Community banks must avoid ‘rocks in shoes’
As the pandemic wanes, branches reopen, and omnichannel banking becomes the norm, community banks must beware of an impending threat.
The rock in the shoe – the friction that drives end customers to vote with their feet, literally.
It’s a metaphor for the clunky customer experience, suboptimal interactions, digital and otherwise, that push loyal customers into the arm of FinTechs and neobanks – for a checking account here, a debit card there, munching in traditional financial institutions’ (FI) revenue streams.
Arvest Bankdirector of operations and transformation of, Laura Merlintold Karen Webster of PYMNTS that community banks need to re-examine their position in the digital world, while leveraging their core strengths, especially the trust they have built with their customers over decades.
“The reason people are attracted to FinTech is because of the simplicity,” she told Webster.
And while digital startups have managed to focus on one or two products, the fact remains that customers want their incumbent financial services providers to build more than a product portfolio – they want a continuum of solutions. that anticipate needs in context in an organized banking experience that manages money in and out.
These desires cut across all generations and demographics, Merling said. For banks to respond to these desires and build customer loyalty, artificial intelligence and other cutting-edge technologies can anticipate when a consumer’s car loan might be about to be paid off, for example , and present new opportunities to put this newly freed money to work. Or there may be tips that help a family set up funds for their children.
At a high level, she said, “the bank is incentivizing them to do things that are happening in their lives, based on the data they have about their lives and their spending habits.”
The opportunity is there for banks, she noted, as FinTechs still have a high bar to overcome to earn the same level of trust as their more traditional competitors.
These high-tech initiatives, she said, take time and don’t just come at the flick of a switch. The key to all of this is tackling the technical debt that has accumulated in FIs over the years. And for any digital transformation, she said, a roadmap is essential. As she noted: Banks shouldn’t embrace technology just for the sake of technology, although modernization can do a lot to streamline workflows and improve operational efficiency and can help FIs “tick boxes” – like the P2P box and buy now, pay later. box, which become table stakes.
Easier for private banks
As she told Webster, the pivot can be done more adroitly by a private bank (Arvest, which is owned by the Walton family but operates separately from Walmart, among them).
“There’s less worry about quarter-to-quarter performance,” she told Webster, “and you can focus on the long-term growth of the business.” For community banks, she said, through the pandemic, there has been a “go-local” movement. There was also a “being able to do things online” movement.
Read more: Arvest Bank on using ITMs to meet customer expectations for personalization
Or, as Merling put it, for Arvest, examining threats and opportunities in the digital age that takes the company beyond its physical branches in Arkansas, Kansas, Oklahoma and Missouri. .
“What’s the next revenue stream – and what keeps Arvest a community bank for the next hundred years?” At the same time, keeping an eye out for those rocks in the shoes helped Arvest find its key lines of competitive advantage. Consider the fact that during the pandemic, even though Arvest branches were closed, calls to contact centers doubled.
These calls, she said, “were not necessary to complete transactions – rather they were for maintaining banking relationships and having conversations.”
The challenge was to become more fully digital while maintaining the relationship orientation of a community bank. Among Arvest’s efforts to combine digital and personal: targeted, one-to-one phone calls and advanced Interactive Automated Teller Machines (ITMs). It’s also worth reaching out to small businesses and independent freelancers, who of course are part of the booming gig economy.
Read more: PYMNTS Intelligence: The Importance of Digital Accessibility to Improve Brand Loyalty and Reputation
Personalization therefore goes beyond simply offering a customer the best interest rate.
“It’s about, ‘What services do you need and what do I know about your industry and your business?’ said Merling.
Looking ahead, Arvest worked with Thought Machine to adopt a next-generation core banking platform. To kick off this transition, the company has chosen a high-growth area – in this case, equipment financing – to transition to the new banking platform over the next three months. Midsize banks are also exploring integrated banking and banking as a service. Arvest is also building a new data platform on a cloud service, Merling said.
And while Walmart isn’t officially connected to Arvest and Walmart is pursuing its own banking solution, Merling noted that there are opportunities that could arise with the retail giant (perhaps through partnerships) on the road.
“There are a lot of things in motion that lay all the groundwork for our path forward,” Merling told Webster. As it expands its footprint on this four-state arc, “as we continue to reflect on what it means to be a community bank in a digital world.”