Community Banks: Banking 2025: Avoid Being Yesterday's Bank

Consumers are being offered smart, digital services in every aspect of their life and are expecting the same from their banks. Financial institutions must transform business models to respond and stay relevant in their customers’ financial lives. Join Chris Hall as he discusses the must haves and must avoids as you plan for banking in 2025.

Transcription:

William Pohl: (00:07)
Can anybody hear me? All right. Wonderful. Thank you. Thank you for joining us today. Uh, I'm William Pohl and I'm an account executive with Backbase. Who's gonna be sponsoring this session here. Uh, back base is an engagement banking platform, which I would describe as a digital banking platform on steroids. And we're really on a mission to help community banks compete with much larger financial institutions. And we do that by giving you the same technology that some of the biggest banks in the world use. So we have clients as large as Royal Bank of Canada, and as small as vantage bank, Texas, who's around 2 to 3 billion. Our perspective is that to stay relevant and compete over the next 5 to 10 years, you really need to own the experience that you're delivering to your customers and deliver those hyper personalized really tailored experiences. So I'm here today to introduce Christopher Hall, who will be speaking about banking 2025 and avoiding becoming yesterday's bank.

William Pohl: (01:04)
So Chris has spent 25 years in software sales, the last seven in, in leadership, and he joined back base about a year ago, really helped elevate our professionalism and, and take us to the next level. Maybe a little bit less fun now with Chris on board, but, uh, a lot more productive. So he originally grew up in Idaho, bounced around a little bit, but, uh, has finally made it back to the, uh, the great state of Idaho. So he's now part of our team in Boise and look forward to hearing what Chris has to say today.

Chris Hall: (01:42)
Uh, a very welcome, thank you will for introducing me there. I, I would've like to be called more fun, not less fun if you wouldn't mind, but with a topic like avoid being yesterday's bank, then it does sound a little bit gloomy, but we'll try to have some fun with it anyways. So, uh, looking forward to this discussion here, but it does start out a little bit gloomy because we're seeing a lot of change in the banking industry. So over 500 banks have failed in the last 10 or 12 years, and we've seen another 550 banks go to acquisition or merger. So the pool is getting smaller. What that means is more assets concentrated in fewer institutions. Um, and we're continuing to see that trend year over year, as time goes by. It's not just banks. Uh, there's an additional, I think I got up to 190 odd credit unions that have been forced mergered in the trailing three years too.

Chris Hall: (02:42)
So fewer institutions, um, on top of that, we're in an interesting economic time right now. So we have, uh, I don't know if anybody's seen any headlines about inflation, but there's a little bit of inflation going on. We've got rising energy costs and across the board, our customers and members are looking at changes in their cost of living and looking for financial services that are gonna help them survive this different economic outlook and decide how they're going to go and the same way you need your customers and members to survive. You need to survive. Your economic outlook is changing too. And we're gonna talk a little bit about what might change, uh, draw an analogy about what another financial institution did and see if we can take some lessons from that as we chart a path forward.

Chris Hall: (03:35)
So when I looked at all this and when I was setting up for this discussion, I was trying to think about another example of changing economic times and my mind raced to Greece in the early two thousands. So Greece had a 10 year long recession. Um, I will not go too deep into why, but they're facing some things that are very similar to what we're facing now, financial uncertainty, current currency, stability issues, and wondering how they're gonna chart their path forward. So I'm using this as the backdrop to talk about a customer back bases, a Lennic bank. So will thanks for introducing back base. Um, back base is a global organization helping banks all across the world, build better platforms to deliver financial services, their customers. And what that means is we get to learn lessons from different organizations around the world and help bring those lessons to our other customers.

Chris Hall: (04:30)
And in this case, we saw the Greek economy go through some trials and tribulations, and we learned some lessons. I'm gonna bring some of those lessons back to you about what Lennic bank has did. So we see a parallel between some of the uncertainty we see today and some of the past we saw within Greece, um, a little bit about Lennic bank. So one of the largest in, uh, group, one of the largest institutions in Cyprus, they had, uh, 51 branches, so a little bigger than most community banks, um, and about 1500 employees going into their recession there. And they had a lot of the same challenges that I think a lot of you have as well. So they have a bunch of different point solutions that they didn't always know how to integrate or couldn't make talk to each other properly. And they'd made great investments in technology over time. They made the best investments they could at the time, but technology ages and in the natural course of things, the best and brightest from five or 10 years ago may not look the best today. On top of that, they had a vision. They wanted to create a strategy where they could deliver a better digital banking experience to their customers.

Chris Hall: (05:38)
So they solved the problem. They went out and they integrated all of their digital solutions over time into a single technology stack that could provide a single experience to their customers. They built a foundation that would allow them to grow and expand on that over time. And they did this by investing in a platform for banking. And as anybody walked around downstairs, the, the word platform is a little overused. So, uh, like every high school commencement speech, I'm gonna go ahead and redefine platform for everybody. Um, where a platform is, uh, in this case, a piece of technology where you're not necessarily delivering the value, you're not necessarily providing the value or you're not consuming the value, but instead you're controlling where the value is delivered to your customers. So an example that I like to use is a little book seller called Amazon based out of Seattle.

Chris Hall: (06:34)
So Amazon's a platform for e-commerce. They don't necessarily own the goods that they're selling. Uh, they're not necessarily delivering the goods that they're selling. That was a lot better part of the story five or seven years ago, but now I've got Amazon vans in every corner of, uh, my streets. Um, and they're definitely not consuming the goods, but they are in charge of how they deliver value to you. So I'll, I'll digress into an example of this and it gives them a lot of power over how we spend and over how we get value from what we spend things on. So I've got an example. Um, a friend of mine is, uh, Teddy. I've known Teddy for 20 years. Teddy is an American inventor and he's a golfer. And those two things have come together. And Teddy owns a small company that provides golf swing aids, and he sells 'em on Amazon.

Chris Hall: (07:20)
So he invented something to make me stop my slice and something to help me read my putts better. And Teddy called me just last week and he said, Chris, you gotta buy my new product. Okay. All right, Teddy, I'll buy your product. He goes, use it and then go leave me a review because he needs reviews on Amazon to get attention. And so I went and I bought his product and I used it and I'm still terrible golfer. But through the course of buying his product, Amazon started surfacing up to me more golf swing aids, because it had decided this is something I'm interested in. And sure enough, I clicked on a couple and I read some reviews and I bought another damned golf string aid. And I wasn't even the market for the thing. So Amazon knew I'm a bad golfer, better than I know I'm a bad golfer. And this is the power that a platform has. It can read signals that you're given to your environment and help put solutions in front of you that you don't even know you have. And this is the solution that Len bank settled on too. They picked a platform that allowed them to put solutions in front of people that they didn't even know they needed.

Chris Hall: (08:17)
So they started with a mobile banking app, and then they grew from there. If you remember the back, the fact set there, we had, uh, a tired old website and they grew into the website, which was also a mobile website as well. And they grew into all of the parts they needed on their digital journey for their platform. What we wound up getting with Lennic bank was a mobile banking app that was best in breed. And this was just the start because they were able to expand from there on top of that, because they were digitizing their customer experience. They were able to digitize a lot of their back office operations. They became a more institution and they stopped doing things like printing out data and moving it to another system. And they stopped doing awkward, scripted hacks to tie two systems together. And they ran a more efficient operation on top of all of that.

Chris Hall: (09:09)
Uh, they built all of this in a way that embraced open banking and they're notable. They, they published APIs. So even third party fintechs and third party banking vendors could integrate to their systems. They launched their first product in just six months on the mobile banking app. And they grew from there. So they put the medicine where it hurt first, and then they got better as an organization. You know, the net outcome of this is Lenox bank won awards for years in a row about having the best digital bank. Um, they've grown the assets under management have grown. Their employees are happier and they run a more efficient operation too. So, uh, we started out with a gloomy topic about traps to avoid. So you don't become yesterday's bank in 2025. I think the first thing to remember is you don't have to be married to the old way of doing business. Um, especially when times are uncertain, if you're in a position to do so, it might be time to get rid of the old way of doing things and look forward to a new way of doing things.

Chris Hall: (10:13)
You don't have to do it all at once. It's tempting to go try to fix everything. Uh, it's tempting for me to go try to fix everything in my personal life. And I think it's tempting in business to try to fix everything too. But I think what's important is to make wise decisions about what you should fix and then grow from there. And then lastly, uh, think about the future of technology and avoid choosing closed solutions to your problems. But think about what the solution you choose today is gonna put you in a position to do in five or 10 years from now. So you can be the successful bank in 2025 and in 2030.

Chris Hall: (10:52)
So I think a theme that will be very valuable as you chart your strategies going forward is around focusing on customers. And I'm gonna explain to you why based on the exact same thing that allowed me to bring the Len bank example to you right now is back base is learning lessons from over 160 financial institutions worldwide. So this gives us rather unique insight into what other economies and other banking customers are experiencing and how we can bring those lessons. So you can learn from 'em as well. So, first of all, we're seeing and hearing from our customers and prospects about more churn in the marketplace. It's not just customers leaving a bank wholesale or credit union members leaving a credit union wholesale. It's about share of wallet and the ease of switching between one financial service provider and another. Um, we're hearing a rising cost of acquiring customers, even brand new neobank that operate entirely without physical plants are still seeing costs upward of $300 on per customer acquisition, which leads us to the conclusion that it's very valuable for you to save your existing customers.

Chris Hall: (12:06)
And it's very expensive for you to lose an existing customer and go have to earn a new one to replace that person. Finally, there's the Edelman trust barometer. So Edelman is a company that measures the trust that people have in organizations it'll measure the trust that you have in your government it'll measure the trust that you have in a philanthropic organization. It measures the trust in technology companies and it'll measure trust in financial institutions too. Um, what Edelman tells us is that the trust level by their barometer is 50% in financial institutions, but 75% in high technology providers, companies like Amazon or Facebook. So they're 50% more trusted than financial service of providers, which is a really interesting landscape to be operating in because it's really understandable why your customers would be willing to place their trust in something that feels like a high technology provider, because they've been conditioned and trained to trust those kind of organizations and less so financial organizations, earning trust and customer loyalty.

Chris Hall: (13:15)
It ebbs and flows in your own customer's journey of doing business with your financial institution. So there's obviously a big amount of trust extended. When somebody decides they're gonna move some of their money into your institution, uh, there's a little amount of trust. That's earned every time when you display the status of how their investments are going or give them updates, uh, there's even trust that goes on. When you have to charge him fees, the chart here doesn't capture everything. If you're helping one of your customers get his first mortgage to buy his house, or if you're helping her save for her kids' college degrees, those are all opportunities for you to earn your customer's trust and earn their loyalty. And as we were just discussing very expensive to lose a customer because you didn't earn that trust and loyalty, we see loyalty scores impacted by how you handle customer complaints and problems. And this can take a huge toll on a relationship with a customer. I mean, I have disputes going on with, uh, a lender, for example, that's stretched out for about four months, which means many, many times I've had to go in and talk about a problem that they're not able to easily resolve.

Chris Hall: (14:28)
Uh, when, uh, a customer decides to move forward with a new product, then that's an opportunity to earn trust. Um, and then in the day to day activities, when a customer monitoring how their financial health is or what the status is of their accounts, another opportunity for you to earn trust and be reliable and be a, a trusted provider within that customer ecosystem up. I almost gave my away, I got too fast on my slides here. So I, I have an audience participation portion. So everybody in the back up from your phones, please, uh, a question for you all, where is trust earned better? Is it earned through digital channels or is it earned through human interaction? So I'll take a show of hands here who thinks that you can earn more trust with human interaction, good answer, who thinks you can earn more trust through digital channels, fewer people, well, bang capital would disagree. So using that same Edelman trust barometer, Bain has been measuring how people feel about different interactions with their financial institutions. And what they're telling us is that no matter the outcome, your customers are happier and more loyal if they've engaged on digital channels.

Chris Hall: (15:47)
So they would rather try and fail using their phones to solve a problem than they would come into the branch and try and fail. So this leads us to a conclusion. The conclusion is let's invest in these digital channels and get 'em right. This is where we earn that trust. And this is where we can earn that loyalty. So we don't lose those very expensive customers.

Chris Hall: (16:15)
So we talk about this in the micro sense is, uh, the digital domino internally. So the first part of the first domino you wanna push over is be good at capturing your customer journeys. What can you do for your customer from a digital standpoint, to make sure that you're solving their problems, whatever that problem is. And then the second part of the domino is can you create that same experience across multiple channels? So now when your customer can start a lending process on their phone, can they go into the branch and complete that lending process, or when they start a savings account in the branch, can they go in and continue to fund that account and monitor that account from their mobile devices? Once you're there, you're in a position to help them solve problems they don't even have, because they're accustomed to working with you in many different environments in many different ways,

Chris Hall: (17:08)
Which allows you to a grow your share of wallet, but B to build that trust and loyalty. So your customers don't look elsewhere for those solutions. So that's the, the micro sense which implies, there's a macro sense of how this helps your business. Once you've in a position where you've increased your customer's loyalty, you're in a position to land more products with that customer, because a you've built the infrastructure, the platform where you can surface the problem that they may not even the answer to the problem that they may not even know that they have. And B,

Chris Hall: (17:43)
Because because you're there and they're used to doing business with you. They can purchase more products from you at which point in time, they're happy because you're solving their problems. And then they become an advocate for you and advocates tell other people about how happy they are, and that becomes your own business flywheel. So you're in a position. If you can start from a foundation of focusing how you do your business on your customers, you can actually grow into a position where customers will advocate for you because you're a trusted partner in how they manage their own financial health. Chris Hall: (18:18) So my doom and gloom, my, my stay away in third whales, third rails, we don't wanna talk about here, but I did want to go closer to something that was more positive here. So I wanted to leave with, uh, a mission or a vision that you can take to avoid becoming yesterday's bank in 2025. First architect, your strategy around your customers. If you don't do it, your competitors will do it. And if your competitors don't do it, then you don't recognize who your competitors are because they may not be the community bank around the way. And they may not be the mega bank. They might be the technology company that hasn't even been started. That'll do a better job at it than you're doing right now. Um, secondly, change is hard in your organizations. And, and I know this because what we do day to day is try to help people get through these change. Chris Hall: (19:09) So, um, as you move towards architecting your business around your customers, you're gonna have to lead with a vision of what things look like. Not necessarily what things look like tomorrow or the day after that, but where you want to be in five years and way past 20, 25 to 2030, and 2035, and make sure that you're moving in the right direction and that you're leading your organization toward that vision. And then finally think about that long term and think about starting with the foundation, you need to be successful and then going from there. So it can be very tempting to solve today's problem with a bandaid or a bit of duct tape or some super glue. But if you're really willing to go into a vision where you want to architect your whole business around your customer, you have to start with the right foundation, or you're always going to be going to the Minimart for bandaids, duct tape, and super glue. So we started out with some doom and gloom and we stopped, saw some things we wanted to avoid. And I think here's some north stars that you can go towards as you continue to work on how you're engaging with your customers so that you can be the bank that is successful in 2025 in the future. And beyond that. Chris Hall: (20:27) And we have some time for questions. Anybody why? I don't know. Why will doesn't have any fun when I'm around? No questions, questions. Absolutely. Um, how shall I get them to you here? I've got, I've got business cards over there. You can ping me on that other questions. Thank you everybody. Five minutes to check your phones before the next speakers.