In this special episode, we look at some of this year’s biggest banking trends. From meeting consumer’s unique needs to scaling for strength, Sean and Gina discuss how banks are delivering in our post-pandemic era. One important reality coming out of COVID is how people of all generations are prioritizing financial wellness, and banks, especially community financial institutions, are in the perfect position to provide education and support. Another major theme from 2022 is the idea of M&A leading to serving more and serving better. That means banks are assessing formats across their whole branch network. Whether kickstarted by M&A or simply though organic expansion, banks are getting more efficient through downsizing while looking like they’re upsizing, especially when it comes to customer experience. A keen eye on their brand is an important element of delivering that ideal branch banking experience.
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. For our podcast this month, we’re covering the biggest banking trends of 2022, and we’re returning to some of our conversations about ways that banks and credit unions are delivering for consumers and growing their institutions at the same time. Now, it comes as no surprise, but what we’re finding in this post-pandemic world, consumers have a different set of financial priorities, along with new expectations for their primary banking relationships. With that shift comes a need for banks to meet customers where they are. On the institutional side, banks must continually find effective ways to compete in a challenging and evolving environment. One way to do that is through growth of M&A. On the podcast, Gina and I have spent a lot of time discussing how, especially if you’re a smaller or mid-size financial institution, you’ll need strategies for scaling that help you serve more and serve better.
Finally, whether you’re a financial institution growing through mergers or expanding into new markets, knowing whether your brand is ready for that kind of growth is critical to success. You can simply ask yourself, “Is my name helping create a better on-ramp for new customers in a new market? Or is it limiting because it’s a name that’s not ownable?” And there can be market confusion. We discuss how you know if you have a brand that can withstand the challenges and opportunities of growth and how to pivot if you don’t. We hope these conversations about the banking trends we’re seeing in 2022 provide some new insight, inspiration, and help your financial institution as you take on better banking in our new normal.
Sean Keathley: One of the big buzzworthy things, I would say, that we’re hearing that’s a real theme across the industry is this notion of how to make banking better. And I think you can get a lot of opinions on the topic depending on where you are in the industry. But I think if you just started with the idea of, what are ways to make banking better? What are ways banks serve more? What is making the experience better for the customer even mean? Gina, what are your thoughts as we think about this idea of making banking better?
Gina Bleedorn: Yeah. When we think about answering that question, I think the best way to think about it is zooming right to what people want banking to be for them. What do they need? And one of those things that we know is happening, I think COVID set it in motion and it has now exploded, is financial education and wellness. And financial wellness has been around as a term for a long time. It’s not a new thing, but I think the resurgence in need is new, and there’s a whole other generation now that is clamoring for it. FNBO actually released a study recently about financial wellness. 40% of people saying they want to increase their overall financial wellness. 44% want to increase their savings. People are really thinking about money in the bank, and 35% of millennials want to start planning for the future.
Sean Keathley: I totally agree. And maybe more on the physical side. We know there is a credit union in the Dallas area, Credit Union of Texas. They opened a high school branch that was so successful, they’ve just opened their second. And the notion here is they’ve got a younger generation running the branches and they are running them on a theme of education. Learn about how to manage your money. Learn about savings, the power of saving over time. Learn about credit scores. Open credit card accounts with the goal of paying them off monthly to build credit. And they’re seeing an incredible interest with the students. And one thing we’ve been watching, I don’t know the count, up to 27, 28 states now have signed legislation to try to incorporate a financial education class in high schools. So this tells you that there is a real thirst for this. And I think whether it is through social media strategies or whether it’s through use of the branch channel, I think there are some best practices out there for financial institutions to look at.
Gina Bleedorn: 27% of Gen Z, and Gen Z are kind of, some are still in high school, some are in college and just coming out of college, want to start planning financially for the future. So thus, financial planning is not just for the old and the wealthy. It’s for everyone. We’ve discussed and want to reiterate, there’s a huge financial advisory opportunity gap in even mid-market and upper mid-market millennials, elder millennials, and even young Gen X-ers that will pay for financial planning services. And many financial institutions don’t really have an offering in place that could be even a revenue stream, a paid offering to financially plan that’s not all the way into wealth management or what typically was wealth management. But is a little more accessible for the masses and the masses are clamoring for it.
Sean Keathley: Well, and they’re not giving themselves a very good grade. There was a TIAA consumer survey earlier this year. 78% of U.S. adults, and many of them in the age group you mentioned, young adults, give themselves a low financial wellness score. So they’re admitting it that this is a real problem. And I think that it’s a great opportunity. It reminds me of thinking about some of the things Charles Schwab does. Most every one of their big prototypes has a conference room dedicated to teaching, and they let people enroll for classes and they teach people on different topics that they post at local levels. And that’s an incredible way for them to give back to their neighborhoods. And they often even find people that look to Charles Schwab to help them solve the problems they’re learning about. But it is a good example of an idea of attacking this problem head on in thinking of it almost as a mini university in each little neighborhood.
Maybe we’ll start just thinking about the merger and acquisition activity. I’ve been talking to several bank CEOs and it is clear there is one key thing on the mind of bankers this year, more than one, but one for sure is growth. Without a doubt. We have had so many clients and other banks that we know of or in the acquisition mode and those that aren’t, when I talk to them, many are in their plans. And if they’re not in their plans, they’re absolutely looking to branch into growth markets with new branches. So I think that idea of growth is really on people’s mind. We have talked in this podcast before, all the benefits of scale, looking for talent. Often community banks maybe don’t have the talent they need. The changing environment, which the pandemic did in terms of movement patterns or where people live, work, and go to school is different. And looking for opportunity often means merging or acquiring institutions or branching into them. There is definitely activity picking back up that is nearing kind of pre-pandemic numbers.
Gina, you were able to attend Acquire or Be Acquired in Arizona. Why don’t you talk a little bit about what you were hearing from those sessions? Talking to bankers and talking to the investment banks and attorneys that were in attendance.
Gina Bleedorn: Yeah. Acquire or Be Acquired, put on by Bank Director really is a topnotch mecca for the heart of what is happening with M&A’s focused a little more around banks but also credit unions, fintechs. And the landscape of M&A is not just exploding, it’s changing. The M&A activity in general is back, but I think there is truly this desire for scale amidst great, great uncertainty. And the biggest uncertainty is coming from the fintech disruption. So not only is scale happening, merger of equals are happening, but banks buying or partnering with fintechs, fintechs buying or partnering with banks, niche tech enablers and large tech enablers getting in the mix in different ways. So there is a great convergence of different types of financial entities almost redefining what financial services is. And so traditional banks and credit unions have a lot of opportunity to capitalize on change, but also some risk if they are not looking to what change is happening and how to make moves to position themselves well amidst that change.
Sean Keathley: We have highlighted some of the larger mergers and acquisitions that really make the headlines. They impact more branch locations, more communities. We are involved in the Truist project, the brand reveal is happening now. So you’re seeing BB&T and SunTrust signage disappear as we speak, and the Truist brand is coming to life in really one of the biggest deals that’s ever been done. But that’s not really the full story because in terms of numbers, there are much a higher number of acquisitions happening at institutions that don’t have that kind of scale. We’re thinking about the regional banks, the community banks, and even the credit unions. And as we know, there’s a far bigger number of those institutions. So the likelihood of those being acquisition driven make it higher just in that sheer fact.
But you could also argue that maybe it’s even more important, the need to scale. The smaller your organization, the more difficult it is to survive and thrive. And many still have the spirit of community bank and absolutely want to be community-focused, neighborhood-focused. But that can be done in more than one community. And often that provides many benefits. And to put it into numbers in a recent report, one in four banks, including all sizes, is very likely to have a merger or acquisition in 2022. That’s really pretty astonishing when you say 25% of banks are planning to grow. That’s the kind of trend we’re talking about.
Gina, we’ve got, I mean, several of our clients are in the middle of mergers and acquisitions, everything from credit unions, some even buying banks, community banks, buying banks to get into new markets. We’ve got Canadian banks buying U.S. banks, two of those with TD and BMO coming in for First Horizon Bank of the West. We continue to see this as a major trend. You’ve been talking to some of the people that are involved in these mergers, and I’d love for you to talk to our listeners about what they discovered and how they think about some of the things they’re not doing as they consider these mergers and acquisitions.
Gina Bleedorn: Yeah. What I find interesting is the lens of which the acquisitions are viewed and the lens of which they are not. Understandably in the deal making process, there are so many uncertainties that all types of potential implications cannot be vetted. But I think for many certain types of considerations, specifically around the brand and around the branch network, are not being considered as carefully as they could or should be as much for planning the actual integration as for decisioning to make the merger or acquisition happen. Making more concerted efforts to think about what a brand implication would be or a name implication would be.
Do I have a name right now that is going to be limiting to these new audiences I’ve just acquired into to new markets? How will my name play in the short and long term? And what happens, that we are oftentimes helping clients reconcile many years later that could have been more adeptly and efficiently planned in advance, is the result of the conglomeration of maybe names of maybe brands or maybe just irreconciled differences between organizations that need to be reconciled for future growth. So those are some of the big eye-opening things we are seeing because oftentimes when we work with clients, it’s right after these deals have occurred.
Sean Keathley: Well, Gina, we know that one of the things that is driving this activity is the economy continues to recover from our pandemic. And if you think about just the overall idea of due diligence and what a bank and its executives board is doing is they’re thinking about merging or doing acquisitions. Where do you think, what you’ve just talked about, where does that fit in from a timeline perspective? When should they be thinking about the things you mentioned?
Gina Bleedorn: Yeah. Really in the last, I would say, third of the due diligence process. So depending on how long that is for your organization, it could be the last couple of months. That means this is getting serious. We’re finalizing. We have not entered into a definitive merger agreement publicly yet, but we are close. At that time, that is the moment you must consider what downstream brand and even branch network implications might be. And for the brand, that could be reconciling the position of the brand or the name or both. For the branch network, it’s about how to really leverage formats and get more efficient and ideally downsize while looking like you’re upsizing. So more locations that are smaller and ultimately saving you operational cost, thinking about that sooner instead of just being afraid of the impact of closures. It’s not about closing. It’s about redesigning and optimizing.
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.