Back in 1994, in the days when telephone banking was new and transactions were still hand-to-hand over the counter, a friend opened a new account in a North Carolina community bank. He made a $1,500 deposit in cash to open the account.
Two days later, he wrote two checks to his new landlord totaling $900 to cover his deposit and first month’s rent.
Two days after that, he got an angry call from the landlord.
The checks bounced, not exactly the best way to win friends in a new town.
Stunned and steaming, my friend went to his small-town bank, with his deposit receipt in hand. A quick analysis by the bank determined that when the new accounts manager keyed the account number into the system, she was off by one number. As a result, the $1,500 deposit fattened someone else’s account.
The branch manager assured my frustrated friend that the problem had been remedied, soothed the landlord with a quick phone call and a letter and my friend kept a roof over his head.
My friend remained with the bank, reasoning that everyone makes mistakes. But always, always in the back of his mind, the question of the institution’s reliability lingered. While some folks keep menus and packets of hot mustard and soy sauce from Chinese food delivery in a kitchen drawer, my buddy meticulously kept deposit receipts.
It comes down to this – customers expect reliability. It’s basic for any business.Fast forward 25 years. Banks from Philadelphia, Miss., to Philadelphia, Pa., have embraced technology. Smartphone banking, apps, online payments, e-wallets. But even so, customers expect reliability. And truth be told, tech ratchets up, not reduces, expectation, bringing us to a cautionary tale from the small town of Monticello, N.Y. reported a couple of weeks ago in The Wall Street Journal.
Read the entire Wall Street Journal article here: https://www.wsj.com/articles/the-problem-for-small-town-banks-people-want-high-tech-services-11551502885
Big banks – the giants of Wall Street – are zeroed in on larger markets with deeper pockets, leaving community banks to stand in the gap, according to the WSJ. In the Monticello case, the National Bank of Delaware bought Bank of America’s only branch in town and things went bad in a hurry, thanks to a multitude of tech-related glitches.
What happened next was like the bank run in the fictional town of Bedford Falls, N.Y., in the Frank Capra classic film, “It’s A Wonderful Life.” National Bank of Delaware customers in Monticello waited for up to four hours in line to yank half their deposits from the bank. Security guards, hired to protect employees from angry customers, stood at the ready.
Customers moved their assets to institutions with more reliable technology. And the National Bank of Delaware, after a century of service, sold itself at a bargain basement price, according to the WSJ.
And it was all about reliability and technology.
Consider this: According to the WSJ, small community banks with $1 billion or less in assets – 4,600 in all – hold 6.6 percent of all bank assets, compared to 31.5 percent 30 years ago. Consolidation and tech have sparked the decline in market share.
When Bank of America unloaded many of its small-town branches like Monticello’s between 2012 and 2015, the smaller banks that purchased those branches typically lost one-third of deposits within a year of acquisition and many closed.
At the heart of all this, community banks are struggling to keep up with the rising costs of technology. And while they may not like it, their customers want to be able to make online deposits and to remotely send money to relatives and friends. They don’t need a small bank a few blocks away, so they turn to bigger competitors for those services.
Here are three ideas to stave off a Delaware National-type crisis:
- Invest intelligently in technology. Community banks know their markets well, better than one of the big Wall Street players. As a result, your bank should know specifically what technology works best for your customers. Tailor your tech investment to those specific needs.
- Face Facts. The bottom line is that in 2019, it’s short sighted to rest on the laurels of community relationships and ignore technology. If you want to attract new, younger customers who will one day want mortgages, car loans, or investment services, community banks must adapt to changing times. And remember, your older, established customers may be more tech-savvy than you think.
Too, remember the fate of print newspapers, which failed to adjust to the tech boom and as a result, failed to monetize digital content. As a result, the morning Daily Bugle that used to be part of your morning routine is no more. Without adapting to technology, your bank could go the same way. Consider this chilling number from Finextra.com. in 1985, there were nearly 16,000 community banks. By the end of 2015, there were 5,874.
- You’re not to small to have a mobile app. With an app, you can maintain relationships, while at the same time maintaining expectations about customer convenience. Maintaining a reliable app boosts customer loyalty.
While the WSJ article, as well as the reality of the declining numbers of community banks may send chills through our sector of the industry, as long as your bank’s doors are open, it’s not too late to change. The Finextra.com piece said it best:
“Supporting their natural strengths with the latest technological achievements, community banks can create a winning formula to let their customers know how they differ from other financial institutions. Thus, technology can give community banks a tremendous opportunity to differentiate themselves from larger institutions and further concentrate on the local community’s needs.”
To read the entire Finextra.com post, go to https://www.finextra.com/blogposting/14269/how-technology-can-help-community-banks-to-survive
How has your community bank improved technology? Send me your story at [email protected]
