In this episode, Sean and Gina discuss the waves of challenge and change facing banking – from a financial crisis that started as a health crisis exacerbated by social unrest – and how you can meet the moment by fortifying your branches through efficiency and customer relationships married to a strong differentiated brand that lives its values out loud.
Intro: This is Believe in Banking, a podcast series for decision makers, influencers and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.
Sean Keathley: This is our podcast for Believe in Banking. I am Sean Keathley, President and CEO of Adrenaline.
Gina Bleedorn: I’m Gina Bleedorn, Chief Experience Officer at Adrenaline.
Sean Keathley: Gina, as we continue this conversation and think about the flow of events, we started with imploring people pre-pandemic to think about being empathetic and thinking about people as individuals. We’ve then been helping people navigate the pandemic itself and deal with the reopening phase and long term planning. And who would have ever thought we sit here now with what’s going on in the country today.
Gina Bleedorn: Yeah. As we were discussing and have continued to think about the spectrum of what’s going to happen, that spectrum even keeps changing. We talked about on one side, could everything in banking flip back to normal or on the other side, get disrupted completely and now we’ve got new dimensions of challenges that are going to have long term effects, whether it be actually extending the course of the pandemic to increased fear around safety, to increased distrust, lack of empathy. We continue to not know what the future holds, but yet have to somehow plan for it. All this time, we have been talking about trust and the role, potentially unappreciated previously assumed role, that banks had as trusted institutions and now that is more important than ever.
Sean Keathley: As we talk about this spectrum of change and not knowing exactly where we’ll land, there are a few things we can focus on. And some of them maybe have been a bit taken for granted or are their benefits that aren’t fully appreciated. And as I think about those, this notion of being in a pillar of trust and being safe, secure and sound and really maybe most importantly, being in a anchor in the community, nothing becomes more important as we move forward and really thinking about making small business and individuals better, especially when times are tough and people need help.
Gina Bleedorn: Another way to think about that is to look inward. You are listening, you are absorbing and experiencing all of the turmoil now in society, tumultuousness on top of tumultuousness and now look inward, fortify your own house, look at your people. How do you support them? Make sure that they feel supported and empowered and safe so that they do the same for your customers. As Sean, you were saying it has been the role of banks for a century to be counted upon and people need to count upon banks and credit unions now today more than ever to keep their lives afloat, to keep their businesses afloat, financial institutions need to lean in to that role as that essential service. The rock that financial institutions need to be for people right now, they must stay alive and healthy in order to be there for people. So, they must balance creating that experience and that support with efficiency within their own walls to do so.
Sean Keathley: So, Gina, let’s talk about this challenge, an efficient branch network being mindful of costs and investment in a time where more and more transactions are digital and the community needs your people more than ever. And I think threading the needle on all of that is the key. So, here we are once again, thinking of the branch network, both as a liability and major investment in cost center and also a key path forward to be in a growth center and a community connection. For a bank or credit union brand manifests itself with people, the purest human to human connection with those people is, in those branches, in those communities.
Gina Bleedorn: What do you think people that work at banks and credit unions right now are feeling and thinking?
Sean Keathley: It’s complicated. I think we are dealing with lots of stress and security concerns. I think there’s personal safety around the pandemic we’ve been in. Then we’ve got different levels of safety concerns as there’s social unrest. And I think there’s a deep desire to help these communities and these small businesses that have really had the double whammy and maybe need more help from their banker than they’ve ever needed before.
Gina Bleedorn: If I was a CEO of a financial institution, what is keeping me up at night?
Sean Keathley: I think the dual pressure of keeping associates safe, making sure they know we care about them as individuals in that intense pressure to honor those communities and help them succeed in a very trying time.
Gina Bleedorn: What about credit pressures and the rate environment and my shareholders?
Sean Keathley: We’re in a financial crisis that was created from a health crisis that is now being amplified by social unrest. So, I think helping our clients rebound and survive and trying to balance keeping the institutions safe, but not losing the consumer. And I think the more of unique relationship you can create, the more you play the long game with your end consumer.
Gina Bleedorn: Right, brand value. What we talk about, why brand at all, why not just be a product and do infomercials? But if the next best product with a slightly better feature will outdo you or that’s 3 cents cheaper. But to your point, you can’t beat real value if it’s unique.
Sean Keathley: You’ve been saying that and I think it’s been-
Gina Bleedorn: You finally believe me?
Sean Keathley: … I’ve heard you say that. I’ve heard you tell bank boards. I’ve heard you talk to credit union CEOs. I think if you were to say it today, they may better understand.
Gina Bleedorn: The way I think about it, you’ve got two things. You’ve got the virtual you and the physical you. And the virtual you is your brand and you can’t touch it necessarily. I guess you can touch exterior signage, but those are manifestations. The brand is, it’s you, your purpose, your people and your physical presence is how you exist and when you are a business that delivers services and no tangible things, that’s where the service is disseminated and that’s in your branches and your call centers and all the places where you touch customers physically and digitally. And so, those are where you focus on making genuine connections and having a brand instead of just a product or a feature.
Sean Keathley: And to that point, we’ve been talking about this idea of blending the line a little bit with your digital presence and your physical presence and there are ways to do that with technology. And that gets into gaining the network effect with a physical presence, but not branching the size, quantity and density that you did pre pandemic or pre digital vortex transformation starting. The example where you’ve been using, ITMs being detached and the idea of maybe ITMs as remote branches, whether it is as you leave but don’t want to totally evacuate or if you go into a new market and you start to bring that human face through video that is safe, but more personal than just the ATM or an online transaction. These are the things when we were talking to people about end of last year and they are so on strategy in our new environment as we go forward.
Gina Bleedorn: As we think about putting investment where it matters and making dollars work hard for the sleepless CEO that’s trying to figure out how to make all of this work in a way that keeps the organization alive and surviving and thriving, a really efficient way to have physical plus virtual presence is what you were just saying, Sean, having remote beacons that have ATMs or ITMs, ATMs with video, whatever you want to call them that have your brand most notably and they are physical and there are ways that if I need to get cash and if I need to be reminded that you are here, there is a person, a virtual person, maybe on the other end, but there is a brand presence that has a halo effect for your overarching brand.
Gina Bleedorn: You of course need a hub that anchors some of those folks at least in some amount of proximity, a couple of miles if you’re in a medium density area could be up to five miles, if you’re in a more rural area or even maybe a half a mile, if you’re in a certain urban area. But you have less focused hub locations and more really efficient spokes. And that gives the halo effect in an optimized way of having presence and that’s what you said, Sean, the network effect in banking in this country. And even in retail, if you have more physical presence in a concentrated area, you will get a disproportionate amount of market share if you meet a certain threshold. If you have between eight and 10% of the total branches in any given area, you will start to get more than that amount of market share in that area.
Sean Keathley: As we think about this idea of being more efficient, but not at the expense of the network effect and we get the question of ROI of the branch. Gina, what examples are there in broader retail where physical presence helps to drive profitability without respect to the one-to-one relationship of the transactions at the physical presence level?
Gina Bleedorn: Well, retail established this model a while ago and there are many parallels between retail and financial. The difference of course, being retail as is selling physical stuff. But Sephora, for example, found that in areas where they had physical stores, their sales doubled. It’s as easy as that, whether people went in the store or not. So, they invested in these beautiful stores that may largely not have people in them, but drive online sales and that same phenomenon has happened in banking.
Sean Keathley: That reminds me of the conversation a few years back with [Cleo 00:11:03] who was running the ING Cafés, later acquired by Capital One and of course, if you’ve seen anything on TV in the last few years, you’ve seen the Capital One Cafés and getting at the heart of what those were trying to do, exactly what you were saying. They saw major relationship growth in every city. They put a physical café and as Capital One tested that in Boston and you now see their cafés in major markets. It’s how they were going to grow to a national footprint without branching at the same density of the banks they first acquired Iberia, Chevy Chase, North Fork who had a 300 branches per metro area. And I think that’s the balance we are now still looking to help our clients unlock.
Gina Bleedorn: So, when we talk about digitization, that strikes fear in the heart of many. A traditional banker, not exactly knowing what the implications of that are going to be, especially for the branch network that are obviously major investments and points of differentiation for community banks and community credit unions. But digitization, even complete digitization like let’s say, all transactions go out of the branch, which we know they won’t anytime soon, but let’s say they did, that doesn’t mean the death of branches. It means the reshaping of branches, the complete reshaping as advice and consultative centers. And that’s already what we want them to be. But if they are not there, the driver of consideration and acquisition and just awareness that you exist is not there. And that’s why they are so important. People are afraid of change. I think that’s because people are not even afraid so much of change as the unknown. The fear of the unknown is terrifying. So, Sean, what do you think about that?
Sean Keathley: That reminds me of our first podcast. When I said we were not futurist and you didn’t entirely agree with that comment. But I think maybe about that a little more, there is truth to it and as we cut through all of this, the strength of a financial institution will remain at the end of the day. And there needs to be a renewed focus on a differentiated brand that sets up the strength of the individuals and people and that is delivered in a channelless way to help us reshape these communities that need help.
Gina Bleedorn: Yes, As an essential service provider, it is time for you to be a calm in this storm, a place people can depend on, trust and turn to.
Sean Keathley: So, here we are again, is the branch network a liability or is it a key growth center and a really important and vital connection to the community? It’s probably both. And as you try to tackle that, it does get even more complicated. We’re seeing people that are reopening having a renewed focus on the drive-up experience. And it’s now been a lifeline that will have a role in the future. Staff as transactions have decreased. And then it is not as easy as just close branches and trim costs and Gina, I’m not even sure that’s the full list of things that make this so complicated. What would you add to that list?
Gina Bleedorn: Your brand. What do you do about it? You’re at a point in time where silence is mistaken for complacency or not caring. You have to have a position internally and externally as to how you feel about everything going on and what actions you are taking. So, you are in a tough place right now, balancing challenges.
Sean Keathley: Now that we make it sound so hopeless, Gina, we have answers and we’ll get into how to tackle all these issues next week on our next podcast.
Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision makers, influencers and industry leaders in financial services. Be sure to also join us on our flagship site, believeinbanking.com.