The Best Way To Increase Digital Deposits

Consumers have come to expect the ability to do banking — and a wide range of other activities — online. These expectations are only likely to grow with the Covid-19 pandemic.

While some banks have offered online services for some time, many others may be rethinking their strategy as they consider options that might help them grow market share beyond their traditional or geographically limited service areas. After all, digital banking has the potential to draw deposits and service loans from a broader pool of potential customers. As banks of all sizes contend with margin compression and increased competition, one of the easiest and most expeditious ways to cut costs is through the use of technology.

As banks work to increase deposits in an increasingly digital world, they have the opportunity to take different, sometimes divergent, approaches to connecting with audiences and compelling them to become customers. Two key strategies are:

  • Establishing a digital branch — a digital version of an existing branch
  • Launching an entirely new digital bank, with an entirely different look and feel from the existing brand

There is no right approach as long as banks are meeting customers’ digital needs. Each bank should pursue an approach that incorporates their brand, their core strategies and their target audiences. But small community banks don’t have to be hampered by the lack of big budgets or deep pockets when providing excellent experiences to their customers and fuel consistent growth, though. By leveraging truly optimized digital capabilities, community banks can grow faster and at a low cost.

Extending the Brand Name
There’s great value in brand loyalty. Many community banks have long-standing positive relationships; strong brand awareness and loyalty are firmly established within the communities they serve. When doubling down on offering online services, leveraging its existing brand name can help the bank establish immediate awareness and preference for its services.

Leveraging the existing brand name can be a less-costly undertaking, since new logos, branding platforms, key messages and marketing collateral don’t need to be established.

The potential downside? When reaching into new markets, an existing brand name may not have enough awareness to compete against the large, national, online brands. Fortunately, the online landscape offers even very small community banks the opportunity to build a very large footprint. To do that, some are launching new brands designed to reach an entirely new target audience.

Launching a New Online Brand
Reaching a new audience is one of the biggest benefits for banks that launch a new online brand. It also creates an opportunity to shift the bank’s image if the existing brand has not been strong or does not convey the modern, nimble image that tends to appeal to younger audiences.

The drawbacks, though, include the costs of creating a new brand, both in terms of time and money with no certainty or guarantee that the new brand will gain traction in the market. In addition, launching a new brand relinquishes any opportunity to leverage any existing brand equity. Operational planning and related costs may also be higher, given the likelihood that some positions and services will be duplicated between physical and online branches.

Still, community banks should carefully consider both options in light of their unique positioning, strategies and goals. While both approaches represent some level of risk, they also provide specific benefits that can be capitalized on to grow market share and revenue. We’ve worked with banks in both camps that have seen incredible growth and gained operational efficiencies well beyond their goals.

No matter the approach, when it comes to digital banking, it’s imperative to have clear objectives, buy-in from all stakeholders, focused resources to make it happen, and partners that can provide guidance and best-practices along the way.

Three Retail Strategies for the Post-Coronavirus Branch

Technology is key to providing a near touch-free experience in the branch and digitally, but many banks are not ready. Less than 50% of organizations believe they are prepared for competitive threats, customer expectations or technological advancements, according to the 2019 “State of Digital Banking Transformation” report.

It’s a daunting task to take on digital transformation. Financial institution didn’t need a crisis to learn that banking from anywhere is a priority for customers, but it has highlighted the slow rate of mobile adoption. Only 17% of financial institutions believe they have deployed digital transformation at scale, with larger organizations being the most advanced, according to the Digital Banking Report. Even after the coronavirus pandemic has settled down, consumers will value banks that make the investment to provide services digitally.

Onboard Customers to Digital Resources
Transacting from anywhere is important, but that’s not the entire branch experience — banks need to provide highly personal financial education and advisory services from anywhere. Focus marketing and communications on educating customers with resources like blogs, social media posts, financial healthcheck tools or webinars on relevant topics like financial planning in an emergency. Content explaining the details and next steps on payment deferrals, personal loans, and programs like the Paycheck Protection Program are especially helpful during this time. Ensure your compliance officer looks over everything before it’s posted.

Offering tools and resources now will position you as an advising partner rather than a product-focused institution. And video banking gives your customers more access to experts. These platforms put face-to-face interactions in the palm of your customers’ hands by allowing them to connect with a banker right from their phone, securely sign and share documents such as photo IDs, documents for new accounts, loans, and other urgent needs.

Give Customers Access to Experts
Banks also need to invest in technology that allows their experts to work from anywhere — including the corporate campus or headquarters too. These investments allow them to work from anywhere makes transitioning to remote easy; they can also improve productivity when they are in the office.

Adding flex spaces in your headquarters allows you to reduce the number of desks provided to full-time employees while improving productivity, the flex space allows your employees to have a space to focus when they need to, collaborate, and it can be used by others when that employee is remote or off-campus.

Your experts will need to have a well-thought-out space where they can perform their remote expert duties. A clean backdrop, technology, and quiet location are all necessary to make sure your experts can handle any question and transaction. However, the space doesn’t have to be expensive or elaborate. Take an Instagram-versus-reality approach to creating the perfect remote expert set-up. Meaning, focus design dollars on what is on camera instead of spending on the entire space. Offer your experts best practices for video conferencing so your exceptional customer service standards are not altered when your associates are working remotely.

Prepare Your Branch for the Post-Coronavirus Consumer
This is truly the time to prepare your branches for the future and provide an even-better experience than before. Consumers post-coronavirus will be more aware of being in confined spaces, such as private offices. A “service spot” offers a unique workspace for associates that is visibly less “confining” but still private, potentially increasing the appeal of getting advisory services in the branches. Ideally, the spots would be set at counter or bar height.

Teller towers are a retail-friendly twist on the old-school teller line. They remove queue lines and create more distance between customers, while providing a better interaction experience with staff.

Easy-to-clean surfaces for furniture, flooring and more will be the way of the future. Brian Silvester, Head of Design at DBSI, offers several examples of easy to clean and green finish options:

  • Stain-resistant surfaces and PFOA-free upholstery are easy to clean and reduce health concerns linked to PFOA.
  • Easy-to-clean laminate instead of wood veneer offers a realistic natural wood-look without having to worry about scratches and special cleaning procedures.
  • Groutless flooring like luxury vinyl tile reduces maintenance over time. There are even options that are carbon neutral.

The post-coronavirus consumer may be hyperaware of germs on everything they touch, and may not be interested in communal brochure racks to gather information. Digital and interactive signage with hand sanitizer nearby in an option that is easy to clean and update. Interactive digital signage allows customers to still obtain the information they want while collecting emails and data for customer insights. Touch-free screens are a great way to showcase your products and services with virtually no risk of community spread.

To create the perfectly prepared retail strategy that can attract and retain customers in any situation, banks need to fuse design, technology and process. Branch transformation, at any level, is both an art and a science.

Three Critical Strategies for Digital Wealth, Trust Success


strategy-7-31-19.pngThe robot (wealth advisors) are here.

The robo-advisor revolution promised to render legacy firms like broker-dealers, asset managers, and registered investment advisors obsolete.

The fear of being left behind motivated many companies across the wealth industry to respond with an open checkbook. BlackRock dropped $150 million to buy FutureAdvisor in 2015. Other firms, like JPMorgan & Chase Co., spent more than three years and millions of dollars building their own robo-advisors. And others, like Northwestern Mutual, spent $250 million to acquire and then ultimately shutter their offering.

Despite all the effort, money and time invested, these companies don’t have much to show for it. The amount of assets under management at these nascent efforts is underwhelming; when combined with ultra-low robo-fee rates, the revenue doesn’t come close to providing any real return on their upfront sizable investments.

What’s the real takeaway for banks? The problem isn’t the technology so much as it is the corresponding business strategy. When it comes to robo-advising, altering the strategy and deconstructing the technology will give banks the biggest returns on their investments. There will be benefits for the brokerage side of the bank, but even greater returns in the trust division, which typically relies on outdated processes based on paper and people.

If banks look at technology with a lens toward driving margin as well as revenue growth, the way they deploy robo-technology changes. Instead of launching robo-advisors and hoping customers stream in, a better strategy could be to become hyper-focused, using the technology in order to maximize its inherent value. Banks thinking about using digital solutions to improve their wealth and trust offerings can focus on three areas in order to get operational and revenue benefits:

  1. Eliminate paper-based trust account opening processes. Using digital trust account opening can dramatically reduce the total client onboarding time and begin the investing and billing processes sooner, accelerating the time it takes to generate revenue from a newly opened account. For example, the typical trust account takes about 40 days to get correctly opened and funded. Technology can reduce that time by 30 days, driving at least 8% more revenue with those extra days, while simultaneously decreasing the people- and paper-based costs.
  2. Automate existing smaller agency accounts. Automating processes like risk assessment, model management and rebalancing can significantly reduce the amount of time and people needed to manage those smaller, less profitable accounts. Banks can achieve higher customer satisfaction via the improved and streamlined process, as well as higher advisor satisfaction from the drastic reduction in operating time.
  3. Retain flight risk retail customers. Retail customers who do not meet the account minimums to utilize a bank’s wealth services often find wealth offerings elsewhere, taking their assets outside of your bank. By digitizing wealth offerings, banks can lower their operational costs and enable a profitable way to service smaller wealth accounts, retain more customers and increase revenue. The key is using technology to correctly segment customers to better predict when they are most likely to become a flight risk to consumer-facing robo-advisors like Betterment.

So, what should a bank do to digitize a wealth or trust offering?

Start by targeting efficiency. While you may be tempted by the siren song of new customers and revenue, the biggest short-term returns for technology always come through cost reduction and margin expansion. Find the areas of your business with the most friction and surgically target them with technology to notch meaningful gains. Once your operations are running faster and smoother, target existing at-risk customers. Yes, you’ll be repricing those deposits, but it’s always better to reprice, retain and ultimately grow deposits than it is to lose them to one of the consumer-facing robo-advisors.

Engaging Branch Staff to Build Merchant Services Momentum


services-7-3-19.pngThe success of a bank’s merchant services program lives or dies by the support from branch staff.

While offering competitive rates and top-notch customer service is important, those things won’t make a difference if bank branch staff isn’t discussing merchant services with customers. Programs suffer without the support and enthusiasm of staff. Here are some best practices on keeping branch staff engaged in merchant services promotion.

Set Goals
A bank should employ a top-down directive from leadership that emphasizes the importance of cross-selling merchant services during customer interactions. It is imperative that the directive includes clear, attainable goals for branches and employees. “Goals are the fuel in the furnace of achievement,” writes development consultant and author Brian Tracy.

Goals help motivate branch staff to sell these services. Leadership also needs to track performance and offer recognition. If staff gets the impression that set goals are not followed up on, it can be incredibly demoralizing.

Empower Your Sales Staff
Employees may hesitate to sell products they have not been fully educated on. But the growing popularity of online banking means it’s important that branch staff capitalizes on every opportunity to cross-sell. It may be the only chance they have to speak face-to-face with a prospect.

Executives need to make sure that bank staff is trained up on all products and services. They can do this through role-playing exercises of different situations that focus on improving communication skills and preparing for curveball questions. This is one of the best ways to prime employees for productive conversations with prospects.

Implement an Incentive Campaign
Managers should encourage staff to stretch for sales goals through an incentive campaign. These campaigns can include referral bonuses, sold-product goals, raffle campaigns and more. Some merchant services providers may sponsor incentive campaigns for their partner banks. Additionally, incentive campaigns aren’t limited to employees; banks should consider incentivizing existing clients through referrals.

Provide Ongoing Training
Payment card technology is constantly changing. Executives need to provide branch staff with tools that will help them stay up-to-date on current trends and industry changes. One way to do this is through a portal that is regularly updated with new resources and information. It is vital that executives cultivate an environment where branch staff feels comfortable asking for additional training or information.

The success of a merchant services program rests on the shoulders of a bank’s branch staff. Executives must make sure they equip their front-line people with all the tools and knowledge they need. The investment of time and resources up front will pay dividends in the future. Every win for branch staff is a win for the bank.

Five Insights into the Top 25 Bank Search Terms


customer-6-20-19.pngBanks can use customers’ search queries to create a more efficient, optimized user experience.

Most marketers rely on search engine optimization to drive traffic to their website, missing a crucial opportunity to optimize searching on the site itself. But on-site search optimization is a critical component of search and self-service for customers, and is a way that banks can create a better experience for users.

Search engine optimization, or SEO, focuses on attracting new visitors to a website. On-site search optimization addresses the existing and returning traffic base—a bank’s current customers and prospects. This approach helps them find helpful and relevant content once they are on the site, which is as important as getting them to the website or mobile application in the first place.

A growing percentage of customers use digital channels to interact with banks and require intuitive search and easy-to-find support information. Banks will benefit from delivering superior on-site search functionality with actionable support answers on their websites and mobile apps.

Transforming a bank’s website, mobile or online banking applications into a true digital support center involves more than a simple search bar. Search terms and activity can be used to inform the support content strategy, while monitoring customers search queries ensures a bank is providing the most sought-after answers across its digital and mobile channels. This continuous process directly impacts an institution’s customer experience, service levels and operational efficiency.

The top 25 search terms across banking websites in 2019 included:

1. Routing Number 10. Direct Deposit 19. Mobile Deposit
2. Overdraft Protection 11. Rates 20. Login
3. Order Checks 12. Address Change 21. ACH
4. Skip Payment 13. Loan Rates 22. Stop Payment
5. Online Banking 14. Debit Card 23. ATM
6. Wire Transfers 15. Check Card 24. Mortgage
7. Credit Card 16. IRA 25. Bill Pay
8. Open Account 17. CD Rates  
9. Account Number 18. Hours  

Customers’ search patterns in a bank’s digital and mobile channels differ the terms used in a search engine platform such as Google or Bing, according to data from SilverCloud. Searches on banking websites and apps average 1.4 words per search, compared to four on search engine platforms. On Google, people search for “the best checking account for me;” on a banking website, they use broader terms like “online banking.”

Two factors drive this search behavior. First, banking consumers are already on the desired site, so they use more narrow search terms. Second, financial terminology can be confusing and unfamiliar. As a result, customers who lack knowledge of specific banking terms tend to use broader search terms to home in on exactly what they need.

There are five takeaways for banks that are interested in how top search terms can help them grow more efficiently:

Banks need to deliver a better customer experience. Having a strong on-site search engine allows customers to service themselves in a way that is easy, fast and efficient.

Strong search could reduce call center volume. Having robust content, frequently asked questions and support answers allows customers to get answers without needing to contact call center agents.

Provide support as mobile adoption increases. Customers will have more questions as banks introduce more self-service options, like online account opening, mobile deposit and online bill pay. Banks should anticipate this and have support answers in place to facilitate faster adoption.

Create opportunity and invite action through search. Banks can drive deeper customer engagement into various product offerings by writing actionable support answers. For example, the answer for a search query for “routing number” could include information about what customers can do with a routing number, like set up direct deposit or bill pay. This approach can increase the likelihood they take such actions.

Banks can do more with less. The more that customers use self-service digital and mobile channels and find information that addresses their queries, the fewer employees a bank needs to staff customer service centers. Institutions may find they can grow without adding a commensurate number of employees.

Banks should review their digital channels to ensure they are providing support content that addresses the ways customers seek information. Content around general search terms needs to be robust. Executives will need to keep in mind that most search terms require 10 or more custom answers to address the transactional, informational and navigational forms of customer intent.

Retail Checking Realities



Forty percent of retail checking relationships are unprofitable, so crafting retail checking accounts that deepen customer relationships, drive deposit growth and enhance the bottom line is a challenge faced by most financial institutions. How can bank leaders tackle this issue? In this video, StrategyCorps’ Mike Branton shares two common mistakes banks make regarding their retail checking products. He also shares his thoughts on enhancing the appeal of checking products and explains technology’s role as a deposit driver.

  • Driving Deposit Growth
  • Why Big Banks are Winning Customers
  • Making Checking More Profitable

 

Smart Growth: Expanding Your Branch Network


growth-11-15-18.pngBranches play an important—but changing—role in the typical bank’s retail strategy. Increasing digital adoption may make consumers more apt to deposit a check using a smartphone camera than through a teller, but they still want to visit a branch for advice: A Celent survey published in May 2018 found more than three-quarters of customers want to meet a banker face-to-face to discuss a topic in-depth. Very few—just 12 percent of millennials—say branches are unnecessary, and prefer all-digital interactions.

And that has many banks evaluating whether to expand their branch network, even in today’s digital age. In Bank Director’s 2018 Technology Survey, 54 percent of responding executives and directors said their bank plans to add branches.

Before you move forward with building or acquiring your next branch, here’s what you should keep in mind.

Establish goals.

Understand how the role of the branch fits within the institution’s overall delivery channel strategy, advises Jim Burson, a managing director at Cornerstone Advisors. “Start with, what are your growth objectives as an organization, and then second, how do you envision the role of the various channels supporting that growth objective.”

These goals will differ by bank. Burson says one of his clients prizes a branch’s “billboard value”—it lets customers know the bank is physically located in their market. That CEO values a big sign and a tiny lobby. “That’s a very clear objective for a branch. So, when they [build] new branches, if they can’t get the signing ordinance they want from a community or they can’t get the visibility they want when people are driving down the street, it’s off the table—that location is gone,” says Burson.

Before purchasing property and breaking ground on a new branch, a feasibility study should be conducted, advises John Smith, chief executive officer of retail banking consultant DBSI. Understand the deposit and loan opportunities within a desired market, and if there is room to gain market share for your bank.

“Every market we go into, we look at it strategically,” says William Stuard Jr., the CEO of $1.1 billion asset F&M Financial Corp. The branch should be within an hour or two of the bank’s headquarters in Clarksville, Tennessee, so the footprint is easy to manage.

Geographic expansion starts with a lending team. “We don’t go in and just get a building and try to start from scratch,” says Stuard. The bank’s Hendersonville, Tennessee branch started as a mortgage office, then a loan production office before the bank built a full-service branch in the town’s growing commercial area in 2017.

Taking an incremental approach to branch expansion appears to be a common method for testing the viability of a market.

William Chase Jr., the CEO of Memphis, Tennessee-based Triumph Bank, with $784 million in assets, says starting out with a loan production office helps the bank get into a market faster. “It’s a lot easier to go through the process of finding some nice office space and get an LPO approved,” he says. “Time is money.” And a full-service branch takes time to build.

He also credits commercial real estate expertise on the board with making smart financial choices on property.

Bassett, Nebraska-based Sandhills State Bank, with $242 million in assets, seeks to fill in the gaps in its sparsely populated area in Nebraska. When big banks pull back from the market, “it offers a great opportunity for community banks to fill that vacuum and pick up more deposits,” says CEO David Gale.

The bank’s current investors bought what was then a $28 million asset bank in 2010. The bank’s initial expansion occurred by sending lenders into new markets. These lenders’ first offices were, in fact, a pickup truck. “Our first three branches in 2010 out of the gate were built around lending talent and started out as loan production offices out of their pickups,” says Gale. Once lenders hit $5 million in loans, the bank would add an office in the market. At $10 million, they would open a branch and hire more staff.

Recent expansion has occurred through acquisition: Bank of Keystone in 2016, and in early 2019, the bank will purchase three western Nebraska branches from Western States Bank. At that point, Sandhills State Bank will reach $310 million in assets.

The pending branch acquisition (which is awaiting regulatory approval) will help the bank diversify its agricultural loan portfolio and acquire more deposits to fuel its loan growth. Like many in the industry, the impetus on deposit growth makes a branch acquisition more attractive than starting out organically with a lender in the market—though Gale does express a preference for organic growth.

Bank leaders hungry to acquire branches need to pay attention to opportunities in their markets. Gale has worked to build relationships with other bank CEOs, and this directly led to the the bank’s upcoming branch acquisition. In today’s competitive M&A market, bank CEOs need to be proactive to position their bank to pick up branches.

Improve the branch experience.

More consumers would switch banking providers over a poor branch experience (47 percent) than a poor digital experience (36 percent), according to the Celent survey.

When asked about specific branch experiences that would prompt them to switch, 68 percent cited ill-equipped banking associates, 55 percent long wait times and 49 percent impersonal service, meaning the bank doesn’t know the customer or understand what they need. Wealthier customers are even more sensitive to these oversights.

Some banks are solving this problem by adopting a universal associate or universal banker model.

“[Create] a relevant environment where you’re viewed as a place to get advice from,” says Smith of DBSI. “Today’s financial institutions are primarily still transactional.”

Because universal associates are capable of doing more for the customer—from service to advice—the customer has a better experience, and the bank can reduce its headcount in the branch. The universal banker model can also present a better career path for the employee, which should result in lower employee turnover.

But to make it work, universal associates should be properly trained, and the branch should be designed to make the most of the new model.

At Triumph Bank, universal bankers are “empowered to do almost anything that a customer would need,” from cashing a check to opening an account to financial planning options, says the bank’s human resources officer, Catherine Duncan. “We’ve got people that want to stick around and want to grow with the company. You empower them to make decisions … it keeps them engaged, it keeps them feeling valued.”

In addition to training these employees, the bank created an manual that serves as a go-to guide for any questions the associate might have, so they don’t have to run to a supervisor or another employee, and instead can help the customer confidently and immediately.

Triumph’s newer branches are designed without teller rows, and universal associates greet customers at the door.

At Sandhills, a lightly-staffed model works better in its sparsely populated market. The bank leverages technology to reach its rural customers—mobile adoption exceeds 50 percent, says Gale, which is on par with JPMorgan Chase & Co.—and you won’t find a drive-thru lane. “We want to talk to our customers,” he says.

Branch transformation initiatives should align with the bank’s overall objectives for its branch network, says Burson. And banks should evaluate their branches—old and new—to determine they’re meeting these goals. Too frequently, a branch is built, and the business case for that expansion isn’t revisited. “They don’t manage to the objectives,” he says. And that’s a big mistake.

Innovation Spotlight: First Internet Bank


spotlight-8-2.png

David Becker, President and CEO

Before he understood banking, David Becker understood technology and its ability to shape the customer experience. Highly attuned to how people would want to bank in the future, Becker started First Internet Bank in 1999, now a $2.4 billion asset institution in Fishers, Indiana. In his 35 years working in financial services technology, Becker has created five companies listed in Inc. magazine’s 500 fast growing companies and continues to engage in philanthropic initiatives to support the economic growth of central Indiana.

When you first told people you were starting a branchless bank, what reaction did you receive?
Nearly 20 years ago, I had an idea to create a bank that lived entirely online. At the time, I had three financial services software companies. Today, we would call them fintechs. My experience as a service provider to the financial services industry, and my years as a consumer and business bank client, gave me deep insight into how banks worked, and, candidly, how they could improve.

How did bankers react? I initially presented my concept to a traditional bank, explaining how a bank could build a nationwide business with an all-online presence. After the presentation, though, the bank’s CEO rejected our concept. He claimed computers weren’t fast enough and the alleged consumer wouldn’t buy in. Essentially, he said it couldn’t be done.

Fortunately, consumers did not share the same skepticism. What’s unique about our story is that this online banking model was born following a focus group with my friends and neighbors. I asked them about how they’d prefer to bank. The ideas flowed. Eighteen years and $2 billion in assets later, we have demonstrated the success that can follow when you remain focused on the customer.

What lessons did you learn working in the technology sector that later helped you as you were growing First Internet Bank?
Before launching First Internet Bank, I worked in and around financial services for years. I saw an opportunity to improve upon the industry’s shortcomings—primarily improving efficiency and the customer experience, both of which rely heavily on technology paired with a human touch.

What’s helped us grow so quickly is that we’ve recognized that we need talented people who can handle anything that comes in the door. Because we have no tellers, per se, everyone who works on our retail banking team, for example, needs to be trained across multiple technologies to handle multiple functions, from complex IRA transactions to mobile functionality to starting new deposit accounts.

And because we’re using technology like mobile banking and biometrics, to revolutionize the banking process, there really isn’t any limit to our potential growth.

How can bank boards start to adapt an entrepreneurial mindset that allows for innovation?
Because we were a pioneer of the branchless model, we’ve learned to use technology to help us adapt to challenges and reinvent ourselves. Technology enables us to expand our business, enter new verticals to diversify our revenue streams, and serve customers across the country—without a costly branch network.

Technology is an increasingly important part of our business, and there is much to be said about the ways fintech is changing the landscape of our industry. However, I would caution boards against looking to a fintech solution as a quick fix to bring innovation to your organization. If you truly want to foster a culture of innovation, look to your existing team.

Today, our hire is the “dissatisfied banker.” We look for the banker who says, “What if we did this instead?” We want the people who challenge the status quo and offer solutions to help us make it better. At First Internet Bank, we call this our “entrepreneurial spirit,” and it permeates the organization.

Our people are the key to our success. Some are bankers that have finally been empowered to do what they’ve always wanted to do. Others are industry outsiders that we’ve hired to bring new solutions to old problems.