Punching above its weight: Small N.J. bank uses tech to take on big rivals
When David Howard and his newly minted digital strategy team at OceanFirst Bank set out in early 2017 to devise a plan for upgrading its online and mobile channels, they decamped to a conference room in a Shrewsbury, N.J., branch.
The fact that the building they were temporarily working in once housed a Blockbuster video store did not go unnoticed. Upon their move to OceanFirst’s administrative offices a year later, Howard presented each team member with an old videocassette tape, to serve as a reminder of why the 118-year-old bank needed to keep moving forward.
“Netflix saw what needed to change, and Blockbuster didn’t,” said Howard, OceanFirst’s president of digital strategy and innovation. “We thought that was an important analogy for the community banking business.”
The bank, a unit of the $10.5 billion-asset OceanFirst Financial in Toms River, N.J., has been aggressive about pursuing innovation. Under Howard’s leadership, it has examined, updated, scrapped or replaced every digital tool in its arsenal, from the mobile app to online account-opening capabilities. Sometimes, his team has invented new tools altogether. Certain projects, such as a hybrid robo-adviser, took many months to refine, while others, such as an Alexa Skill, were whipped up in days or weeks.
“OceanFirst realized several years ago this was going to be a digitally driven market, and if you can’t make that leap, you won’t survive in the long run,” said Frank Schiraldi, an analyst at Piper Sandler.
For his success in helping OceanFirst keep pace with — and sometimes even outshine — the digital offerings from much bigger regional banks, Howard is being recognized as one of American Banker’s Digital Banker of the Year finalists for 2020.
Hey, want a free lunch?
Howard’s team — a group of internal recruits spanning various departments across the bank — found that spending their early days in Shrewsbury gave the planning efforts a practical advantage: instant focus groups.
Their conference room was situated between the teller line and the vault, granting them ready access to the customers they were trying to serve as they shaped OceanFirst’s digital strategy.
When testing new tools, the team would entice passersby to share their opinions with the promise of a free lunch at the deli next door.
The feedback made it clear that the tools had to appeal both to the most tech-savvy customers and to those who often relied on the branch.
Using those insights, OceanFirst went on to make a slew of digital improvements.
Read about our other 2020 Digital Banker of the Year honorees:
Some of the projects involved simplifying processes. With Bottomline Technologies, Howard and his team tore down and rebuilt the bank’s electronic account-opening tool, changing it from a 47-step ordeal with a manual review to a plain-English automated experience that customers can complete in 10 minutes or less.
Other projects introduced entirely new offerings, such as a hybrid robo-advisory service that catered to budding investors.
In 2017, OceanFirst invested in a startup called Nest Egg that blends robo advice with human input. Nest Egg creates a portfolio for each user (minimum balance: $1,000), based on the user’s risk tolerance level and investment objective. It also enables live video chats with the fintech’s registered investment advisers. The video chats can take place on the customer’s personal device, at a kiosk or in a branch.
In his former role as OceanFirst’s chief risk officer, Howard found it wasn’t feasible to hire enough brokers to be available in all 57 branches, given the estimated transaction volume. But, “moving the entire interaction into a robo-advisory platform took compliance risks and human interaction risks out of the business,” he said.
At the same time, customers who were not practiced investors or didn’t have a lot to invest could get help at a low cost. “We think that’s a tremendous win,” he said.
The service has been a success. By the end of 2019, a year after the bankwide launch, 1,400 customers had signed up and invested a total of $40 million.
“David is not put off by disruptors or the changes they make to our industry,” said Rebecca Rothstein, OceanFirst's director of digital banking and one of the founding members of Howard's team. “Instead, they are an opportunity to acquire new ideas and set new goals.”
The long-term strategy
Howard began his career as an engineer before transitioning to Wall Street to work on credit and risk analytics. After Hurricane Sandy hit the Jersey shore in October 2012, and Howard’s home and neighborhood were destroyed, he decided lifestyle changes — including a shorter commute — were in order. He joined OceanFirst as chief risk officer in July 2013.
“I wouldn’t consider myself to be a code- or tech-savvy kind of guy anymore,” said Howard. “But I think of myself as a long-term strategist and a problem-solver.”
Chris Maher, OceanFirst’s chairman, president and chief executive, apparently agrees. In the fall of 2016, he tasked Howard with heading a new digital strategy and innovation team, and gave him carte blanche to recruit whoever he wanted to be part of it. Howard ended up with five dedicated team members, including a software engineer from the IT team and a personal banker from the branch network.
Early on they conducted research to inform the business plans they were developing, and capitalizing on their location in the Shrewsbury branch — which Howard referred to as their “skunkworks” — worked out very well, not only because of the access to customers, but also to branch employees. “We were directly in the front lines with branch staff and customers,” Howard said.
One of their earliest projects was figuring out what digital tools needed to be refreshed and which needed to be replaced altogether. Besides snagging passersby for ad-hoc demos, the branch hosted “Digital Days,” where customers were invited to give feedback about how well OceanFirst’s products were working for them while enjoying homemade cookies from the staff.
Howard also realized the importance of an educational push. So he set about turning customer-facing employees into tech experts.
His team designed a seven-week training course that would educate the staff on all of the financial technology available to customers, including peer-to-peer payments and digital wallets. “We figured out early on that to be successful with our customers, we had to first get successful with our bankers,” said Howard.
The “Certified Digital Banker” training series is fully remote and test scores must be at 80% or higher before employees can pass to the next level. Bankers learn how to use all the tools and why they are valuable to customers.
As a result, “it’s totally normal” to see branch staff helping customers to load their debit card to their mobile wallet and connect their smartwatches to their phone, said Howard.
Skillful and speedy
Some initiatives the team took on were designed to meet a future need rather than a present one.
At the end of 2019, Howard split his developers and business analysts into four groups and tasked them with building skills for Amazon Alexa and apps for Google Assistant in a day. He provided meals and threw in $1,000 as a reward for each winning team. Both sets of voice apps were built that day, and the Alexa version was launched soon after. (The Google version is still pending, with OceanFirst waiting on the tech giant to square away its rollout.)
So far the Amazon Alexa skill can do the basics. For instance, it lets users obtain the bank's phone number or routing number. But Howard’s team is working on a customer authentication process that will allow for more private data to be shared via the smart device.
Even though the option of banking this way hasn’t stirred up significant interest among OceanFirst’s customers, Howard believes this will change over the next few years. Plus, “it’s fun from an internal standpoint to say, we just built a tool that is not yet as good as Capital One’s, but pretty close. And we did it ourselves, with our guys,” he said. “I think my total budget for that day was pizza, sushi, bagels, and $2,000 in prize money.”
In Schiraldi’s assessment, the digital offerings from OceanFirst are ahead of those from similarly sized peers, to the point of being on par with the superregionals. “OceanFirst is certainly punching above its weight in terms of asset size,” he said.
Through the pandemic, Howard and his team have continued to innovate. When branches closed to walk-in traffic, they adapted their online account-opening tool for the telephone to serve customers who weren’t comfortable completing the process online.
OceanFirst doesn’t show any signs of slowing down either. Full-time employees involved in digital efforts, including supporting roles, have multiplied from seven in the fourth quarter of 2016 to 82 in the first quarter of 2020.
In roughly that same timeframe, the number of customers who are considered active digital users more than tripled, to 74,000.
The pandemic has further fueled an increase in digital interaction. Mobile activations, which include new users and those using the app for the first time in 90 days or more, jumped 188% in the two months following the March 17 closing of OceanFirst’s branch lobbies, compared with the time period from Jan. 1 through March 16. Mobile deposits went up 52%.
Eager to maintain the digital momentum, Howard and his team are focused on improving the overall experience for those customers. The to-do list for this year includes voice and chat bots, video banking and appointment-setting capabilities.
The bank also aims to sharpen its use of artificial intelligence for customer-behavior analysis, segmentation and retention, as well as better apply advanced analytics to digital customer acquisition campaigns and Bank Secrecy Act compliance.
Howard is undaunted by this ambitious agenda.
“We relentlessly talk about why digital transformation was really important for all of us,” he said. “This is a marathon, not a sprint.”