How community banks can find the balance between personal and digital

Shaun Weston looks at the opportunity for community banks and credit unions to bridge the gap between digital and personal relationship building.

How community banks can find the balance between personal and digital. Image by TanyaJoy,

There are just as many challenges facing community banks as there are for ‘megabanks’. There are also similarities in how all financial institutions can dig their way through these challenges. However, credit unions and community banks may have an advantage over the big banks that could tip the scales in their favour when it comes to digital transformation.

Community banks (and other smaller banks), wherever they are in the world, have a reputation for being local, in helping their local communities, and for developing more personal relationships with their customers. You could say they’re already set up for being customer-centric, not product-centric, and that they have a head start when it comes to building trust. So, why do they need to improve? Why bother transforming at all?

The big banks have other ideas, and are already making strides in winning over the hearts and minds of local customers, many of whom prefer a branch to a mobile app. Last year, Bank of America announced that it will open more than 500 new branches over the next four years, while JPMorgan Chase leads the way in terms of branch opening in the US, with CEO Jamie Dimon saying: “Every time we open branches in a new market, we bring the full force of JPMorgan Chase to that community.”

In the UK, bank branches are closing at a rate of knots. Santander recently announced plans to close 140 branches “following a slump in the number of transactions it handles”, according to reports. The two opposing fortunes may show the state of digital development in the UK over the US, but there’s a balance to be struck on both sides of the Atlantic between staying financially inclusive, providing services to everyone, and being digitally savvy while doing it.

Reduce friction

This is where community banks can prosper, and at the heart of the solution is a combination of relationship management and automation. Community banks and credit unions should embrace automation more, to further develop their strong customer relationships and reduce friction even further.

“It’s very hard for a big retail institution to win over somebody who has a personal relationship with a person at the bank, that they trust, who’s giving them advice and providing value,” says Joe Salesky of CRMNext, during a podcast discussion with BAI Banking in August 2018. “Growth is inhibited by friction. Those opportunities to collaborate with a knowledgeable person at the bank, and really get help in your financial life, is something that we’re really missing.”

The marriage of technology and proactivity can help community banks deliver frictionless experiences, and to take this opportunity and run with it, the benefits of automation need to be better understood. The big banks have a head start in terms of throwing weight behind ‘digital projects’, innovation departments and M&A, but many of them don’t have the agility to see the project through from A to Z (or they lack the foresight and personnel to manage their legacy systems).

If you’re a small- or mid-sized financial institution, you may think everyone is moving quickly around you in automation and AI circles. While it may be true that some competitors are nimble and enthusiastic, most are not. Industry analyst Ron Shevlin recently shared statistics from a Cornerstone report that revealed how “just 2% of mid-size financial institutions have already deployed chatbots, machine learning, or other AI technologies, and 5% have implemented robotic process automation (RPA)”. In other words, there’s plenty of elbow room to get stuck in with your own digital banking engagement platform.

The biggest company in the world recently announced that Deirdre O’Brien would replace Angela Ahrendts in charge of retail operations for Apple. You don’t really replace someone like Ahrendts – you build on the work she did over five impressive years, which is to say you reach out to use technology to build relationships with people and communities. You could sensibly argue that Apple is a benchmark for what can be achieved by community banks, in that it has used ground-breaking technology and retail space to reduce the friction between customer and product. And it has done it incredibly well. The opportunity is for community banks and credit unions to adopt the same approach, wherever they are in the world.

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