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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.

A recent study by cg42 claims that community and regional banks stand to benefit the most from this scandal, with a projected $38.7 billion in gained deposits and $1.6 billion in gained revenues over the next year and a half.

This is the first time in decades that community banks are on the cusp of steady and fast-paced growth in the coming year. While this is great news for the community banks, with such a sudden influx of new customers, these institutions will now face a new set of challenges in terms of matching the services that larger banks are easily able to offer. Although many customers are making the switch to smaller institutions, they are accustomed to a certain standard when it comes to technology, mobility and customer service.

To keep up the momentum and retain these “big bank” customers, community banks must be aware of these three things:

1) Check the fine print on your core contracts

Growth is generally seen as good – unless a bank is set up to be punished for it. Many core providers don’t provide volume discounts as the number of accounts and asset size grows. In essence, community banks can get punished for growing bigger. Be sure to check the pricing details and schedules of core IT contracts and reach out in advance to negotiate for better rates based on expected growth.  Sometimes community banks may have trouble getting suppliers to take them seriously – if that happens, it is time to consider engaging a professional negotiator.

2) Make sure your technology is up to date

Community banks must offer the technology big banks’ clients demand. Many of the Wells customers are millenials with a healthy technological appetite. Community banks need to make sure their mobile and online banking experiences are up-to-par. Most likely, that will require some upgrades, particularly on the mobile front.  Check your core IT contract to calculate the penalties they will assess for de-conversion, conversion and interface fees. You may be able to free up money by restructuring and renewing existing agreements – repurposing the savings toward the mobile upgrades.

3) Increase online usage by implementing on-boarding processes

What good is new technology investment if you are not also investing in a process to get ROI?  Credit unions do an excellent job of on-boarding online users early on in the relationship – supporting penetration rates exceeding 80 percent of account base, while community banks typically hover less than 35 percent. Community banks ought to implement processes to properly onboard people to their online and digital products when they open an account or at later touch points. To support this, their team must be digitally savvy and properly trained on their products and systems.

With millions of Wells Fargo customers search for a new banking home, make sure your community bank implements these three strategies and procedures into their business plans and core contracts. Not only will these tactics attract new customers, but will also provide rentention results for your existing customers.

About the Author

Aaron Silva is the founder, president and CEO of Paladin fs, the  negotiator redefining the status quo in Core and IT banking contracts. He is also the founder of the Golden Contract Coalition, an alliance of banking industry professionals leveraging their collective influence to address the contract disparities with national Core and IT vendors.

 

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