If the first year of COVID-19 felt like a fast and turbulent roller-coaster ride for community banks, the second had many in the industry perplexed and wondering if the wild ride was finally over and if it’s OK to settle down and get back to normal.
But as we found out in 2021, that old normal — going back to doing business the way we did before the pandemic — is never coming back.
A steady stream of new variants — from delta, lambda and epsilon to the fast-spreading omicron — have made a mockery of many return-to-office plans. But they’ve only accelerated change that was already on its way: customers’ increasing need for access to fast and convenient banking service from any touchpoint.
More than ever, customers are juggling hectic work and personal commitments and they expect their community bank to deliver high-caliber, efficient experiences that match their speed of life, whether they be face-to-face, on the phone or digital.
With almost two years of the ‘new normal’ now behind us, what does the future of community banks look like? What are the key challenges and trends that the banking community will face in the coming year as they strive to compete and earn the loyalty of customers?
Three trends that grew steadily over the past two years have shown for good reason that they’re not going anywhere. Here’s why they’ll be ever-critical in 2022, and how community banks can implement them to position themselves for success in the coming year:
1. Digital and mobile banking will be expected to cover an even larger majority of transactions in 2022
Completing many if not most transactions and requests digitally — that’s become a competitive prerequisite for community banks in 2021. The line between what customers expect from their bank and what they receive from digital experience trailblazers like Amazon and Apple has rapidly vanished since the pandemic.
With today’s digital-first consumers more comfortable than ever buying banking products from emerging neobanks and fintech services, traditional financial institutions face unprecedented competition to earn new customers and grow lifetime value.
Digital laggards, even at the community level, can’t afford to delay investing in capabilities that are not in step with both market evolution and customer expectations. That means banking processes that can be handled digitally absolutely must be available to customers and easy to use.
There’s no reason why consumers should not be able to become customers from the device they interact with the most: their smartphone. Digital onboarding options need to actually be digital from start to finish: Experiences that are partially digital or self-service fail to be effective.
In a recent survey, banking professionals revealed that when customers can’t completely digitally onboard themselves, less than half end up doing so in 6 hours or under.
Lack of digital should not be a barrier standing in the way of acquiring new customers, nor should it block processing new loans or servicing most common customer requests to keep them happy and loyal.
Community banks must eliminate legacy processes that rely on customers searching for and fetching PDF documents from their email inbox, or printing those crowded documents and scanning or faxing them back. That kickstarts high-effort customer journeys that generate paperwork and admin overhead for banking employees, delaying and frustrating everyone involved.
2. It’s time to call time on overdraft fees
For decades, overdraft and NSF fees on checking accounts and lines of credit have been an infuriating and costly inconvenience for customers. But over the past couple of years, the profits banks have gained by collecting overdraft fees are becoming a dealbreaker for customers and a reputational nightmare, attracting the ire and scrutiny of the U.S. Senate.
Larger traditional banks have started to respond. Capital One has decided to do away with these fees altogether, and JP Morgan Chase recently revised their overdraft policy to give customers a day to catch up on their payments, while PNC is both lowering these fees and extending the grace period to cover overdraft amounts.
Between national, community and neobanks, it’s never been easier for customers to virtually walk their business elsewhere. For community banks, supporting their customers by doing away with overdraft fees will be key as they compete for their loyalty against larger and digital-first counterparts.
3. Branches will continue to close — but also adapt to be where their customers are
In the face of a new and rapidly spreading variant, many community banks will need to close more branch locations to fight the spread and protect the health and safety of their staff. But community banks can apply lessons from the past two years to adapt both their digital and physical presence.
By bringing in an innovative partner, community banks can get the most out of their existing systems and operations. A proven technology partner can analyze a community bank’s current processes and how digitizing them can eliminate barriers, make data agile and accessible in a remote and hybrid environment, and cut away operational costs and overhead.
And digital innovation is not the only way banks are adapting to today’s customer behavior. Supermarket branches are not new — but may prove to be hugely important over the next year as a means for community banks to be there for customers in the locations they frequent most. Some banks in recent years have invested in piloting coffee shop branches that also provide co-working spaces.
Allowing customers to get their banking activity done, apply for loans, and learn how to better manage their personal finances in a cozy cafe setting can help community banks reshape and greatly enhance these relationships.
Adapting your physical footprint can prove to be a major competitive differentiator for community banks, enabling them to be where their customers are and build meaningful and profitable long-term relationships.
Zviki Ben Ishay is the CEO and cofounder of Lightico, a SaaS platform that empowers businesses to accelerate their customer journeys through automated workflows for finance, insurance and other B2C businesses.