We just moved, and I grossly underestimated the work involved.
I had prepared for the pain of packing, loading, unloading, and unpacking everything we own; but I hadn’t accounted for the real work of establishing new relationships for everything we need. Things like utilities, Internet, garbage pickup, grocery store, dry cleaners, dentist, dermatologist, pharmacist, eye doctor, doctor doctor (sic), barber, hair stylist, manicurist, pedicurist – don’t judge, I require a lot of pruning to be presentable.
But what about a new financial institution? Do we really need one?
My community financial institution (CFI) back home has no branches here, but it does have a mobile app. So, do I really need a new local CFI with branches full of people I don’t know?
All things equal, which is more vital: local brick and mortar or remote hometown people who I trust and with whom I share decades of history?
The thought of opening a new account and redirecting all of my bill payments, subscriptions, and mobile wallets made me cringe, so I decided to follow “the law of least effort” and stay put. That is, until I needed to wire the proceeds from the sale of our old house to the holder of the mortgage on our new house.
I called my friends at my hometown CFI and asked about the best way to transfer the “guaranteed funds” required by my mortgage holder. I couldn’t believe what I was told:
“Well, we could provide you with a cashier’s check or send a wire, but you would have to come in for that.”
“Are you saying I would have to drive three hours there and three hours back just to wire the money?”
“Bless your heart,” I said. “What else you got?”
“Probably the best thing would be to open up an account at a bank where you are, then do an external transfer from your account here to your account there.”
“Wait, are you saying I should get a new bank here?”
“Yes, that would probably work best.”
My CFI of 40 years was explicitly recommending I find another bank!
This is what my friend and fintech wunderkind, Ben Metz, calls the “trans-local” problem, i.e., how CFIs remain relevant for customers who either never come into a branch or who can’t because they no longer live where the branches are.
POST SCRIPT #1: Fortunately, my mortgage holder later explained that it would accept a standard personal check, and that bit about “guaranteed funds” just meant I needed to have the money in the account I’m writing the check on. In other words, “don’t send us a bad check.” This loose use of language ticked me off but saved my relationship with my hometown CFI.
POST SCRIPT #2: Someone else at my CFI later clarified that I could originate a wire remotely as long as I satisfied some extra authentication and verification steps over the phone.
My experience has crystallized a few things that are especially important, given we’re at the beginning of a new era in which CFIs can solve the trans-local problem by making digital banking personal and by servicing remote relationships meaningfully.
Here are the take-aways:
- The moment of need never happens inside the branch … but that’s OK now.
Despite all of the hype about mobile-first this and digital-only that, branches aren’t dying. In 2009, we started experiencing a mild correction to a 40-year stretch of over-branching in the U.S., but the overall number of branches in the U.S. remains steady.
And despite what you hear, branch engagement remains similar across all age groups (Celent). Moreover, branches still drive consumer choices about where to open new accounts. The top two reasons consumers don’t join credit unions is “inconvenient branch locations” and “not enough branches” (MCUL).
But why are branches important to consumers who never plan to visit branches?
Because people are funny about money. Financial behavior is often very different from consumer behavior in other areas of life.
Roughly 75% of American consumers say they are living paycheck to paycheck, regardless of absolute income. This means there is no such thing as a small money problem for most people. Any problem with money (e.g., a strange transaction, unexpected balance, or misrouted payment) is a catastrophe in the making. And when consumers are threatened with financial catastrophe, they only want one thing: to speak with a real person—preferably someone with whom they have continuity and history.
In a pinch, consumers don’t want to muddle through an interactive voice response menu or be forced to speak the right incantation to a chatbot.
The bottom line is that proximity to branches is proximity to the people who can solve your pain and prevent financial catastrophe. It’s that simple. Proximity to branches is peace of mind. It’s insurance. It’s a hedge against a primal fear.
But what if proximity to people was facilitated by rather than replaced by digital banking? The assumption that you can only access live, local, personal service at the branch or over the phone is no longer true.
Last year witnessed the advent of secure, authenticated, integrated chat channels inside digital banking. These channels enable personal, candid, expedited conversations between the customer and his/her preferred representative at the local, community FI. More important, these conversations are beginning in real time at the moment of need.
This is no small thing. The moment of need never happens inside the branch. Technologically, CFIs can now be there for their customers and members at the very instant a need arises, something branch networks simply can’t do. That means credit unions can fully deliver on their movement’s mantra of “people helping people”, and community banks can translate the power of their personal service into digital channels.
Even better, for most CFIs, the folks fielding those real-time moments of need will be the very same people staffing the branches CFIs must maintain for purposes of account acquisition and community presence. Branch strategy and digital strategy are no longer mutually exclusive; they’re directly linked.
- “Our people make the difference” … or so you say.
It’s a trope as old as community banking: “our people make the difference.” It’s been said so often by so many CFIs that it’s lost its meaning, but the truth of it is about to be tested in a very real way.
What happens when CFIs put their people front and center inside digital channels at the moment of need? Does their in-person service translate digitally? Are your staff savvy enough to communicate effectively via text or video-over-IP – augmented on the backend by macros and a 360-degree view of the customer relationship?
For the last 50 years, technology in banking has been deployed indiscriminately and consistently to replace people at the CFI – think ATMs, IVRs, and digital banking. In other words, the very entities who stake their identities on personal service have used technology systematically to eliminate the people who deliver that personal service. Equating technology with self-service can be a self-defeating strategy for many CFIs, maybe even an existential risk long-term.
The good news is that CFIs now have a choice. Some digital banking solutions now help CFIs better curate the all-important line between self-service and personal service. Each consumer has a different limit of self-service. The goal of CFI technology is to make personal service (with a familiar face and name) available wherever and whenever that limit is reached. And this is the ultimate differentiator for CFIs vs. MegaBanks.
Technology at its best is supposed to minimize the mundane in order to maximize the meaningful. CFIs should not be focused on making technology seem human but rather on extending humanity using technology.
For humans, meaning is and always will be derived in authentic connection with other humans, especially at the moment need. In the new era, CFIs are positioned to develop and support more meaningful relationships that are much deeper than the shallow, transactional interactions that typically occur at the teller counter today.
And when your staff find themselves more actively and regularly engaged in meaningful relationships with customers, morale rallies. When your people can ‘make a difference’, it really makes a difference for your people.
- “Personalization” ain’t personal.
Obscuring the rise of truly personal digital banking is the attendant phenomenon of “personalization”. “Personalization” refers to data analytics applications that provide more relevant and customized information to customers in digital channels. These applications include real-time alerts, offers, and spending-pattern advice tailored to the individual customer.
The problem is that “personalization” ain’t personal. Personal is what happens when a real person connects with another real person. Understanding and maintaining the distinction between personal and “personalization” is crucial for CFIs. While MegaBanks and BigTechs focus on AI and automation for the sake of automation, CFIs should capitalize on consumer preference for personal support in the context of money.
When consumers are asked about their preferred form of “personalization,” the overwhelming majority choose personal (that is, human) support. According to research by InMoment, this is most true for younger demographics.
When asked about their top service concerns, banking consumers cite “wanting to talk” to a person, wanting their problem “resolved on the first point of contact,” and wanting the person helping them to be “knowledgeable and competent.” These native preferences create a huge opportunity for CFIs in digital channels.
When consumers have a problem or question about their money, they don’t want to talk to Alexa or Erica or Google.
Better Than Before
The future of personal digital banking is very bright. The best integrated and authenticated chat channels are now incorporating widgets and real-time account information that preclude the customer having to remember account numbers, describe problematic transactions, or get bogged down in unnecessary key strokes. Instead, the CFI staffer simply presents actionable multiple-choice lists inside the context of the conversational thread.
Even more promising are chat channels that are directly connected to the CFI’s core, enabling chat that is not only informational but transactional in real time. This means that instead of my CFI requiring me to come into the branch to originate my high-stakes, high-dollar wire, I will instead be able to complete a wire from inside my mobile banking app or online with the help of someone I know at my CFI coaching me through it field-by-field. Once done, robotic process automation ushers the wire through sign-off approvals and initiates origination.
This is personal service at the moment of need, and it’s better than anything my CFI has ever been able to offer inside the branch historically. This is how meaning is made, how relationships are nurtured, and how CFIs solve the trans-local problem and sustain community across geography and time.
Welcome to the new age of “better than before.”
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