In this special episode, Sean and Gina return to conversations about the fundamentals for financial institutions acting with trust and transparency that they’ve explored on the Believe in Banking podcast. They address key ways banks and credit unions can increase consumer trust in banking by building relationships that demonstrate their commitment to community and how trust provides the foundation of the community banking system. Finally, they discuss how traditional financial institutions have a real advantage over challenger banks, especially as they combine consumer trust with creative ways of doing good.
Transcription
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 Believe in Banking podcast. I am Sean Keathley, CEO of Adrenaline. Given the events of the past few weeks in banking, we thought it made sense to revisit some of the fundamentals for all of the financial institutions we’ve been talking to over the last couple years, especially around the ideas of trust and transparency that we’ve explored on Believe in Banking. So for our March podcast, we’re going to do a special episode on building trust in banking.
We’ll be looking at ways banks reaffirm their commitment to their customers, show the strength of the community banking system, while diving in discussions about strategies for connecting people at the neighborhood level, ways banks build on the inherent trust in each and every one of those communities and then maybe most of all, we’re going to explore the ideas for purpose-driven banking, where the community financial institutions really live out their values, building on community, being trusted partners and being there for each and every one of their customers. We hope this episode’s focus on trust reaffirms all the ways that banks are showing up with conviction and give some inspiration for the creative ways of doing good for customers and their communities.
Gina Bleedorn: Consumer preferences continue to shift. They were already shifting pre-COVID. They’re shifting even more post-COVID and some recent stats from KPMG, Pricewaterhouse and Accenture. 75% of consumers are expecting great customer experiences and that tone has been set from some of the leaders in retail that had to elevate their customer experience digitally and virtually, in order to differentiate and is now extending to all sectors, inclusive of banking. Especially in banking in a primary financial relationship, 63% are seeking value for the money. That has been a major uptick since COVID is increasing anxiety and pressure on consumers throughout the nation, to make sure they are getting as much value from their financial institution as possible. And they are fleeing existing relationships, or switching rather and we haven’t seen that much migration because of fees and rates in many, many years.
So really, there is an opportunity here, by having a real value proposition combined with a customer experience proposition, that we know the top five, top six are going to struggle to deliver. 4 out of 10 people must trust in the brand of primary financial provider that they choose and about 2 out of 10 actually choose financial brands that have values they perceive to be matching their own. And then 31%, they want to manage their account however they want to manage it. These are not surprising, but they are just reiterating what we already know and the numbers keep going up as far as expectations and what people want. Sean, you just had a rare opportunity to meet with, in person even, a lot of community bank CEOs. What are some of the themes the bank CEOs are talking about?
Sean Keathley: Well, for sure, Gina. And you think about one of the problems with the community banks and credit unions, even competing within their own space, is the large five have so many more resources and the technology spend, the people, the talent and so it’s another face of fierce competition that is absolutely on the mind of community bankers.
Gina Bleedorn: It’s important to be aware of what’s happening, because that is what your very customers are looking at and seeing. We will reiterate that what you have that the other players don’t is trust, or we hope you do. As a community institution, your mere presence in the local communities of the people you serve is at least a certain level of trust and then the relationships that you have with them and that you have the potential to have because of that physical presence, that makes you real. And when it comes to money and finances, certainly, there are different preferences among different generations and different demographic and psychographic types. Most people want to be able to talk to someone about their money and have a lot of fears about making someone they can’t see in person a primary financial institution.
Sean Keathley: Clearly, they’re thinking about the end user and making things simple and easy, but it’s also around education. That’s one of the things they’re trying to teach people is the value of money. Make it easy. Give me access. Help me learn. I think those are all positive attributes to apply to any strategy.
Gina Bleedorn: Yeah. We’ve certainly covered that before with the idea of purpose-driven banking. Help me look after my financial well-being. One thing to consider came out recently in an Accenture study, on the rise of digitization and banking, talking about the risk on two levels. The first risk is commoditization, as there is increased competition and it becomes all about price and ease of digital experience. That’s going to make it very difficult for a lot of institutions to compete. And the second is lack of trust. Apparently, banking, trust in your bank to look out for your well-being is down in the last two years. The same Accenture study reveals that although most consumers were satisfied with how their primary financial institutions supported them through the pandemic, only 29% trust them to look after their financial well-being.
Sean Keathley: What that tells me, Gina, is this headline should be it’s not only digital. You better than anybody can explain why not only digital? What happens if you become digital only in your strategy?
Gina Bleedorn: You lose the value of in-person relationships that most financial institutions have built a business upon.
Sean Keathley: For the most part, what you said is true, that the platform of banking is built on people and relationships and the sensitivity around money and needs.
Gina Bleedorn: I think it comes back to the great risk of commoditization and loss of trust. If those two things happen, there will be a great loss in community and regional banks and credit unions throughout the country, but I don’t think that there will be, because there are too many people ingrained with those institutions today. Everything you can do to make your strategy as customer-centric as possible, all of that needs to be in place, but with the idea that you’re not going to be better than the best digital bank out there, or the national banks digitally. So you have to be better in other ways and those other ways are going to have to involve in-person financial relationships with real bankers.
Sean Keathley: And Gina, with that comes a real opportunity. 49% of the US consumers plan to open a new checking account. That’s every other person and it gets back to what you’re talking about. This idea of losing trust and there was a lot of trust lost last year and so there’s a sea of opportunity coming. Then you get into the needs. 44% plan to increase their investments. 15% want to meet with a financial advisor. A lot of these things, to your point, Gina, especially with those community organizations, need to happen in person. These are important money issues and I think the average American is thinking about what the banks and credit unions provide and that personal advice-driven service.
Gina Bleedorn: So today, we want to talk about a topic we’ve discussed before, but has new relevance and I think growing relevance every day and it’s the idea of purpose-driven banking. Accenture coined the phrase that’s now become broader than just Accenture and asked if this is banking’s electric car moment, because it is that a little bit. The pandemic has accelerated the need to serve as heroes and I think banks have the opportunity to do that. Banking is a service that everybody needs. Traditional financial institutions are coming back with ways of exemplifying the idea behind having a greater purpose, a higher bottom line, if you will, besides just profits.
There’s also a whole series of new lending programs that were really realized during the pandemic lending and some of these same techniques that large banks and community-size institution used. They are now leveraging that infrastructure and that technology that they had to figure out to spur more business lending. And also related, there has been a surge of underbanked support and underbanked programs. The underbanked community in the US is about 18% of households in the country do not have a primary checking account or primary financial institution, which sounds like a shocking number, but all of these ways of reaching varying audiences and extending further to the consumer to give them what they need and what’s best for them and their lives and their financial wellness. All of this, in our opinion, is examples of banks driving towards purpose-driven banking.
Sean Keathley: Yeah. Gina, it’s exciting to see these more traditional banks doing these more creative things. The average American going through all these challenges, it’s a great opportunity for these banks and the banks have a big advantage. When asked who they trust, there’s a great Finextra article about this, Americans trust traditional banks more. More than the government, more than government agencies, but far more than big tech and fintech and it’s thinking about who has their best interest in mind, who is going to safeguard their data, who believes in them and wants to help them. So these more traditional banks have a real advantage when they start to combine the trust they have in the consumer, in some of these creative ways to do good and to not just make profit through fees. Ultimately, make profit by helping Americans be more successful.
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 many digital options, so many still remain physically tied to cash and to branches. American Banker just reported 40% of US consumers across demographics citing cash as their preferred payment method. I was talking to a banker just the other day. A banker who keeps essentially a stash of cash, not exactly under his 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, 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, and there’s a balance too to all this, Gina, and I think one of the things we touched on already and we continue to talk about, we 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 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, by local, builds trust. Double down on that. I mentioned recently in an ABA Bank marketing webinar, locality is your superpower and that is also your point of differentiation and your leverage point, so double down on that.
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.