By Dave Pond
We recently got the StrategyCorp brain trust (our sales team) together and asked a simple question to them: What do you see as the biggest shift that banks and credit unions need to be aware of in the next 12 months? What are you hearing from the financial institutions you talk to on a daily basis?
The answers we received are varied, but all are important shifts that bank and credit union leadership need to keep on their collective radars.
Increased Competition (Digital Banks)
When you talk about digital banks, the pressure to improve the mobile experience is creating a serious challenge to community financial institutions that aren’t actively pursuing digital and mobile banking solutions. Ultimately, it’s driving more customers and potential customers to the larger banks.
Deep Pockets in Smaller Markets
Many big banks are starting to view themselves more like technology companies and less like traditional banks. And they are stepping up their moves into smaller markets. They're drive toward redefining banking relationships is threatening market share for smaller, less tech-forward FIs.
The consequences are bigger banks acquiring smaller FIs or smaller FIs merging with one another to defend their territory and also boost their bottom lines short term while they find new revenue and technology solutions intermediate term.
Buy Now, Pay Later
Buy Now, Pay Later has taken the financial sector by storm. Fundamentally, these are short-term financing deals and threaten credit card use or micro loans. If banks don’t grasp that and rethink how they can take advantage of this clear customer demand, they're going to be missing some more interchange opportunities as their customers or members buy more stuff using embedded finance solutions that offer BNPL. Many FIs are talking about this.
Digital banking is becoming an increasingly common reality. Being able to manage onboarding for personal and commercial accounts is a growing challenge as smaller FIs try to bridge the gap between a basic digital portal and developing a strategy for inserting the personal touch into that digital opportunity. Just like the ATM was the first generation of digital banking, it hardly solved the challenges of providing financial services that drive real revenue.
Internal costs are going up across the board but it’s not physical branches that are the specific issue. Staffing is the culprit. Branches aren’t being shuttered; it's just costing more and more to run a branch. They’re offering more money to keep people, which means the cost to keep staff is only increasing. And if costs are rising, it’s hard to implement new products to deliver more revenue, although it’s precisely the right time to adapt to the industry’s shifting dynamics.
A number of StrategyCorps clients have shared that they're short-staffed in the branches, and many branch managers are covering the front lines.
That hasn’t changed since the pandemic began, and it won’t likely change in 2022. The shortage puts pressure on financial institutions to adopt new products, technologies and management structures that continue to reinforce customer service and satisfaction first.
FIs that we talk to are looking for direction, so, they hope we can provide creative engagement. They know about the industry but need help with ideas to better engage members or customers in this digital-first world.
Whether through digital onboarding, using our core partners, or creating a new recurring revenue channel, they know unique and different solutions without significant disruption can help them adjust their direction. They're looking for help with those solutions or ideas to deepen relationships and help them generate revenue.
There are more and more banks and credit unions getting new chief experience officers and chief innovation officers, to try to cut through the administrative inertia that banks have built up. The goal is to challenge legacy thinking and become less like traditional banks and more like dynamic companies that are customer focused.
People in these new positions have different ways of thinking about banking products and services, and fintechs and sales people need to relate to these executives. Maintaining the status quo is going to put some long-time executives in the hot seat as banks look to cut costs and want people to produce results that offer growth in a transitioning sector.
FIs are losing customers to better tech every day. This is simply a matter of remaining relevant. In every other sector in the economy legacy businesses have had to adapt to new competition and technology to thrive. Banking is no different. However, it’s important to meet banks and credit unions where they are and keep them relevant while helping them build toward the future.
This is table stakes in the new digital banking experience. But it takes communication and collaboration among the partners to make it happen. Fintechs don’t necessarily get the regulated banking environment and bankers don’t get the fast-paced space of fintechs. Making sure when these fintech companies come in, they deliver on services that allow FIs’ customers or members access to their information, no matter what channel they use as well as the other apps and services that are available through other partners. As long as they all connect, you have a great start on omnichannel banking.
Sometimes it can seem overwhelming to look at these challenges and realize that many of them might apply to your FI. But the fact is, after understanding, developing a plan of action that is reasonable and affordable is your next best step.
StrategyCorps has built two powerful solutions to tap into two core needs expressed here: a clear path to increasing recurring revenue, and more valuable customer engagement.