Banking is often viewed as the industry ripest for market disruption. Breakthroughs in consumer-pleasing technologies and the proliferation of overhyped fintechs are cited as reasons why community banks, in particular, are viewed as overweight, exhausted pugilists unable to make the grade in a new, highly competitive, tech-driven environment.

Experts would have us believe that conservative banks are a sitting target for the hundreds and hundreds of fintechs launched just last year. They position community banks — mired in a century of regulation and dragged down by expensive brick-and-mortar networks — as the dinosaurs of a forgotten age.

“Risk-averse” and “legacy-laden” may accurately describe community banks; however, that doesn’t condemn us to extinction. Our future doesn’t depend on a technology-first strategy. In fact, a stronger community focus is all that is needed for a community bank’s survival.

Boxing gloves
A handful of underfinanced startups aren’t enough to sink the industry. Community banks will survive digital disruption so long as they concentrate on what their customers want and need. Adobe Stock

The alleged game-changing weapons brandished by fintechs aren’t the big guns they think they are. Yes, getting a loan approval in 10 minutes or downloading an investment plan created by a robo-adviser onto a smartphone are welcomed customer conveniences. But if banks want to offer their customers those services, they’ll just buy the fintechs offering them. Fintechs are the ones scrambling to survive, and most of them will happily sell their wares for a few million dollars. The other nine out of 10 fintechs will simply fail.

Technology may drive disruptive innovation in most industries, but in banking, a handful of underfinanced fintechs aren’t enough to sink the industry. Furthermore, most community banks play catch-up, following the lead of the big banks in offering handy digital features and services. Whereas the digital-first strategy plays well for big, high-tech banks and their economies of scale, it is suicide for smaller institutions. The strategy doesn’t play to our strengths. Therefore, the community bank’s primary goal must focus on enhancing the customer experience — a priority the corporate culture must embrace and a roving team of internal implementers must lead.

The stakes are high. Not all community banks will survive. Many institutions are on a toboggan run that won’t end until they crash into the backstop. Competition is simply too intense, regulations are too expensive and management is too complacent. But instead of worrying about what a fintech is doing, banks’ survival plans should hinge on constantly improving the customer experience.

To succeed in this mission, community banks must emulate innovative online retailers, like Amazon, whose initiatives are not grand but generally minor and intuitive and add up to a beloved brand. Initiatives such as auto-filled forms, an easy return process, if-this-then-that recommendations and product ratings make the process easier for Amazon shoppers. Not satisfied with achieving next-day delivery, Amazon is now sinking hundreds of millions to make same-day deliveries — all in the name of improving customer service. Speeding up interactions, of course, is a critical element for increasing customer satisfaction and is also why online retailers are continuing to invest in their websites. Retailers know 40% of web visitors will abandon a site if it takes more than three seconds to load. Time matters in in-person transactions, too. McDonald’s, for instance, is putting in self-service kiosks and rolling out an app to save customers seven seconds on ordering food. An extra seven seconds is not a big worry in banking. But it would be if we were putting customer experience first.

Banks have the luxury of relating to customers on a one-to-one level, but we don’t take advantage of these customer interactions. We still end up in the least-loved brand category. The difference between us and the top-rated brands like Amazon is an unrelenting focus on customer satisfaction. When customers provide feedback, we see their suggestions as burden more than a mission.

Why don’t we remind customers how to avoid fees? Why don’t we compensate bankers based on making customers happy instead of boosting our bottom lines? A focus on immediate profit is more than shortsighted; it’s the industry’s Achilles’ heel.

Banks that change their culture, focus on customer happiness and consistently improve service will end up the winners. Disruption is in the details.

Kevin Tynan

Kevin Tynan

Kevin Tynan is senior vice president for marketing at Liberty Bank for Savings in Chicago.

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