Compliance Guide

Business Development

Priority One: Improving Customer Experience

Banking’s future is dependent upon meeting new expectations.

By Michael Scheibach


“Traditional banks see fintech startups and digital banks as threats to their business, and rightly so because these new entries into financial services tout an appealing, user-friendly customer experience, which can help successfully target groups like millennials.”

The comments of Will Weidman, senior vice president, Applied Predictive Technologies (, reflect those being made throughout the industry — an industry repeatedly being warned about its impending disruption. Yet Weidman also emphasizes that traditional banks have a competitive edge in their ability to provide customers with personalized service, which is essential in building long-lasting relationships. The key is to learn from the disruptors and implement more efficient, streamlined, integrated online and mobile offerings.

According to APT’s recent State of Business Experimentation report, traditional financial institutions are, in fact, doing just that. Eighty-eight percent of those surveyed are improving mobile capabilities, and 50 percent are adding Smart ATMs and self-serve technology to further entice customers eager for cutting-edge convenience.

“Traditional banks are actively investing in mobile and online offerings to meet growing demand for digital banking options,” said Weidman. “If they once were behind, they now seem to be catching up.”

Weidman cites the fact that banks are beginning to offer promotions encouraging customers to migrate to lower-cost mobile or online channels, while others are testing strategies to engage and onboard customers that open accounts outside the branch. According to the SOBE report, all financial institutions surveyed are striving to improve their digital onboarding processes to accelerate channel migration, with 78 percent of respondents marketing new mobile and online app features. Seventy percent of respondents said enhancing their online banking platform is a strategic priority, and 60 percent said that channel migration is as well. In addition to tackling the mobile and online spheres, banks are adapting their physical branch networks to cut costs by carefully closing less-valuable locations while trying to retain valuable customer relationships.

Weidman points out that banks are increasingly training branch and call center staff to assume more universal roles than just fulfilling traditional teller responsibilities. This is essential as customers using these channels not only want to conduct transactions; they also want financial expertise. As branch closures increase, contact centers are becoming increasingly integral customer service resources. Banks are experimenting with the traditional call center model by focusing more on proactive outreach and cross-sell activities, rather than just fielding incoming requests.

Undoubtedly, traditional financial institutions need to move toward omnichannel or digital banking. But this is not the complete answer. They also need to personalize the customer experience. Weidman notes that some banks are now using beacons, Bluetooth-enabled devices that communicate with smartphones, to send nearby customers localized event information and promotional offers. Others are embracing innovative branch formats in hopes of connecting with customers on a more personal level.

“Not all new programs will necessarily be well-received by customers,” said Weidman. “For example, video-conferencing technology may save costs and appeal to younger tech-savvy customers but alienate those that prefer in-person interaction over talking to a screen. By testing new customer interaction strategies on a smaller scale, sophisticated banks can identify which programs they should target to different branches and customer profiles before making sweeping changes.”

The bottom line, according to Weidman, is to focus on customer preferences and conduct personalized outreach. Disruptive players are forcing traditional financial institutions to innovate quickly and implement the most effective changes possible. These institutions must prioritize mobile banking and channel migration, and incentivize conversion to these new digital services with online-only promotions and user-friendly, personalized interfaces.


Michael Scheibach is executive editor of BankNews.

Partnering for Payments

Fintech payments solutions offer new challenge.

By Michael Scheibach

Generating revenue, improving product offerings, streamlining operations and better serving customers are among the top priorities for financial institutions in 2017. They also are the priorities for small businesses, especially retailers, who constantly look for ways to reduce costs, better serve their customers and increase revenues. Many retailers, in fact, are now part of the Merchants Payments Coalition — representing nearly 3 million stores — whose mission is to reduce credit card fees and create “a more transparent system that works better for consumers and merchants.”

Needless to say, banks must confront this changing payments landscape or risk losing their retail customers to fintech startups. In a report released last year, “Banks, Retailers and Fintech: Reimaging Payments Relationships,” the authors point out that fintech companies “sense an opportunity” in payments and are “muscling in” on banks’ traditional turf. “Banks cannot afford to be complacent,” reads the report. “Changes sweeping the industry suggest that there is a lot more disruption ahead, with potentially much more significant impact on banks.”

An even greater threat than payments processing, however, may be the weakening of the overall business relationship with a retail customer — an area of strength for banks. In other words, fintech payments solutions often have expanded capabilities that strengthen the fintech’s connection with its customers.

An example of a fintech company offering more than a simple payments solution is Fattmerchant (, a subscription-based merchant processing company. Its solution also includes one-time and recurring online payments, invoicing capabilities, a reporting dashboard with analytics, a mobile app, technical support, customized reports and more.

Although Fattmerchant has focused primarily on retailers, professional services and ecommerce companies, it also knows the importance of working with banks because of their longstanding small-business customer base. To do this, the company recently introduced a white-label Partner Program for banks and credit unions that is fully customizable according to the financial institution’s brand standards. A financial institution that becomes a partner has access to tools and resources for marketing, customer service, technical support and account management. Plus, the program allows institutions to analyze merchant processing savings for clients and helps clients switch processors, all while the institution earns money.

CEO Suneera Madhani emphasizes that one of the biggest benefits of the program for financial institutions is the ability to partner with a merchant services provider with no markups. Financial institutions have traditionally worked with standard processors cutting into their customers’ bottom lines, says Madhani. Now they are able to recommend a company that works for the mutual benefit of both the merchant and the institution.

“Customers of financial institutions enrolled in our Partner Program have access to a network of available resources and transparent pricing to help them succeed,” said Madhani. “The program provides updated technology such as a detailed analytics dashboard and tools, as well as a fully integrated virtual terminal. By using Fattmerchant, merchants are offered major savings through no markups and no contract. Merchants also have the added benefit of working with both their bank and the Fattmerchant team to find ways to save, essentially expanding their financial support system.”

Although the Partner Program is new, Madhani said the early response has been positive, with small to medium-sized financial institutions seeing the greatest return. One such institution is Axiom Bank in Orlando, Fla. According to Daniel Davis, president and CEO, the bank and Fattmerchant are working together to provide customers with affordable merchant processing, and to ensure that customers are improving their return each month and reducing unnecessary spending on exorbitant bills.

“Small-business owners are seeking convenience, clarity and trustworthy services,” said Davis, “and that’s what they’ll find with this partnership.”


 Michael Scheibach is executive editor of BankNews.



Paths to Prosperity

How three banks expand revenue streams: spanning borders, offering phone-charging stations, and focusing on intangibles.

By Susan Thomas Springer

What strategies kept banks successful in 2016? The paths to prosperity are as varied as the communities they serve. These three-high performing banks have stayed true to their roots while reaching new revenue streams by being innovative and harnessing technology.

Find Blue Ocean
One bank discovered a profitable niche market by reaching beyond traditional geographic borders.

Government-guaranteed lending, where the Small Business Administration, U.S. Department of Agriculture or Farm Service Agency alleviate loan risk to small business owners who may not qualify for a traditional loan, allowed Almena State Bank to expand farther than its headquarters in Almena, Kan., where 400 or so people live.

This 80-year old bank, with only 28 employees, owns two airplanes that fly several days each week to meet potential customers and conduct follow-up visits. The bank expanded its market this way about five years ago, when the economic downturn made it clear growth was needed while avoiding risk. Almena State’s leader calls it a profitable tool.

“We don’t do a lot of marketing now because word travels in the business world – it’s amazing,” says Shad Chandler, chairman and president.

Almena State, $82 million in asset size, now provides loans to hospitality, farming, ranching and commercial clients around Texas, Missouri and Oklahoma. Technology enables these far-flung customers easy access to remote capture services and quick communication. In addition, the bank serves local customers in two locations. These services are ably managed with a top-notch team of employees since the bank’s small communities are progressive small towns where young people want to raise families.

“We have a strong incentive program and great employee retention,” says Chandler. “Everyone knows we’re at a disadvantage in the whole scheme of banking because we’re small — so we have to do it better.”

Chandler says one point of differentiation is that when customers call his bank, they talk to a real person. And when they call back in two years, they’ll probably talk with the same person.

Chandler sees a bright future. He’ll continue to manage capital and growth because he has no plans to go public. His team is watching for the day interest rates rise.

“An increase in rates should have no effect to our interest margin because we don’t do long-term fixed- rate lending – and if we do we hedge our liabilities,” say Chandler.

Stay Current
Based in Brooklyn, N.Y., Dime Community Bank has operated in the New York City area since 1864. Yet it has changed with the times as the community transformed from crime-ridden in the 1970s to a hipster haven today. With $5.6 billion in assets, Dime has 25 locations with three new branches scheduled to open in 2017. Today’s customers “carry their banks around with them in their pockets,” says President Kenneth Mahon, which is why one new branch features phone-charging stations and a coffee counter.

Dime, which did more than $1.5 billion in multifamily loan originations last year, is one of the largest multifamily lenders in the New York City market. While regulators may become concerned about risk in a bank with more than 300 percent concentration in commercial real estate, Dime has been several times higher than that for almost 20 years.

“Our view is that New York City multifamily loans are not really commercial real estate,” says Mahon. “It’s a residential loan.”

The typical Dime loan is a pre-war building from 10 to 40 units, some of them rent-regulated. There may be retail on the ground floor but most of the income is from the residential portion. This asset class has been profitable niche because it takes fewer people to originate a $1.6 million loan than it does a paper-intensive single-family loan.

“The keys to Dime’s profitability are twofold. It’s low operating expenses – you’ll see our efficiency ratio is below 50 percent – and the other is low credit cost,” says Mahon, who adds non-performers are practically zero.

Dime has offset the expense of staying current with cybersecurity by avoiding lavish headquarters and maintaining a fairly flat organization chart.

Technology enabled a big boost to the bottom line when the bank launched the DimeDirect Money Market Account in 2015. Promoted online, it features fast, automated account opening. Dime has lured deposits from across the county with its annual yield of 1.1 percent, one of the highest in the United States.

“Suddenly, a lot of people clicked through and opened accounts,” says Mahon. “It’s been a substantial part of funding our growth — more so even than bricks and mortar.”

Looking ahead, Mahon is focused on bringing the best employees into his growing organization. Human resources is identifying key characteristics for new hires to find the right fit and maintain the friendly working environment of a smaller bank.

People First
Since Choice Financial was formed in 2001, the bank has grown through mergers and acquisitions to 19 locations in North Dakota and Minnesota, with $1.15 billion in assets and 230 full-time equivalent employees. Choice’s focus is business, commercial and agriculture, although it offers a wide array of products including consumer loans.

The bank has thrived through change thanks to its strong employee culture which includes balance between work and family, plus active community support such as the recent Swipe Out Hunger debit card program, which raised $40,000 for food banks.

“We tend to focus on the intangible things that we can bring to communities and customers to make their lives better and build our business at the same time,” says Brian Johnson, CEO of Choice Financial, headquartered in Fargo, N.D.

New employees are oriented at the Choice University, a program the bank developed to instill core values and teach a common language. Choice places employees in jobs according to their strengths rather than spending time trying to improve weaknesses. And because employees are spread out across two states, Choice increased the feeling of connection by installing video conference rooms where employees “can see enthusiasm and body language.”

Johnson says mergers and acquisitions often fail to live up to expectations, partly because it’s hard to merge people with different habits. Instead, his organization has prospered by embracing change as an opportunity.

“Hire people that buy into that culture and don’t fall in love with their desk and their title because we want to be an organization that’s progressive,” says Johnson.

Choice’s growth includes bringing wealth-management advisors, commercial insurance agents and a health benefits company on board to broaden the financial products available to customers.

Johnson recently served a three-year term on a community advisory board with a regional Federal Reserve Bank, where he participated in discussions on how to defray regulatory and technology costs for banks in the Midwest where the population is sparse compared to the coasts. Technology, which “the customer expects for free,” may not play direct into profitability yet grows the brand with the customer and makes bank an attractive partner for a merger.

“These costs and burdens force us to keep getting better and building bigger,” says Johnson.


Susan Thomas Springer is a contributing writer based in Sisters, Ore.

Five Ways Traditional Banks Can Survive and Thrive in the Age of Algorithms

By Florian Douetteau

Today, the banking industry faces rising competition with tech giants such as Google and Apple entering the space as well as a slew of fintech startups and the growing prevalence of the Internet of Things — or, IoT. These challengers bring new, innovative products tailor-made for the connected and mobile world into which they were born. (more…)

Editorial: Community Banks Poised to Gain Disaffected Big Bank Customers

By Aaron Silva

If you were offered $1 million would you take it, even if there were some slight implications on maintaining such a fortune? This is essentially the situation that community bankers have found themselves in recently. Due to the Wells Fargo scandal that continues to cast a shadow over the banking industry, many Wells customers are opting to take their business elsewhere: community institutions.


Plan in the Future, Not the Past

By Don Musso and Stephen Brown Klinger

The article is the second of a four-part article series on strategic planning adapted from FinPro’s 2016 State of the Industry speech titled “The Traditional Community Bank Model is Dead.” The first article, “Focus on Customers, Not Products,” appeared in the October issue of BankNews. The next topic is “Focus on Relationships and Not Transactions,” which is scheduled to be published in February 2017.


FDIC, SBA Announce Training Update

November 28 – The FDIC and the Small Business Administration have announced several enhancements to Money Smart for Small Business, a resource that provides practical guidance for starting and managing a small business.


Changing the Lending Game for Pro Athletes

October 28 – Far too often, young athletes find themselves starting their professional careers needing to borrow money to keep themselves afloat until proceeds from their contracts roll in. But for some players, a limited credit history can make the lending market treacherous territory to navigate.


U.S. Retail Banks Slow to Move on Omnichannel Tactics, Research Finds

October 18 – Today, BookingBug released its first research into how the top 10 U.S. retail banks are creating a more competitive customer experience, and which areas they are falling behind on.


Focus on Customers and Not Products

By Don Musso and Stephan Brown Kinger


This article is the first of a four-part series on strategic planning based on FinPro’s 2016 State of the Industry speech, “The Traditional Community Bank Model is Dead.” The next topic is “Plan in the Future and Not the Past,” in December.


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