In this episode, Sean and Gina discuss the challenges that will face the financial services industry in our post-pandemic future. Most notably, banks and credit unions will need to overcome staffing issues in order to meet consumer demand for efficient transactions via updated digital options while still having branches close by for more complex and consultative banking needs. Attracting higher-skilled bankers requires a real investment for banks and a commitment to move beyond traditional teller-based banking models. Banking’s growth mandate means banks must balance ways to grow in new markets and be more efficient in more legacy locations, providing a blend of financial wellness tools and advice that consumers need to spend and save better.
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: Welcome to our podcast for Believe in Banking. I am Sean Keathley, President and CEO of Adrenaline.
Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline.
Sean Keathley: As we move forward, there’s a lot of still incredibly difficult challenges everyone’s facing. One of those for these financial organizations is just staff. Last year, we had to keep staff safe; and that’s still not out of people’s minds, but it’s gotten more complicated. A lot of different markets are having a hard time finding enough people to work in certain jobs, and manning a bank branch or a credit union branch is something that is very difficult. And it can be even more so in certain regions; there have been people moving around, or safety concerns. There’s a lot of factors around that.
Sean Keathley: And we were talking to one of our clients who is branching for growth, and they’re doing a couple of things. One of the things they’re talking about is in those growth markets, it’s really important to have the higher quality employee. They’re paying more in these universally designed models. They don’t need as many employees as they do in a traditional teller-driven branch; but they’re making real investments in people that can really help solve problems, give advice, as opposed to using the more traditional approach, where there’s not technology, and you need a lot of different bankers. So I think that’s an interesting trend; and perhaps a best practice that can start to be deployed. Technology and cash automation, et cetera, is making the simple more convenient for the consumer. And when you need real heart advice, you’ve got a qualified banker that can help with the conversation.
Gina Bleedorn: One way to look at it, kind of “what’s old is new;” banks and credit unions have always told us that, “What is the difference when I ask them, ‘What makes you special?'” “Our people. Our people are the difference. Our people are why people bank with us.” The difference now, is those people have to do more. It is not as much about servicing with a smile and support but advising. And so, your people can still be, and ideally should still be, the differentiator; because a human-to-human relationship with any consumer or business owner of any age, from any demographic background, will always trump that of a digital one. So in a way, doubling down on your people, and reframing who those people really need to be, that is a key to future success.
Sean Keathley: I totally agree, Gina. And I think the times we’re living in are putting more emphasis on it. There’s a lot of studies that are out there around just people’s concern about their finances, and people are worried. And we’re seeing it across age groups. So now even the youngest workforce is worried about, do they have too much debt, student loans, or otherwise; do they understand finances? Can they start understanding the power of saving today, and the power of saving over time?
Sean Keathley: And I think that notion of financial literacy, and having organizations really doing good in the community by teaching people, is one of the examples that can be an outcome, of that people focus on helping, versus that just customer service with a smile. So there is a balance. And I think the oldest, newest, brilliant, we’ve been saying this for a long time, really ever since the iPhone came out, and made digital transactions an option. But I think what we’ve been through in the last 16 months is probably putting more pressure, as you look for ways to grow and be more efficient in more legacy markets. I think there’s going to be a balance of technology and people, that’ll be the solution.
Gina Bleedorn: What’s interesting is, the Neobanks and the Fintechs, at least many of them, went after how people spend money. That’s why the payments industry continues to be the thinnest techie penetrated. We talked about the Google Plex account with Luvleen from BankMobile a few episodes back. And that’s a really interesting bridge, where Google has made an account that focuses on how people spend money and then sprinkles in options for them to save money. It is essentially helping them learn about their money in real-time, giving them real advice, real trends. Now, the Google Plex account is designed to be available for financial community institutions to give, so that type of advisory service is able to be delivered in a sophisticated way on Google, by institutions of all shapes and sizes.
Gina Bleedorn: But, whether you are thinking of offering Google Plex accounts, or something like it, keeping in mind advisory; and real-time advisory is a real threat, in a way, from what technology is enabling, and what big tech can do, as well as what the Neobanks and Challenger banks have built business models around from various angles of just a part of banking. So, the more banks can capitalize on the trust, foundation, and relationships that are already established, by beginning to give pieces of those more advisory services, the more ahead of the game you will be.
Sean Keathley: Gina, great points. And I do agree with everything you said, but it’s yes/and. Cash is not going away; and there’s been a lot of theories around digital payments, and everything going online. But the statistics don’t bear that out. A new study says Gen Z is leaning out 58% of Gen Z; leans on cash, to help them keep spending in check. And we know. We talked to a lot of our bankers in 2020; a lot of the good they did was refunding NSF fees. But if you think about what caused those, and there’s a lot of problems. A debit card; sometimes a $3 purchase costs you $35. The other thing that’s going on is, we’ve got natural disasters with Ida. There’s no electricity or power. And if you’re in a totally digital economy, that can be a challenge to get things like food and water and gasoline.
Sean Keathley: The other big, huge trend that is continuing, is our country is becoming a bigger and bigger melting pot. And we’re having more diversity around cultures and different countries. And as I’ve been speaking in countries, like going to Thailand and Bangkok and other places; they don’t trust their government, and in Thailand, they go have their passport checked after they make their deposit. So they don’t just believe they put it in the bank. They want to have a banker write it in a passbook. So I think this trust factor; we see that in certain communities where there’s a growing different, culture building. Cash is a key to the culture. And so I think whether it is for certain things like tips, or buying fast food, your spending because that’s what you do culturally, or just using it to budget. I think those are all reasons we’re going to see a balance. Digital payments are exploding, but cash is not disappearing.
Gina Bleedorn: In Maslow’s Hierarchy of Human Needs, we are reminded, right above really like food and water, is safety and trust. And it continues to be so interesting how money is so tied to that because it is tied to the idea of being able to keep my family and myself financially safe. And I think that’s why, despite so many predictions and so much digitization and so many digital options, so many still remain physically tied to cash, and to cash machines, and to branches. American Banker just reported 40% of US consumers across demographics, citing cash as their preferred payment method.
Gina Bleedorn: I was talking to a banker just the other day; a banker who keeps essentially a stash of cash, not exactly under the mattress, but in an envelope, for the purpose of giving it to his children for budgeting. So whether it is psychological triggers to force you to budget, or just thinking about being attached to money; in the cultures that Sean was mentioning, the idea of money and safety is related, maybe even intertwined. And it is a partial explanation for the great conundrum that we have discussed. No one wants to go inside a bank branch, and everyone wants to have one nearby.
Sean Keathley: Well, I think, and there’s a balance too, to all of this, Gina. And I think one of the things we’ve touched on already, and we continue to talk about, we’ve talked about for years, is this ability to have financial literacy and to educate. And it really has to be on a layer of trust, and an organization that has a consumer’s trust can teach them. And so there is a difference between having $40 that is your allowance for two weeks, versus piles of money under your mattress, which may not be safe. And so I think all of this gets back to, there is not a silver bullet on how people want to use or do things. It’s all a personal preference. And the more we can make people feel safe and educated, the better their decisions are informed. And that is around being really community-focused. Whether you’re a large organization or a small, in the neighborhood you’re serving, helping them be more safe and comfortable is going to do your organization good.
Gina Bleedorn: We’ve talked about this in some varying ways before, but when you say what you just said, Sean, about being community-focused, another way to think about that is doubling down on locality; because that’s what that is. It’s your physical presence. It’s in many cases, the communities from which you were born as an organization, or have an established relationship. That locality alone, buy local, build trust; double down on that. I mentioned recently in an ABA Bank Marketing webinar that was just recorded, that’ll air at the end of the month, the locality is your superpower. And that is also your point of differentiation and your leverage point, so double down on that.
Sean Keathley: Well, this gets back to the point around the balance of technology and qualified staff. We’ve long been talking about using strategic tools like ATMs, deposit-taking ATMs, ITMs, teller cash recyclers, trying to get the cash out of the hand of the banker. There’s a lot of benefits: safety, security, it lowers theft, it’s way more efficient. This is really an important way to balance the different tools or ways people want to use their money, whether it is digital cash or a balance of that. We’ve been working on this ITM research, looking to industry experts, talking to lots of different organizations of different sizes in different parts of the country, and getting their feedback on their thoughts around ITMs, how they’ve used them, what they think of them. And that’s the research we’ll be deploying here very soon. It’s very telling. It does show us that as you’re thinking about your branch network and how you’re going to manage payments and cash, there are no plans for cash to disappear anytime soon. And it’s got to be part of your strategy.
Gina Bleedorn: We weren’t satisfied with the amount of information available to us and to our clients on ITMs and how to use them, so we did our own. And that is the research Sean mentioned, we’re putting out later this month in September. I think that what we’ll find, some preliminary findings from that research is that ITM deployment is exploding. If it’s not on the radar already for your organization, it will be, or should be.
Gina Bleedorn: There’s also a funny term that we even have used as well: cashless, cashless branches. It’s not a consumer term, it’s a banking term. There’s no cash in the teller’s hands, but there’s still cash in a machine. So watching out for using that as anything public-facing, consumers still very much want cash, even though it is of course, a way for you to optimize. But the right balance, and this is not new news, continues to be physical and human delivery; that human delivery can be an absolute point of differentiation. But you have to re-imagine it for what consumers need from that human point of contact now, and what’s really going to matter. It can’t just be served with a smile.
Sean Keathley: Well, and Gina, the other thing we’ve talked a lot about is the network effect, the importance of locality. I don’t want to give away all of your ABA Marketing content, but this notion that everyone wants the bank branch, but no one goes in it. That’s impossible to do with our traditional approach. If you’re going to think about different formats, hubs, and spokes, balancing, growing into new markets, and not just vacating legacy markets that don’t have a lot of potentials; there is no way to do it without using all of these tools in the toolkit, doing it efficiently, and with the right level of expertise, where appropriate.
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.