Retail banking is still a “contact sport”

There aren’t many people that couldn’t wait to hear “2020 has left the building”. Every new year and 2021 is no exception, starts off with its own challenges. I’ve been talking with a lot of bankers these last couple of weeks and a couple of common themes are:

• Changes in regulatory leadership
• Economic uncertainty
• COVID-19 not just done yet
• Consolidation of the industry

There is one piece from last December that I keep returning to when I need a boost in optimism. It’s from JP Morgan’s 12/15/20 report titled the “U.S. Mid & Small Cap Banks Technology Disruption Report”. You can view it here.

There is a lot in here. My favorite take:

“In the age of convenience, the amount spent on technology is the wrong measure. We now firmly believe that the amount being spent on technology provides little to no value in terms of how a bank is reshaping its business in the digital age. In fact, with technology a means to an end, the true end in the bank industry is one single concept: providing outstanding convenience to customers. “

The gist of this piece is that retail banking is still a “contact sport” and that mid-size banks not only have a role to play but they can win the fight.

There has been a shift through the last eight months in what retail bank customers are looking for from their bank relationship. Initially, customers wanted to know “How do I bank?” with lock-downs and safety concerns. That has evolved with time to “Help me survive”. Customers tell us in multiple studies that they want advice and guidance. Specific topics customers are looking for advice with:

• Improving their financial situation
• Budgeting
• Investments (Protection of current)
• Retirement Investments (Future needs)

Current events are constantly documented in social media or through the news which fosters uncertainty. It isn’t a surprise that people would want help with such personal items. Uncertainty is typically combatted through learning.

JDP has found, with a monthly financial health study, that the largest declines in positive sentiment people have regarding their own personal financial situation pertains to their creditworthiness, their ability to pay their bills, and their level of savings to cover short term needs.

The largest increases in the negative sentiment of personal financial situations occur in people’s level of savings to cover short term needs and creditworthiness. These results represent national trends through December of 2020.

People are nervous and a little worried. Protecting their families and their family’s assets is top of mind.

These are specific results from that same financial health study. Households fall into one of four categories based on a variety of variables. Jumping off this table is the fact that “Healthy” households are dropping while “Vulnerable” rise. This explains the desire for advice and guidance.

A couple of quick points about advice and what customers tell us they are looking for:

• Tailored – Don’t send HELOC offers to college students
• Channel – Provide access to advice through the channel the customer prefers (branch or digital)
• Focus – Stick with budgeting help, ways the bank wants to help (Forbearance, grace periods, fee waivers, etc.)

Before I close, I wanted to share one more take away from the JP Morgan report:

Smaller and Nimble Structure Allows Regional (Mid-Size) Banks to Execute Better:

Another key point of differentiation for the regional (Mid-Size) banks is the nimble structure that allows them to be more agile and responsive to client needs. In fact, even the most senior executives were involved in responding to client needs at regional (Mid-Size) banks which led to a more agile approach in making decisions to suit client requirements.

Don’t overthink this – the relationship has always been, and continues to be, the most influential factor driving customer experience, retention, and growth. If we want to protect ourselves against competitors, fintech’s and the influence of the times in which we live, we need to protect and support the relationships we have built with our customers. That is today’s front line.