From Transactional to Relational – Community Banking Realized

 Author: Lee Wetherington, lwetherington@profitstars.com

It’s a trope that is trot out all too often. “We’re a community bank…we’re all about relationships.” But relationships can be shallow, as shallow as the small talk that accompanies a typical teller-line transaction.

Most community financial institutions pride themselves on knowing the names of those they serve, but let’s get real. Knowing someone’s name doesn’t mean you know them, much less have a meaningful relationship with them.

Minimize the Mundane to Maximize the Meaningful

The recent legislative failure to delay Durbin has brought new urgency to financial institutions’ search for new fee-income and cost-cutting alternatives. In the branch, this means capitalizing upon service kiosks and cash recyclers to improve efficiency and reduce overhead.

While this scares many, take heart. Fully automating the mechanics of cash and check transactions just might finally free up time for real conversations about real pain points, both of which create opportunities for real relationships and higher profitability. Done right, automation and technology can make room for the meaning that has long been lacking in financial services.

What Have You Done for Me Lately?

Since 2009, many consumers have simply given up on managing their finances. They are exhausted, confused, and overwhelmed. According to Javelin Strategy and Research, 19% of consumers no longer actively manage their money. Worse still, one in every four members of Gen Y makes no effort to monitor, plan or budget finances.

This presents a big opportunity for financial institutions. Instead of providing a balance and a list of transactions, second-generation online banking (a.k.a., online financial management or OFM) visualizes account data to make it meaningful and actionable. At a glance, customers can know how they measure up in terms of spending, saving, and investing.

Once customers know where they stand with their money, they are much more likely to make decisions about what to do next and how to do better, i.e., purchase the right financial products and services. This is good for the customer and good for the financial institution, but it all begins by making the data meaningful by making it visual and understandable.

Relationships Happen Before & After the Transaction

The next step is for financial institutions to provide meaning and help when and where customers need it most: in the moments that precede a purchase or transaction.

Think about it. With unemployment high and the threat of a double dip looming, many consumers must make fiscally responsible decisions. The convergence of mobile banking, e-commerce, and shopping apps will give customers just such help in real time on demand.

Already, consumers use mobile apps like RedLaser and Amazon’s Price Check to scan store items and find better deals elsewhere. The real question is whether the consumer’s budget can accommodate the prospective purchase at all. Can I really afford these $100 shoes right now?

By tying mobile shopping to OFM budgeting in real time, the consumer will be nudged to make responsible choices in their own best interest as spending takes place. If they spend beyond budget, OFM will alert them afterward and make recommendations to remedy the overreach.

Isn’t this just the kind of candid advice a good friend would give? You bet it is. It’s the mark of a real, meaningful relationship.

Relationships are Social

Financial institutions that continue to conceive their role and purpose as one-way providers of data processing, products, and services will never realize the potential and profit of meaningful, two-way relationships at the core of the community banking ethos.

Nowhere is this more apparent than with financial institutions’ forays into social networking. Most completely forget the “social” in social networking. Success with social media is not about what your bank or credit union says, sells or promotes there. It’s about the quality of the conversations started and engaged. Specifically, it is about what your customers say about you to each other (and prospects) that really matters.

According to recent research by Aite Group and EFMA, of all social media tools available, most financial institutions consider “customer review sites” the most influential of consumer preference. Yet, only 15% of financial institutions offer a forum in which customers can rate, review, and share their feedback on the institutions’ products and services.

In short, financial institutions don’t make the space for true conversation and real two-way relationships.

Can You Relate?

The mobile/social universe into which we are migrating places a high premium on the relational over the transactional. The economic, regulatory, and technological forces fueling this migration give financial institutions the occasion and opportunity to make good on the “community” they claim to exemplify and serve. So, can you relate?