The digital spectrum for brick-and-mortar community banks seems to range from the mobile app-less to the smartwatch banking-capable with most banks in the migratory middle. The migrants are building new functionalities into decades-old systems or, if they’re fortunate, starting with a fresh platform. How is that playing out in the Midwest?
The mobile app-less
Marketer Sarah Bacehowski is someone who spends a lot of time with bank clients in conversations, she said, “wrapping their heads around how digital they need to be.” Bacehowski is president of Mills Marketing in Des Moines, Iowa, which has served financial institution clients since 1975. She is a strong advocate for the mobile app, which she calls “the hub of the wheel” of a delivery system for products and services that should be multi-channel.
“The industry is kind of 10 steps behind,” she said. “Eventually, there needs to be a kind of Amazon-style delivery of services for transacting, opening accounts and expanding into voice banking with Siri.
“It’s about understanding the expectation: millennials want to do banking on their watch,” Bacehowski said.
The customer audience she’s referencing, of course, is the upcoming generation of 92 million digital natives ages 22 to 37, who are accumulating and inheriting wealth. UBS has reported that with assets transferring to them, the millennial generation could be worth as much as $24 trillion by 2020. That’s roughly 1.5 times the size of the U.S. economy in 2015, according to CNBC.
On-demand services are everything to the digital native consumer. TheBANK of Edwardsville in southern Illinois near metro St. Louis was an early adopter of technology and was the very first community bank to offer online bill payment, said digital director Mike Cruz. One incentive, he said, was to attract student customers to a bank branch on the campus of Southern Illinois University in Edwardsville.
Leveraging the iPhone, TheBANK worked with a vendor to create an online mobile app that has since been enhanced with the iPhone 10 to include finger touch ID and face recognition login without the necessity of passwords. In August 2015, after Apple introduced its smartwatch, TheBANK adopted and promoted smartwatch banking. The watch pairs with the iPhone and communicates via Bluetooth technology. Customers, who Cruz said fit the millennial demographic, mostly use their smartwatches to check balances when making a purchase, and to locate bank branches and ATMs.
Generally, the most common digital banking activities millenials use include, according to a 2014 FICO report:
- checking their account balances
- checking for fraudulent activity
- transferring funds
- performing account maintenance
“From everything we’ve read and know, millenials live and breathe their digital phones,” said Cruz, who has been with the bank for 34 of its 150 years. (Plans for a merger of the $1.8 billion TheBANK with Champaign, Ill.-based Busey Bank were announced in late summer.)
Early adopters may not have peers at first, but “eventually [competitors] catch up,” Cruz said. “Everyone follows suit.”
The hardest friction to remove for the banking customer starts with decades-old core tech systems in place today at most U.S. banks. Digital rebuilding, Bacehowski said, is occurring primarily in banks with assets of $750 million to $1 billion. According to the FDIC, there are 3,453 banks in the $100 million to $1 billion asset size.
The $1 billion First Citizens Bank in Mason, City, Iowa, is among the very latest to complete a major overhaul of its online and mobile banking systems. When a vendor announced it was sunsetting its line of financial products, the bank took it as an opportunity to start fresh, said Joleen Fleming, senior vice president and retail officer. With promotional fanfare this past summer heralding a coming “digital shakeup,” the new website is set to go live this fall. But it was a multi-year, all-encompassing process to get to this point.
The message was consistent from customer surveys initiated two years ago, Fleming said. The digital strategy was the right approach, and customer needs were segmented by age groups. Millenials were not satisfied with the bank’s online banking and bill paying services. So a new vendor was identified nearly 18 months ago.
The vetting of outside vendors itself requires “a whole lot of due diligence” with an eye to security, Bacehowski said.
Since November 2017, a First Citizens conversion team of 10 employees from retail, lending, IT, compliance, operations and marketing has been actively engaged in the digital transition. The final implementation phase involved online and in-person training on the launch products with all 210 employees at branches in northern Iowa and in Mora, Minn., Fleming said.
Now the bank has new mobile payment systems accessible by computer and mobile wallet. With new offerings of Popmoney and People Pay, customers have the ability to do person-to-person (P2P) or account-to-account (A2A) transactions. Tests were done on the viability of using Apple smartwatches to check account balances and receive text message alerts.
“The ability of our customers to use Popmoney and People Pay online banking is going to allow our marketing department to strengthen our product offerings,” Fleming said. Debit cards are popular, and new account signups through BaZing offer gift promotions designed for the digital user, such as a Bluetooth speaker, cellphone dry bags, and a suite of cardholder services from free cell phone protection to roadside service.
New tools for personal financial management is something Fleming is “super excited about” because a holistic view of complete banking brings all accounts into one system. It even allows customers to import information from outside accounts for tracking purposes.
One of the best benefits of the digital upgrade may be to the bank’s own self-perception. While she used to feel the bank was being outpaced by competitors, First Citizens President and CEO Marti Rodamaker finds herself in a whole new position with few digital peers in a nationwide network of CEOs of banks around the country of similar size.
“We felt we were behind the curve in what we were offering, so we’re excited that we’re on the cutting edge,” Rodamaker said.
The First Bank Financial Centre of Oconomowoc, Wis., is some 18 months past its major digital upgrade that was prompted in 2015 by analytics showing smartphone traffic to the bank’s website had increased 106 percent. Back then the mobile site at the $1.1 billion bank was not optimized for ease of customer use, so it took several clicks to access inside content. Search engine optimization was not up-to-date with current Google algorithms that would enable data parsing to drive customer business to the site.
Now the bank’s user-friendly approach is clearly visible on first glance and detailed down to the tone of brief high-impact content. In the bank history section a digital timeline offers a tongue-in-cheek invitation: “Feel free to peruse our historical timeline, maybe learning a few more fun facts about FBFC you can share at dinner parties!”
Since adding digital mobile wallet services (Apple Pay and Google Pay), FBFC’s marketing director Becky Miller said, “We are pretty confident the approach is working as we’re seeing digital transactions consistently rise versus in-branch transactions. So even though we’re not actively encouraging our customers to do one thing over the other, we are seeing a natural progression with digital.”
Online customer traffic is easy to track with Google Analytics, including zip code origins. A recent report run by First State Bank of Rosemount, Minn., showed 54 percent of traffic was direct to the bank’s website while 33 percent of touches were sundry “organic searches.” Smaller chunks of traffic were for referral or social media hits, said Mark Toombs, president and CEO of the $72 million bank. Interestingly, Toombs attributes an uptick in website traffic to customers of competitor banks who are researching options while area banks involved in mergers are making changes.
What about the tech-shy?
So where does this digital migration leave customers who prefer traditional delivery? They do online transactions and even some smartwatch banking, but their needs are different and require specific marketing if banks want to keep their aging customers’ growing deposits. Baby boomer wealth is estimated at $30 trillion, according to US News.
Heritage Clubs International, a peer group of community bank affinity club leaders, examined best practices and made clear in a 2016 report the 77 million baby boomers born between 1946 and 1964 require “very targeted marketing.” Content images need to show people “10 years younger than reality.” Boomers “perceive themselves younger than they are,” according to the report. They also prefer a hands-on approach of doing versus seeing.
First Citizens has in its migration toolkit the advantage of a long-standing bank club tradition. The bank was first in the nation to create a bank club back in 1980. Heritage Clubs International has now grown to include 200 banks in 33 states. It used to be bank clubs were for customers “55 and older,” but they are now open to any age group, Rodamaker said. A thriving offering of these clubs is group travel, but educational services are also popular. Instructional seminars give customers hands-on experience with online banking and mobile apps, using tablets, laptops and smartphones.
In Wisconsin, First Bank Financial Centre’s “Let’s Learn” online financial center is an example of the education component now essential in an online presence. First State Bank of Rosemount offers FAQs with security tips on creating and storing IDs and passwords. FSB is another bank offering a mobile app for customer account access via Google Play or Apple.
Multiple surveys show that millenials want online tools to assist with personal finances, planning and budgeting, in particular, for college expenses. Banks hope a digital strategy with these tools will position them to retain customers later in life. But the first link in the customer journey is the ability to carry a bank in your pocket and on your wrist.
As First Citizens Bank said online of the benefit of linking a bank debit card to Apple Pay to pay by iPhone or Apple watch: “It certainly comes in handy for those times when you forget your wallet.”