A very insightful study that summarises the strengths of Community Banks and Credit Unions and the challenges both face when they have to compete with mega banks increasing their market share in the US.

1. 22/07/2019, 21)53People Prefer Small Banks and Credit Unions, But The Clock Is Ticking
Page 1 of 5https://thefinancialbrand.com/76884/digital-community-banking-credit-unions/
People Prefer Small Banks and Credit
Unions, But The Clock Is Ticking
Researchrevealsasoberingassessmentofthechallengescommunity
bankingprovidersandsmallerinstitutionsfacewithrespecttotheirdigital
capabilities.Expertsweightheresultsandofferadvice.
By Bill Streeter, Editor at The Financial Brand
According to a study from The Harris Poll, a majority of
consumers (58%) also said they prefer to deal with local and
regional banking providers instead of large national institutions.
Considering that the top three banks in the country — Chase,
Bank of America and Wells Fargo — have added $2.4 trillion in
new deposits since the financial crisis, the survey results are a bright spot for
beleaguered smaller banking providers.
But the survey also probed why consumers prefer dealing with a larger or smaller bank
or credit union. Here the results were mixed. Community and regional institutions
handily win in “better customer service” and providing a “more personalized
experience” — defined as using the customer’s name when greeting them and offering
relevant products. Large national banks, however, deliver a “better digital experience”
(ease of access) and “more/better digital capabilities” (e.g., mobile deposit, P2P
payment, mobile account opening).

2. 22/07/2019, 21)53People Prefer Small Banks and Credit Unions, But The Clock Is Ticking
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“Never mind Amazon.
Chase and BofA are
taking an unfair number
of Millennials away from
community banks and
regionals.”
— Alex Jimenez, Zions Bancorp
Mark Vipond, CEO of D3 Banking that sponsored the Harris survey, admits he didn’t
expect as many consumers would prefer large national banks because of their superior
digital offerings. That figure will continue to grow — something Vipond says should
concern community banks and credit unions.
Vipond says smaller institutions have a slight leg up for now, but they will lose that
edge if they don’t continue to advance digitally.
“It’s their game to lose,” he warns.
BiggerDoesn’tAlwaysMeanIt’sBetter
Alex Jimenez, senior strategist for Zions Bancorp ($67 billion assets), says that even for
institutions at their size it’s tough competing against the megabanks. And for all the
chatter about Amazon as a potential competitor, Jimenez says he worries more about
Chase and BofA.
“Never mind Amazon. The megabanks are taking an
unfair number of Millennials away from community
banks and regionals,” he gripes. “We don’t even make
the short list.”
Despite the huge advantage in resources of the top
banks, Jimenez and others believe they have
vulnerabilities — lack of speed in development being
one.
Michael Carter, EVP with Strategic Resource Management, observes that given their
massive infrastructures, most of the large banks spend much more of their tech dollars
on maintenance than they do on innovation. Things like toolkits for application

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programming interfaces (APIs) are out there now and affordable for smaller
institutions, giving them a means to catch up, says Carter. But they have to take
advantage of the opportunity.
Nobody’sNailingPersonalization
More than three in five consumers (61%) want their financial institution to anticipate
their financial needs the same way online retailers do, the Harris survey found. Women
and younger consumers in particular strongly agree on that point. The survey also
found that more than three quarters (78%) of consumers are more comfortable with
their bank or credit union having access to their personal data than a large technology
company.
“Banks and credit unions own the trust card,” Carter points out, “for now.”
Taken together, these two findings clearly suggest a path forward for traditional
banking providers, provided they seize the moment to upgrade their digital capabilities
and mindset — particularly to deliver a more personalized experience.
Nearly everyone in banking agrees personalization should mean much more than using
someone’s name in an email message. Broadly it should be anticipating consumer
financial needs and interests and proactively presenting them with offers and
messages in their preferred channels.
“Too often we define ‘customer service’ as something reactive,” says former banker
turned consultant Ginger Schmeltzer. “It should be proactive — like Amazon and Apple
— getting ahead of consumer needs.” According to Schmeltzer, customer service
should be about helping people meet all their financial needs. This could take the form
of something as simple as: “We see you just moved. Can we help?”
Banks and credit unions, however have quite a ways to go, according to Jimenez.
“Banking is woefully behind on personalization,” bemoans Jimenez. He has accounts at
a couple of big banks, and he’s frequently surprised by how little they personalize
communications, particularly considering how much his data tell them; it’s nowhere
near the level of personalization that the banking trade media so often writes about.
For example, he recently received an email from one of them with the salutation, “Dear
Valued Customer.”
Consultant Michael Carter recounts how he received a message from his bank recently
suggesting he should consider refinancing his home loan. The problem was, he received
the message while he was waiting to wrap refinancing his mortgage… with the same
bank!
Not everyone buys into the Amazon hype either. Jimenez, for one, doesn’t believe
Amazon is as great at personalization as they get credit for. As an example, it’s not
uncommon for Amazon users to get “You might also like” messages showing the very
product that person purchased the day before.
“That’s not personalization,” Jimenez quips. “That’s just a lazy algorithm.”

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“Progressive banks think
of branches as part of
their digital
transformation.”
— Michael Carter, Strategic Resource
Management
The banker admits he is impressed by the Happy Birthday messages he gets from
Capital One Bank. “But they’ve been doing that for ten years.” He asserts that little else
has been done in the industry beyond that.
Nevertheless, Schmeltzer thinks things like the birthday message are important. “Look
at how such a small thing can be so memorable,” she says of Jimenez’s experience.
While she isn’t as pessimistic as some analysts in the banking industry — indeed she
thinks that a lot of work toward personalization is happening — she does agree that
progress is slow.
DigitalSystemsSufferFromAgeandDecay,Too
When the term “legacy systems” comes up, most often it’s in reference to aging core
processing platforms and how their decrepit inflexibility hampers financial institutions’
to implement many advanced digital features.
There’s another, counterintuitive perspective though. According to D3’s Vipond. He
maintains the websites and mobile banking apps used by well over 90% of banks and
credit unions in the U.S. are now getting creaky themselves. They’re anywhere from 5
to 15 years old and their functionality is very static.
Tech that’s 5-15 years old may not seem so when compared to 25-40 year-old
mainframe systems. But for customer-facing technology, that’s pretty elderly, because
digital capabilities change and evolve so quickly. Two examples Vipond cites are card-
control features and data analytics.
According to Vipond, the industry suffers from additional issues rooted in its past. For
instance, the vast majority of banking providers still see branches, online, and mobile
as separate channels. He contends that they are — or at least should be seen as — all
part of one evolving channel that will eventually include features like conversational
banking from a consumer’s car and more.
“Progressive banks think of branches as part of their
digital transformation,” he adds, so that consumers
can, if they wish, start an application on their phone
and continue in the branch without missing a beat.
But alas, nothing in the financial industry moves fast,
a point the veteran banking technology executive
readily concedes. But that doesn’t temper his ultimatum: banks and credit unions must
get their digital acts together in the next two to five years. If they don’t they will face
one of two likely futures: either they will get acquired or become dinosaurs.
To avoid that fate, Schmeltzer strongly recommends that “those who control the purse
strings be deeply involved in digital.” She encourages banks and credit unions assemble
teams to better understand the needs and preferences of younger consumers, and to
have a large number of employees actively involved in the organization’s digital
transformation.

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Michael Carter has seen the most success where banks and credit unions have true
buy-in from the very top — not just easily forgotten words in an all-staff email once a
year. But real commitment includes things like new org charts. And compensation
packages.
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This article was originally published on November 13, 2018. All content © 2019 by The Financial Brand and may not be
reproduced by any means without permission.
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