Advice to small banks: Resist urge to overautomate

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NASHVILLE, Tenn. — Shortly after he began house hunting, Lee Wetherington said he received an email from a community banker that "just blew me away.”

The lender, in an attached video, wished Wetherington a good morning and offered to help with the home buying process. While far from cutting edge, the video demonstrated the marriage of technology and relationship banking that community banks must pursue to compete in an increasingly high-tech market.

“We’ve got to use technology to highlight our emphasis on one-on-one, personal service," Wetherington, director of strategic insight at Jack Henry & Associates, said in a presentation at the Independent Community Bankers of America's convention. "That’s what every community bank in this room says sets it apart.”

Copying big banks that automate as many processes as possible "will not serve community banks going forward,” Wetherington said, referring to that approach as "botomation." Community banks “do not want to emulate that strategy. ... It cuts the heart out of what it means to be a community bank.”

Banks that talk about digital strategy often miss a key point: They must view delivery channels as a spectrum, with branches on one extreme and a fully automated platform on the other.

“Knowing where to curate that line is job one for community banks,” Wetherington said.

Umpqua Holdings in Portland, Ore., is among the banks that seem to be striking the right balance between branches and digital offerings, Wetherington said. The $27 billion-asset company's Go-To platform, unveiled in September, gives customers access to a dedicated banker they can communicate with by text or online chat. Customers select a banker after downloading the Go-To app.

Go-To is the “start of a new era in which community banks will make the digital channel personal in way big banks can’t,” Wetherington said.

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While Go-To’s rollout has been “deliberately slow,” Rilla Delorier, Umpqua's chief strategy officer, said the addition of new business has quickened in recent weeks, with about 12,000 customers enrolled. The bank is also preparing for a major marketing campaign set for mid-April.

“I call it the speed of trust,” Delorier said in an interview. “It takes some time to engage on a deeper level. Once they start, they get a little more addicted.”

Digital programs like Go-To should re-energize branch employees by offering new opportunities for them to serve clients as foot traffic continues to decline, Wetherington said.

Delorier said she has witnessed that firsthand at Umpqua.

“At first, our bankers were a little threatened by it,” she said. “They thought they would all be centralized, or that stores would close. Once they realized it was a tool they could use, and they saw the adoption rates climb, they began getting excited. They’re getting pretty jazzed now.”

Go-To may represent the wave of the future, but community bankers continue to use paper-based systems to a great extent, Guru Dharam Khalsa, chief operating officer at MK Decisions in San Diego, said after Wetherington’s presentation.

MK Decisions is one of eight early-stage fintech firms the ICBA selected for its ThinkTECH accelerator program. All eight demonstrated their products at the trade group's conference.

“The biggest challenge bankers face is paper,” Khalsa said. “They need to learn how to leverage technology to support relationships.”

After receiving input from dozens of community bankers in the weeks leading up to the ICBA conference, MK revised its lending platform to make it less automated and give bankers a bigger role in making final lending decisions.

“Wetherington has a point,” Khalsa said.

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