Vincent Bezemer, Head of Strategy at Backbase, made this comment in an article recently published by The Financial Brand: “As long as there has been money in the U.S., there have been community banks… long before there were national and international banks. To this day, community institutions provide vital services to locals, whether that be saving accounts or loans for families and small businesses. Their business model is built on having deep relationships with the communities they serve.”
This made me think. Why can’t we expand the definition of “community”? The FDIC Community Bank Study says that “community banks can develop close relationships with customers because they tend to be smaller in size and only conduct business locally. The larger the institution, and the more places it does business, the more difficult it is to manage relationships at a personal level.”
Must that continue to be the case? Why can’t community banks offer those vital services to families and small businesses that aren’t necessarily in the same neighborhood as their community bank’s branch? Granted, as Bezemer points out, the transaction between community banks and their customers is based largely on “deep relationships.”
Today, however, those deep relationships are far less about geography than they are about trust, reliability, and access. Case in point: As businesses are learning that their employees don’t need to come into the office to do their jobs, people are learning that they don’t need to walk into a branch to do their banking. Which is why, of course, banks such as Wells Fargo are closing branches… in the case of Wells, 26% of their branches in just the last six months.
Between high tech and big data, the opportunity to build digital platforms that can target niche consumers, living anywhere in the country, has never been greater. With the advent of products such as Core-on-Demand from FIS and BankAnywhere from Jack Henry & Associates, there is no reason why a community bank based in rural Nebraska serving a customer base rooted in agriculture can’t also serve the younger, more ethnically-diverse, Gen Z employees of a West Coast tech company.
These new digital solutions enable community banks to launch multiple, digital versions of themselves – often referred to as “digital” or “direct” banks – where they can compete for business in markets far from home.
One example cited by financial technology company FIS speaks to a client who launched a digital bank in just 8 months, went national in 60 hours, and reached $1 billion in deposits in just 90 days in this video interview.
How is this possible? Bankrate.com tells us that customers who purchase a CD from a large, national bank can get .85% for a one-year CD. With the national average at .29%, that means that there are a lot of banks – most likely small, rural banks where they’re not competing on rates – are paying a lot less. By building a digital bank that can reach potential customers anywhere in the country, your bank can bring in deposits by only paying out .29% or less.
That Nebraska bank…of course, is a very different bank to potential customers on the West Coast. Close to home, it specializes in agri-finance, college savings and retirement products and with a digital presence such as “Agriculture.Bank,” they can target farmers all over the country. Whereas in the Gen-Z market in Silicon Valley, that same bank is known as “HighTech.Bank,” offering products such as credit cards, first-time home loans, and auto loans for Teslas and Porsches.
But, thanks to the banking customer’s move to digital experience, Agriculture.Bank can easily focus its presentation, its marketing, and its product offerings – agri-finance products, for example – on this very unique market. It’s completely different from their other digital bank, “HighTech.Bank”, the one that offers first-time home and auto loans to 27-year-olds on the West Coast, but certainly the two can peacefully co-exist.
Is this a brand, spanking-new idea? Not really. In fact, I talked about it in 2016 with this blog article: Bananas, Baking Soda, and Bank Marketing. To sum up, using baking soda as an example, it all comes down to marketing. Walk through your local grocery store and you’ll find baking soda in a number of aisles, positioned as a toothpaste, carpet cleaner, a baking ingredient, an air freshener… it’s even sold as an essential additive to pool water! It’s the same product. What’s different? How it’s marketed; specifically, how it's presented, positioned, and promoted based on the desired consumer’s needs. Another benefit is the pricing. The same generic baking soda that is sold for $.82 a pound in a plain orange box can be sold for over $2.00 a pound by putting a cat’s picture on the front, targeting cat lovers and their litter boxes.
Now that the digital banking technology has arrived, why can’t community banks do the same?
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To view our marketing creative, both print and digital – ranging from product and brand ads to in-branch brochures and signage – visit bankmarketingcenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com.
As always, I would love to hear your thoughts on this subject!