Embracing the Challenger Mindset

Over the last several years, there has been a ton of talk about the impact of outsiders like fintechs on banking and the ways community institutions have to keep up. In this episode, Sean and Gina flip the script a little and reframe the idea of what it means to be a challenger bank today. What are the ways community financial institutions and regional banks are leading? For these banks, embracing a challenger mindset means going beyond technology tools and focusing on other ways of innovating and competing. With examples of in-branch and mobile banking, the discussion uncovers ways that banks dig into their core, double down on their brand and meet people where they are to deliver the experiences they want. And customer satisfaction scores show the approach is working.

Text Transcript

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, President and CEO of Adrenaline.

Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline. So we have all heard the term and we’ve talked on Believe in Banking about the idea of challenger banks, mostly in relation to fintechs and certainly, big bank technology that smaller banks can’t keep up with. And the idea of partnering with fintechs instead of trying to one up them in the very areas of which they’re experts. But today we want to reframe the idea of being a challenger. It’s not just about tech partnerships. It can be about so many more ways to innovate, to compete, knowing who you are, what you stand for, doubling down on that in ways that meet people where they are and with what they want, the experiences they want.

Gina Bleedorn: So to that end, there was a recent article on Insider Intelligence that flipped the script a little bit on keeping up with the challengers. And they did it by looking back at disruptors in the wealth management space, like robo-advisors, low, no commissions, automated trading, and where we are a decade later. And what they found is that the startups were yes, innovative, but they could not out compete larger incumbents. So established players, institutional players, like Vanguard, Fidelity, Schwab. They actually incorporated technology in their business model and emerged as the winners. They rolled out the same services on a bigger scale. They had the ability to do it more cost-effectively. And as such, the innovators weren’t the winners, the institutional players were.

Gina Bleedorn: What’s more is that these challenger, neo banks are actually struggling to reach profitability, less than 5% of them are even breaking even. And there was a 28% drop in fintech funding in Q2 of this year. So that leads us to what is there in traditional banking that matters that can be disruptive. And simultaneously ICBA just put out a consumer survey, finding that nearly 7 of 10 US adults cite the importance of banking with a locally based institution. And 70% also cite the importance of personal banking relationships. So this is new data that supports an ongoing, certainly, premise that we believe at Adrenaline and have talked about since the inception of Believe in Banking to double down on who you really are, is a challenger strategy, if you do it in innovative ways.

Sean Keathley: Well, Gina, if you asked in that same consumer survey, follow up question, when you think of those two things that are important to 7 out of 10 of you, would you think those apply to fintech? I think 100% of those people would say no, fintech does not lead with local and community-oriented. So back to what is the right version of being a challenger? Well, to the point of the definition, according to the FinTech magazine, it’s usually a small bank. And the biggest reason for that being the case is larger organizations often struggle with legacy infrastructure. It’s harder to innovate. So taking it out of the technology lens and thinking it more of a brand personality, a challenger bank is someone that can think like a challenger, but have roots in the local branch locations, the neighborhoods they serve.

Sean Keathley: I think of a bank we know well that comes to mind who’s been on this podcast. That’s Origin Bank. Origin Bank has been on an incredible journey and they are moving from being a local Louisiana-based bank, proud of serving Louisiana, but now serving Mississippi and Texas, and they’re doing so in an entirely different way. They are opening a new location in a high in market in Dallas. And the brand is being further elevated to help people in different financial situations. And I think it’s an example of someone that is keeping the spirit of being community-minded, but using technology and personal service to serve a much broader service set and consumer base, as you start thinking about a multi-state strategy,

Gina Bleedorn: Another example of a bank that’s also been on the podcast that is a challenger in many ways, IncredibleBank. The CEO, Todd Nagel joined us to discuss some of this previously, but they yes, adopted a fintech partnership mentality and that IncredibleBank began as a digital-only web bank, a spin out of River Valley Bank. And then they rebranded the entire bank under that name. And as such, they have customers in all 50 states and an incredible digital reach. But beyond that, they are doubling down on creating unique, in person experiences with an ICE promise, incredible customer experience, that they make manifest much like Chick-fil-A’s my pleasure. It permeates every way they serve with customers and it makes all the difference. They are reimagining service delivery in the way of the drive up and new technologies throughout the branch experience. And they have interesting niche lending areas like RV finance, where they are dominating individual categories, because they’re doubling down on what they’re good at and what they know.

Sean Keathley: Well Gina, these examples of Incrediblebank and Origin Bank. These are in a lot of ways, I think of them, super community banks. They really have the challenger mindset, the nimbleness of a community bank, but boy, they’re doing a lot more than a typical community bank. And the asset size can range from pushing 2 billion to 8 or 9 billion. But we’re seeing this mindset permeate through other clients that are ranging in different asset sizes. And we mentioned the examples are different because your challenges are different. When you’re in a multi-state environment and maybe the size of like a First Horizon, their strategy can be similar in mindset, but execution can sometimes manifest in different ways. One of the things they did, which was very interesting was their new growth location in the Brickell neighborhood of Miami. And I think that would be a really cool story to talk about for a minute.

Gina Bleedorn: Yeah. First Horizon, they’ve been a long standing client since back to First Tennessee days, and like many banks, they have changed shape as an organization as they have made acquisitions, they acquired Capital Bank in the Carolinas, they’ve acquired Iberia Bank, and now they have just been acquired by TD Bank. But in recent years, one of the movements they made was towards bringing together a more full bank experience. And that was made manifest in a prototype, we helped them design and implement in Downtown Miami in Brickell. And the idea was for this location to be a lot more than a branch, a community hub in a way, but also a place where all of their services, wealth, commercial, retail, and other specialty areas come together to service customers. And in this case, relatively high net worth customers in this area of Miami, in a more holistic way, bringing to bear all of the best of the bank has to offer. Another great example of innovation in the form of simply a branch experience and a flagship. But the model is challenging the status quo.

Sean Keathley: Another example I really like is Comerica Bank, another bank we know well, have been working with for gosh, two decades. When you think about Comerica Bank, they are in 7 of the 10 largest US cities. So their footprint is vast and their challenges like First Horizon can be different yet again, from a super community bank. We helped them last year, roll out a mobile branch. And you start thinking about this strategy on these types of venues that are on wheels and making sure it makes sense. And the idea of the Comerica Bank mobile branch is more about connecting to communities, actually doing educational events, showing up at the Girls and Boys Club of American Chapter in Florida, to talk about financial education. They’ve got their ITM and ATM online. It can be an education center as they’re rolling out those kind of features in markets, it can be training. So you start thinking about how you think differently and how you apply strategy to challenge your mindset and connecting to community. It can manifest itself in very different ways.

Gina Bleedorn: A MasterCard survey from just a couple of months ago actually talked about trust in banking versus fintech. And what was very clear is that people, yes, they are trusting fintech today, about a third of a respondents, 32%, said they strongly trust them. But 20% said they strongly distrust them as opposed to traditional financial institutions. Over half saying they strongly trust them with only 6% strongly distrusting them. So back to the trust that you have as a traditional financial institution.

Sean Keathley: Well, Gina, another satisfaction survey, J.D. Power talks about online only banks that offer more personalized customer service are the ones that get higher satisfaction ratings. It is much more difficult for those that are just doing less individualized service to get high ratings, direct banks, high mountain decline in terms of personalization, as they don’t have a local branch. They really can’t humanize the offering. They can’t make it local. So if you think about what we’ve talked about, this combination of challenger fintech-like thinking delivered through trusted brands that attaches itself in the communities, that becomes a winning strategy.

Gina Bleedorn: Yeah, Sean, exactly.

Sean Keathley: Well, as we’ve been doing these podcasts for two years, and clearly the two-year pandemic has reshaped a lot of things. And so in thinking about the financial institutions and the challenges definitely have been a critical business, stayed open in the headwinds of a pandemic, valiantly serving their customers and markets and having to really pivot. And you think about innovation, my goodness. How about an entire industry innovating how to balance, safety, and security and security, not just in health, but in financial health? And I think that’s been a remarkable journey that organizations have been on. I think that behaviors have bent and they may not come back exactly the same. There have been a lot of different things that people have adjusted to as a result of what everyone has been through from where they work, where they’ve lived, how they shop. And I think that the financial institutions have done a remarkable job.

Sean Keathley: And it just kind of reminds me, Gina, maybe you could close up with this, thinking about the idea of we believe in banking and we know that banks do too, but it feels like the consumers are saying they do as well.

Gina Bleedorn: Yeah Sean. People believe in banking, and that was, I suppose, the hypothesis and mission statement for Believe in Banking when it came about, and we launched it during COVID. And to see the entrepreneurial mindset, the challenger, whether they thought of it at the time that way, mindset of banks and credit unions permeate into all kinds of strategies, challenger strategies, to enable success has been incredible. We created Believe in Banking to support the banking industry on the precipice of great change, some of which was forced by the pandemic. But now has blossomed into something that I think is forever changed for the better and has limitless possibilities.

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.