Community banks must embrace cryptocurrency and fully integrate technology into their operations to survive, according to the 2022 Community Banking Research report undertaken by business consulting firm Wipfli.
The report comes as crypto emerges as a major player in finance: Last year, the market capitalization of all cryptocurrencies reached a record $2 trillion, and there are almost 10,000 different cryptocurrencies. Still, more than half of respondents indicated they were less likely to adopt crypto over the next 18 months than do so. Fewer than one-third said they were more likely to. In December, the Federal Reserve Payments Study revealed the first decline in the number of credit card payments noted by the Federal Reserve, a sign that people are shifting to P2P and other crypto-involved payment options. Though offering crypto services can feel less natural for community banks than wealth management or insurance, doing so strengthens relationships and attracts younger bank customers, according to Wipfli.
Improving the ease and security of payment transactions, loan approvals and accounting processes, and opening new virtual branches will also be keys to your future success, according to Wipfli. “The real threat to community banks arises from new technologies and payment companies that have penetrated deeply into banking services nationally,” said Anna Kooi, national financial services leader at Wipfli. “It will be imperative for community banks to stay true to their mission of investing in their community and community organizations while staying relevant both digitally and by offering the right service offerings. They have to further enhance the personal relationships they have built with customers despite the move to new payment technologies and lack of in-person interactions.”
Community banks more likely to keep branches open
According to the Wipfli report, the vast majority of community banks are projecting growth of up to 10 percent over the next 12 months. Community banks are defying larger trends by maintaining their physical banks — 84 percent of community bankers said they had not closed a single branch in the past 12 months. Nearly 8-in-10 had added wealth advisory services, which historically had not been offered due to regulatory pressures and the inability of banks to scale and retain related talent. According to Wipfli, those challenges are no longer present as registered investment advisors drift from their national institutions, and turnkey technology solutions power back offices.
More than 2-in-3 bankers “are extremely concerned about employee retention and recruitment,” and approximately 75 percent said talent management is a primary concern. Forty five percent said the ongoing labor shortage is stymying their growth. “The majority of employees leave because they don’t see opportunities for growth in their current position,” Wipfli noted of retaining key employees. “Strong retention practices — such as creating career blueprints and creating a culture of learning and development through internal training programs, education reimbursement and mentoring programs — will give employees a reason to stay.”
According to Wipfli, you have opportunities to allow employees in front- and back-office teams to adopt a flexible schedule: Questions you should ask to gauge that possibility include whether the employee meets face-to-face with customers, has access to equipment only available in your branch. “Challenge your assumptions,” Wipfli stated.