line of business” model. Technology, however, especially that which inspires a digital transformation, is horizontal in its role and impact.

This difference between how a bank is structured organizationally and how digital technology should be used within an institution means bank’s leadership must have a horizontal mindset about technology. The manner in which a midsized regional bank addressed this challenge is a good example. The bank converted a digital banking team of four, working in the retail side of the business, into a department of more than 30 that included each person who has or will directly contribute to the digital strategy of the bank. To ensure communication and ideas flowed as freely as possible, the bank housed all the people on this digital team in the same area of their headquarters using an open-office concept.

Adjust Budgeting From Project-Based to Forward-Based
Another area to consider during the early stages of any digital transformation is an institution’s budgeting process. Many banks use a project-based budgeting process where the senior executive responsible for a project works with others to build a business case, project plan, and budget that goes through several approvals before reaching the board of directors. Given the material levels of investment of many projects within a bank’s operation, this vetting process seems justified.

However, because the project-based model is optimized to minimize risk, progress can be painfully slow and take a very long time. It is therefore ill-suited for any organization that wants to maintain parity in the digital marketplace where the only things that change faster than technology are the expectations of the customer. To respond to this rate of change, banks must be able to move quickly. In the case of one bank, this was achieved by implementing a “forward-based” budgeting model that designated a specific investment level for digital at the start of the year. The digital leadership of the bank was given the authority to use this money marked for digital in whatever way deemed necessary for the institution to respond to evolving customer demands and technological innovation.

This Isn’t Your Grandparents’ Technology
When an institution does turn its focus to determining what third-party solutions and services will best support its digital aspirations, there are non-negotiable qualities from vendors that should be part of the evaluation process. These qualities are not typically on the list of “must-haves,” and can typically decrease both cost and complexity.

In the case of three regional banks going through a digital transformation, the non-negotiable item was control. Each felt it was essential that the vendors with which they would build their digital future delivered a product that gave the banks control over their own digital future at the solution level. In other words, does the solution allow a bank to make changes at a branch level, only be exposed to customers in that branch’s area, without needing the assistance of the vendor? This is important as many banks have had limited ability because the solutions required vendor intervention for even the smallest change.

Digital transformation is about more than choosing the right replacement for legacy, disparate, online and mobile banking systems. It should touch every aspect of an institution. This is an undertaking not for the faint of heart. Many institutions will insist they are different and can win without changing the way they operate. Unfortunately, such evaluations are why the billions of dollars of investments made collectively by financial institutions will not delay how quickly they become irrelevant to the customers.

2018 Technology Survey: Enhancing Board Know-How


tech-survey-8-27-18.pngTechnology and strategy are inextricably linked in today’s evolving digital economy. Unfortunately, bank boards—tasked with the oversight of the bank, including its long-term performance in a changing competitive environment—continue to struggle to wrap their hands around technological change and its implications. Seventy-nine percent of directors and executives say their board needs to enhance its level of technological expertise, according to the 2018 Technology Survey, sponsored by CDW.

Sixty-three percent indicate the board should better understand how to tie technology to bank strategy, and 60 percent say the board should better understand how the bank should invest in technology—a key concern, given rising budgets and an increasing number of technology vendors working with banks.

But the survey also indicates that directors have made strides in their focus on technology, both personally and as a board. Half say the board focuses on technology at every board meeting, up from 42 percent two years ago.

And the directors and executives participating in the survey indicate that they’re better users of their bank’s technology. More than three-quarters say they personally use their bank’s mobile and online channels, compared to 51 percent three years ago. With the onus on banks to enhance customers’ digital experience in the age of Amazon, a better understanding of digital through personal experience can only serve to improve these banks’ strategic direction.

The 2018 Technology Survey is comprised of the responses of 161 directors, chief executive officers, high-level technology executives and other senior executives at banks above $250 million in assets.

Additional Findings:

  • Sixty-five percent believe their bank has the products, services and delivery methods to meet the needs and demands of today’s customers.
  • Eighty-three percent say improving the user experience on digital channels is a goal for their bank over the next two years, followed by improving account onboarding (73 percent) and adding more features to the bank’s mobile app (71 percent).
  • Despite the buzz around Amazon’s Alexa, just 21 percent say integrating with that or a similar external platform is a near-term goal.
  • Forty-five percent say they plan to add more branches that will be smaller in size. Thirty-seven percent plan no changes to their bank’s branch footprint. More than half plan to update technology used in branches over the next two years, and 47 percent plan to add more technology in the branch. One-third plan to upgrade ATMs.
  • At least half of respondents indicate a need for significant improvement in their bank’s use of data analytics and business process automation.
  • Sixty percent indicate their bank has been increasing the number of staff focused on technology and innovation, and 55 percent have a high-level executive focused on innovation.
  • Sixty percent say their management team and board are open to working with newer technology startups. The typical bank, according to the survey, works with a median of seven technology vendors, including its core processor.
  • Sixty-one percent say their board has brought in relevant bank staff to better educate itself about technology. Twenty-nine percent have a board-level technology committee that regularly presents to the board.
  • Cybersecurity remains the top issue focused on by the board, at 93 percent.

To view the full results to the survey, click here.

How Switching to a Boutique Core Enhanced CNB’s Customer Experience


technology-8-15-18.pngThe bulk of the banking industry may work with the big three core providers—FIS, Fiserv or Jack Henry & Associates—but some banks are finding that smaller, boutique providers can be the better fit. That’s the case for $3 billion asset CNB Financial Corp., based in Clearfield, Pennsylvania, which made the switch from its big core provider a little more than two years ago to one that’s smaller, nimbler and more willing to collaborate with its client banks.

“We’re not a change agent by any means, but we’re constantly changing and evolving to what we believe the clients need and what our markets want, and when we talked with our prior provider, they didn’t have that same impetus,” says CNB CEO Joe Bower. “Customer experience wasn’t their focus.”

So the bank began a long and exhaustive search, spending 18 months exploring 11 different core providers, including the big three. COCC, a client-owned, cooperative core platform in Southington, Connecticut, won the contract.

The ability for CNB to be part-owners of COCC played a role in that decision: As owners, the provider’s clients have a larger voice, so advocating for a new feature is an easier process than CNB experienced with its former provider, which would demand money up front and put the request in a queue. Research and development on new features was charged by the hour. The process was slow and expensive. Enhancements to CNB’s mobile banking platform were expected to be a two-year project with the old core provider, for example.

Now, “action begins to take place almost immediately,” says Bower.

This isn’t because CNB is a bigger fish for COCC—Bower says the core provider is just as responsive to smaller client institutions with good ideas. And any new feature is then available to all COCC users, so everyone benefits.

And Bower says COCC’s proactive approach to innovation and the deployment of new technology played a role in its selection as CNB’s core. “We were looking for somebody [that] wasn’t stuck in their ways or too large to make major changes within their structure,” he says.

Perhaps because of this, COCC is open to working with startup technology providers and is nimble enough to vet them quickly. COCC directly partners with startups, and along with COCC’s own capabilities, it helps CNB get new features to market more quickly. For a technology company that’s not one of COCC’s partners, but rather the bank’s vendor, the core still coordinates integration efforts. CNB has experienced at least two fairly large integrations with outside technology firms—a commercial underwriting platform and a new peer-to-peer (P2P) payments solution.

“When new ideas surface—whether it’s from us or a small fintech startup—they’re nimble enough to take a look at it, review it and within months, as opposed to years, if we all feel like it’s a direction we ought to take, it happens, it comes aboard,” says Bowers.

Converting to COCC from its older core was more challenging in today’s 24/7 economy. CNB started fresh, converting everything—including its online and mobile banking platform—and timing this to ensure minimal disruption to customers was difficult. The core conversion began on a Friday in May 2016, and the bank and COCC only had until the following Monday to work out any major bugs. While the initial conversion went off without a hitch, dealing with smaller issues impacting a small percentage of customers at a time—problems with money transfers, incorrect statement descriptions, misapplied fees—kept bank staff busy long after the initial implementation.

“I would estimate close to 12 full months where your eye comes off the ball a bit in regards to new client acquisition, continuing to grow your assets—some of that has to take a back seat for a while,” says Bower.

Despite the conversion headaches, all-in-all Bowers says it was worth the hassle. “We’re a much better company today than we were before the transition,” he says. “Because of our ability to offer more programs, have better say in what happens with our core processor, and what services and what our client actually sees is something we [now] have some control [over].”

And the improvements aren’t just due to working with a core provider more suited to CNB’s business and strategy. Providing a better customer experience was a key driver in its decision to move to COCC, but the bank did some soul searching and realized that like its former core provider, it wasn’t thinking through the customer journey, either. So, roughly four years ago, Bowers put an executive in charge of the customer experience, promoting Leanne Kassab, who has a background in marketing, to a new position as executive vice president of customer experience and marketing. It’s position more commonly referred to as a customer experience officer, or CXO. In her role, she maps out every experience a customer could have with the bank to identify where to improve each process. She also oversees internal and external communications, and is in charge of the bank’s marketing department and call center.

Kassab also established employee task force groups to focus on different areas of the customer experience—the bank’s branches, commercial banking, new customers and existing clients—as well as employee training. These groups have been so successful that the bank’s human resources head borrowed the idea to create groups focused on the employee experience.

The bank has also changed its training programs to focus more on the client, rather than solely on operations. “We want the employees to understand the first onus on us is customer satisfaction,” says Bowers.

Bowers admits that better communication could have improved the relationship with its former provider, and his team actively works to keep the communication lines open with COCC. The bank participates in a commercial-banking roundtable to weigh in on future projects and frequently participates in user group meetings. Bowers has biannual conversations with COCC executives.

But perhaps most importantly, CNB chose to focus a junior executive on fostering a direct relationship through weekly communication with COCC. She’s newer to banking, and Bower says this fresh perspective is a benefit. She runs the bank’s e-solutions, managing what the customer sees online. Because of this, Bowers believes her perspective on new products, services and ideas inherently includes what the customer reaction could be—and she can communicate that to COCC.

Putting more effort into communicating with its core provider has created a more fruitful relationship, says Bower. “They understand where we want to be, and they understand where we think they ought to be in the world of banking today.”

Is It Time to Get Aboard the Zelle Train?


zelle-8-3-18.pngConsumers moved $25 billion in the first quarter of this year using Zelle, the peer-to-peer (P2P) real-time mobile payments service introduced late last year. That puts consumers on track to spend an estimated $100 billion through Zelle this year, a 33-percent increase from 2017. While this indicates an impressive level of growth, it is less clear whether consumer acceptance will be widespread enough to fuel mass adoption by the nation’s financial institutions. But bank leaders can’t ignore the important role payments could play in their organizations.

Few financial institutions offer Zelle to their customers. Zelle lists 113 financial partners, a fraction of the more than 10,000 U.S. banks and credit unions. Twenty-nine banks have launched the service so far, including the seven big banks that partnered together to form Early Warning, the company that owns Zelle. (The consortium also owned Zelle’s predecessor, clearXchange, which was deactivated shortly following Zelle’s September 2017 launch; Zelle’s transaction data includes clearXchange.)

The biggest banks hold the lion’s share of deposits—the consortium accounts for more than 40 percent of domestic deposits, according to an analysis of Federal Deposit Insurance Corp. data—so many consumers already have access to Zelle.

“P2P really works when all of your friends and family can use it,” says Jimmy Stead, the chief consumer banking officer at $31.5 billion asset Frost Bank. Frost was an early Zelle adopter, signing on with clearXchange in September 2016. He says customers love it, and use of the service has grown by roughly 300 percent over the past year.

Zelle is free for consumers and easily accessible through their bank’s online and mobile banking channels. (Consumers can use the Zelle app if their bank hasn’t launched the service.)

Early Warning’s efforts to generate buzz around the Zelle brand—most notably through a series of TV ads featuring Hamilton actor Daveed Diggs—help partner banks get their customers on board. And Zelle only has to convert existing bank customers to the service, while services like Venmo have to attract individual new users, notes Ron Shevlin, director of research at Cornerstone Advisors.

A lack of interoperability between payments services has dampened mobile P2P adoption by consumers, says Talie Baker, a senior analyst at Aite Group. “[Zelle] will be the only interoperable network for mobile P2P payments once all the banks get on board with it—and it basically is right now because of their partnership” with Visa and Mastercard, she says. Eventually, “a bank that’s not participating in [Zelle] is going to have a hard time being in business.”

Eighty-four of the financial institutions partnering with Zelle have yet to launch the service, and the rest of the industry is waiting in the wings. But implementation isn’t as easy as just flipping a switch.

“This is a very complex system—it’s spread across multiple banking platforms, multiple electronic data providers,” says Frank Sorrentino, CEO of $5.2 billion asset ConnectOne Bancorp in Englewood Cliffs, New Jersey. The bank plans to launch Zelle in August. A Zelle spokesperson confirms the payments system must be integrated with the bank’s core, which includes integrating messaging, and putting policies and procedures in place around risk management and customer support.

It’s interesting to note that the Zelle TV spots feature a diverse cast of actors, not just millennials. Stead says that adoption leans toward Frost Bank’s younger customers, but older customers are using the service, too. Cross-generational payments—a college kid getting rent money from mom and dad, for example—are common. This sets Zelle apart from the millennial-heavy Venmo, which doesn’t put funds directly into a bank account (users have a Venmo balance) and has a lower average transaction compared to Zelle.

But the payments space isn’t poised to end like Highlander, the 1986 Sean Connery film in which immortal beings fought until only one survived. Connery may have said “there can be only one,” but there doesn’t have to be—and there’s unlikely to be—one winner here. Venmo is also growing with consumers, with its social media-like feed, debit card and new partnership with Uber. “[Venmo is] hardly suffering as a result of the launch of Zelle,” says Shevlin.

In today’s competitive deposit market, payments should be a part of any bank’s core deposits strategy, says Shevlin. Services like Zelle can help keep deposits in the bank, while an institution that offers an outdated solution—or doesn’t offer one at all—may find its deposits lured away by a competitor, whether that’s a Zelle bank or a fintech account like Venmo.

Redefining the Meaning of a Customer Relationship


relationship-3-12-18.pngFor most people, brick and mortar branches have become remnants of prior generations of banking. In the digital age of mobile deposits and non-financial, non-regulated companies like PayPal there is little incentive to walk into a local branch—particularly for millennials. This presents an anomaly in the community banking model. Community banks are built upon relationships, so how can the banks survive in an era so acutely inclined towards, and defined by, technology seemingly designed to eliminate “traditional” relationships?

The solution is to redefine the term “traditional” relationship. While customers may not want to walk into a branch to deposit a check, they still want information and advice. Just because a millennial does not want to deposit a check in person does not mean that he or she will not need to sit with a representative for guidance when applying for their first home loan. Using customer segmentation and understanding where there are opportunities to build relationships provides an opportunity to overcome the imminent threat of technology.

If information and advice are the keys to building relationships, it becomes imperative that bank employees are fully trained and knowledgeable. It is crucial that community banks spend time hiring the right people for the right position and then train and promote from within. Employees must fully understand, represent and communicate a brand. That brand must be clearly defined by executive management and communicated down the chain of command. It is incumbent upon the leaders of the organization to first set an example and then ask their employees to follow suit. Some of the most successful community bank CEOs can recognize their customers by name when they walk into a branch. These are not the biggest clients of the bank, but they are probably the most loyal because of the quality of the relationship.

The focus needs to switch from products and transactions towards specific relationships with specific customer segments. Customer-centric banking strategies will improve the chances of survival for community banks. Those that are not able to adapt will be eclipsed by the recent revival of de novos or will be acquired by institutions that are embracing this customer-centric approach. A customer-centric approach is critical to drive value whether pursuing organic growth or M&A. For banks evaluating an acquisition, there are additional considerations that need to be addressed prior to entering into a transaction, in order to safeguard the customer relationships that the bank has built and ensure that the deal enhances the bank’s brand and business model, while also building value.

If you are one of the survivors and are engaged in an acquisition, what does all of this mean for you?

  1. FinPro Capital Advisors Inc. advocates having strict M&A principals and parameters when evaluating the metrics of a deal, which will vary from bank to bank. This concept extends to culture and branding as well. A good deal on paper does not necessarily translate to a successful resultant entity. If a transaction will dilute your franchise, disrupt your culture or business model, or in any way undermine the brand and customer base you have built, do not pursue it.
  2. Signing a definitive agreement is not the same thing as closing a transaction. Integration begins as soon as the ink dries on the contract. Planning should have occurred well in advance. Management needs to focus on employee, customer and investor reception of the deal, along with regulatory approvals and strategic planning. A poorly executed integration can provide an inauspicious start culturally and can increase merger costs substantially.
  3. Retain the best talent from each institution and take the time to ensure that the employees are in the right position. Roles are not set in stone and an acquisition provides the perfect opportunity to re-position the bank’s staffing structure. This includes implementing management succession and talent management plans for the new entity. Develop an organizational structure for the future, not just for today.
  4. Communicate effectively throughout the entire process. Be transparent and be honest. Bolster relationships and foster enthusiasm in the new entity from day one. Corporate culture is one of the most difficult attributes to quantify but it is palpable and can either energize every person in the company or rapidly become toxic and disruptive.

For all banks, the brand and culture that you build will directly impact your customer base and define the banking relationships you create. To build meaningful relationships with your customers, banks must first build meaningful relationships within the organization. In so doing, banks will be able to redefine their model by focusing on relationships instead of transactions, customers instead of products, and eliminate isolated divisions to create integrated organizations. The traditional banking model may be dead but banks with strong leadership and corporate culture will recognize the new paradigm and enact change to evolve accordingly.