Prioritize to accommodate the industry’s top concerns.
By Karl Dahlgren
As the end of 2018 quickly approaches, bank leaders should take this time to reflect on their strategic course for 2019. At a recent Barlow conference, BAI presented a workshop that included discussion topics related to timely initiatives that banks should carefully consider to remain competitive. The biggest concerns on bankers’ minds are the developing fintech environment, the role of digital account opening services, key marketing and customer acquisition initiatives and the talent crisis in the industry. These significant topics have already had a drastic impact on the banking environment this year and will continue to for the foreseeable future. In order to thrive, bank leaders need to develop achievable plans to navigate these top concerns in order to shine among their competitors.
The role of fintech.
Fintech continues to influence the banking industry in many ways, from influencing consumers’ expectations to serving as a partner or competitor to banks, and leaders need to understand the nature of its role when making strategic plans for the organization. Bank leaders aspiring to enhance or expand their service offerings should closely monitor developments in the fintech industry and consider partnering with a fintech organization that addresses their key growth objectives. Larger institutions may even look to acquire one.
While banks of certain sizes can easily invest in incubators or have the resources to make large acquisitions, smaller banks should not ignore the developing fintech arena just because of limited research and development budgets. While these smaller institutions may not be able to acquire fintech organizations, they can certainly learn from these organizations’ example. Many fintech organizations prioritize agile processes, streamlined and customer-focused products as part of their innovation and product delivery processes.
One way smaller banks can imitate fintech is by using application programming interfaces. This type of technology enables banks to easily integrate with new technology, ultimately helping their marketability. Due to the rapid pace at which technology is evolving and the stronghold that large banks seem to have on fintech, many banking organizations should view partnering with fintech companies as almost a categorical imperative and should consider partnerships or modeling fintech-like practices an important topic to discuss during planning sessions.
The potential benefit of digital account opening services.
When conducting strategic planning sessions, it is important to understand that consumers have identified digital account opening as one of the top services they would like to use, if provided. According to the first installment of the 2018 BAI Banking Outlook series, a survey-based research initiative that compares perspectives between consumers and bank leaders, more than 60 percent of consumers would use online channels to open a loan account, an investment account and a deposit account, if the process were easy. However, more than half of banks do not allow new customers to open their first accounts online.
Furthermore, many consumers that have successfully opened accounts online have expressed that the process was not easy. While digital account opening services carry a higher operational security risk, banks do not have the luxury of ignoring this clearly articulated customer need. Innovation is no longer a nice to have; it is a must have. This is yet another reason that banks need to strategize about better ways to deliver the solutions that customers demand.
Marketing and customer acquisition initiatives.
New customer acquisition remains one of the most important aspects for the growth of a bank but can sometimes be one of the more difficult aspects of planning, especially in a market of declining deposit growth. Since there are a finite number of potential customers, new customer acquisition will likely come from another bank’s customer base. For this reason, bank leaders need to understand what drives a customer to open a new account.
In the second installment of the 2018 BAI Banking Outlook survey, BAI researchers focused on trends in marketing and customer acquisition to enable financial services leaders to better understand this crucial element of a bank’s marketing strategy. The survey found that the majority of customers felt that if their main bank provided a better omni-channel experience, improved the in-branch experience and enhanced mobile banking channels that their overall experience with the bank would improve. Bank leaders should seek to understand and meet demands such as these and use the differentiating qualities to effectively market to this segment.
Addressing the talent crisis.
During strategic planning sessions, bank leaders have an opportunity to address the common industry challenge of attracting new talent, especially since young adults entering the workforce are no longer viewing banking as an attractive industry. As in any industry, attracting and managing talent is crucial to an organization’s long term success. In response to this issue, BAI conducted a BAI Banking Outlook survey on talent management to find out the most impactful methods of engaging employees. Not surprisingly, more than 65 percent of the bankers who responded said that a higher salary would be the primary reason for changing jobs.
While it would be difficult to issue raises to employees across the board, leaders should regularly complete competitor analyses focused on salary and benefits. The results of this research may help identify areas of improvement in banks’ salary structures as well as other non-monetary incentives that can be differentiators. Similarly, only 30 percent of BAI’s survey respondents believe their benefits are competitive. Bank leaders should survey their employees to find out which benefits are most valued and consider adjusting the benefits package according to the survey results.
Other than salary, career advancement opportunity is the top reason bank employees typically leave their organization. Many times, if employees do not see a clear opportunity for growth within the organization, they will question a long-term future at the bank. Ideally, banks should implement or increase awareness about a leadership development program. Fifty-four percent of respondents indicated that they were unaware that a leadership development program existed at their bank, even though the majority of human resource professionals indicated that the surveyed banks did in fact have one. If employees are unaware of the potential for growth within an organization, the most ambitious, talented staff members are likely to look for opportunities elsewhere. While leaders are building strategic plans to meet external market demands, it’s important to attend to the internal needs of your employees.
The banking industry is in the midst of great change — whether from within or with the help of strategic fintech partnerships. Banks can take full advantage of this planning season by facing these top concerns and opportunities when mapping their course for 2019 and beyond. This is the time to understand your place in the market, prioritize innovative initiatives and meet consumers’ changing expectations. Innovative banks have begun to see the signs for change and have adjusted for the new climate, addressing higher consumer expectations for streamlined, tailored services and instant gratification, while adapting to a competitive talent market.
Smaller banks may need to seek out a competitive differentiator, such as marketing key products and services to their communities. However, finding a key differentiator must never come at the cost of striving to keep up in the industry’s race to innovate. Finally, obtaining and retaining talented employees should be an ongoing initiative, and one that should remain among the top concerns for bank leaders. No matter how large or small, banks should carefully assess the industry’s environment and address each of these significant issues carefully as they plan for a successful future.
Karl Dahlgren is managing director of BAI, a nonprofit independent organization that serves the financial services industry with actionable insights.