The move towards digital transformation has become especially urgent for midsize financial institutions as accessible, convenient digital banking services become the expected norm rather than a reaction to pandemic realities. In 2020, branch account openings declined from 56% of total account openings to 36%, meaning that 64% of checking accounts are now opened online. This trend is certainly due in part to the pandemic, but also aligns with the shifting preferences of post-Boomer generations. . This shift has placed unique strain on midsize institutions who have traditionally focused on personal, community-based service to differentiate themselves and offer excellent relationships to their customers. Midsize financial institutions that struggle to provide quick, simple online account onboarding are missing out as applicants move on to competitors if their attempts to open an online account are stalled: only 14% of online applicants will come into a branch to finish account opening, while the rest disappear or, worse, move on somewhere else.
As people have relied more on digital banking over the last year, big banks have closed the satisfaction gap between themselves and midsize institutionss at an unprecedented rate. It often feels unfair, considering big banks often have budgets for digital investment that are the same as the total asset size of midsize organizations. Not only do big banks have bigger budgets, but many midsize financial institutions also face entrenched mindsets around change, especially when it comes to digital change. Even though the pandemic pushed a lot of innovation forward, innovation maturity has dropped since last year as digital onboarding times stalled and crept back up again. These trends can feel overwhelming when looking ahead to strategic planning for 2021—how do midsize financial institutions compete?
In a recent webinar with Jim Marous, co-publisher of The Financial Brand, we discussed strategies midsize institutions can leverage to compete with bigger banks. Ultimately, we decided it came down to a central idea: stop playing a game that you are destined to lose.
Change the Game and Play to Your Strengths
Midsize financial institutions must think of themselves as David facing Goliath; if David tried to take down Goliath on sheer strength and size, he would have failed. By using his speed and accurate, laser-focused aim, however, he was able to fell the giant. Midsize institutions must take this approach in shifting the focus and mindset of their leadership and culture to center the specific segment that they can serve best. Customers need to know you know them, and yet 75% of organizations of all sizes struggle to provide this kind of personalized service. By focusing on a core purpose to serve specific, unique needs, shifting marketing strategies to align with this core and creating excellent onboarding experiences backed by deep data analytics, midsize organizations can absolutely play in the same sandbox as the bigger banks.
Pinpoint A Purpose: Traditionally, banks have developed mission statement that are centered on their organizational values, goals and strengths. Shifting to a customer-centric growth strategy first requires developing a purpose statement that bucks the often passive voice of a mission statement. Purpose statements build trust and create value for people by giving concrete actions and eliciting emotional responses that customer can get behind.
Every purpose statement should center on the “edge” that midsize financial institutionss have over their competition. Find the disadvantage in the size of bigger banks and use it to your advantage—more often than not, the edge lies in speed and ability to deliver on changing market needs more quickly than large institutions. While those with $50b or more in assets only disbursed 36% of PPP loans—despite managing 74% of all assets in the US—banks with $10b or less in assets moved faster on PPP loans and disbursed more loans more quickly. It may also lie in intimate knowledge of the community a midsize bank serves. For example, Elevations Credit Union in Colorado allows members to enroll their debit card in their Elevations Local Change program. Every purchase with their Elevations debit card is rounded up to the nearest dollar, and the extra change supports local scholarships and community grants through the Elevations Foundation.
Make Marketing Matter: Midsize financial institutions must be smart about how they spend their marketing dollars, since every cent counts with smaller budgets. When it comes to big spends on TV advertising, let the big banks pave the way: seeing a TV ad for any bank will prompt potential customers to begin their search of all potential financial institutions, not just the one doing the advertising.
Target advertising to local reach by advertising in a geofenced area. Push your purpose into front and center view by identifying groups and forums that relate to your purpose even if they are not related to banking. For example, if you’ve gamified your savings product to offer donations to a wildlife preservation foundation in your community, advertise in hike and bike groups, wildlife enthusiast groups and other related social spaces. Go where your ideal customer is instead of hoping they find you.
Improve Digital Onboarding: If customers cannot originate products on their mobile device, missed potential for growth is inevitable. Not only must applications be available on mobile devices, they must also be fast to complete: an app that takes 6 minutes to complete has only a 54% completion rate. This is mainly because life gets in the way, and midsize institutions must be sure to minimize distractions and capture vital contact information first to ensure that conversion rates stay high.
Creating a lead nurturing system to follow up with abandoned applications can reap huge rewards for midsize organizations. Simply following up on incomplete applications by phone or email resulted in a 40% conversion rate for one Temenos customer. This follow-up process would be hindered, however, if the application did not capture contact information from the beginning. Prefilling information from mobile carriers can help speed up this process, along with type-ahead tools for fields like occupation. If midsize institutions can get their account onboarding process down to 90 seconds or less—an achievable goal with Temenos technology—they will already be several steps ahead of some of the biggest banks.
Deliver Data-Driven Insights: Many banks have focused a lot on improving digital onboarding, but still lack meaningful transformation when it comes to the longer customer journey. Customers want to see their financial institution prioritize their financial wellbeing and success and help them secure their financial future. Surprisingly, even big banks have not deployed these kinds of data-driven experiences widely or successfully.
Financial institutions can position themselves as a trusted financial partner by using data to educate customers on best next moves, help them set up safeguards and demystify complex processes like buying a home or investing. For example, instead of asking customers what their lowest account balance should be before sending an alert, banks of any size can use insight into typical customer income and spending patterns to make personalized communications regarding unusual activity or sudden dips in account balance. Customers want to be able to trust their financial institution to take care of them and guide them without having to spend significant chunks of their busy lives completing mundane banking tasks or scouring information about additional products and services.
There are a lot of challenges that both big and midsize organizations have when it comes to digital growth, but the way forward on a growth path will look very different depending on size. As customers become more acclimated to digital banking experiences, midsize institutions must find ways to replicate their personalized service in digital channels without adding unnecessary human touchpoints or making onboarding processes overly long and complex. By pinpointing a specific purpose for a narrow segment, using targeted marketing strategies and deploying data-driven process to simplify onboarding and other parts of the customer journey, midsize financial institutions can change the game and stay competitive with larger banks and fintech challengers.