Financial institutions

How Community Financial Institutions Can Take Technology to the Next Level in 4 Steps

By Gabe Krajicek, CEO of Kasasa

Community financial institutions (CFIs), such as banks and credit unions, have always been the backbone of the communities they serve. Right now they are taking on challenges with perception, technology and marketing. While many CFIs offer phenomenal personalized service, many consumers feel they lack the technology and innovation they expect from a financial institution.

CFIs are fighting an uphill battle against megabanks and fintechs, whose budgets allow them to reach consumers at scale and offer a wide range of readily available services. The ability of megabanks and fintechs to meet consumers where they are, at any point in their financial journey, leaves CFIs siled and struggling to find innovative ways to compete.

The pandemic has accelerated the transition to a digital landscape and created a fundamental shift in what consumers value and expect from financial institutions. The only way for CFIs to compete with megabanks and fintechs is to ensure a seamless digital experience coupled with the unparalleled customer service that only they can provide.

It is essential that CFIs combine new technologies with traditional efforts to maintain their relevance in the competitive banking landscape. Most importantly, IFCs must accept the fact that other community financial institutions are not their competitors, and the first step to gaining and maintaining consumer awareness is to embrace their community roots. The next step is to implement innovative technology and marketing to differentiate.

CFIs that choose to outsource data to a third party can alleviate common problems, such as a lack of time, staff, or technology to tackle big data. However, CFIs run data goldmines, and partnering with a third party allows them to leverage the research investment and operational scale that a data-driven marketing firm offers. .

Step 1: Renovate your digital agency experience.

During the pandemic, online banking services surged as branches closed. Nearly 40% of people still feel uncomfortable walking into a branch. Full digital experiences have now become an expectation, especially for millennials and Gen Z consumers who are constantly demanding and embracing technology.

For CFIs, this means a seamless digital experience that includes everything from opening and managing accounts to providing personal financial advice. All of this needs to be easily accessible through online and mobile channels, especially for the younger generations who represent the future of banking. Since CFIs are not designers and developers, this can be done by cooperating with a trusted partner.

Step 2: Expand your comfort zone when it comes to consumer data.

Data is essential for reaching new consumers and supporting existing account holders. It is crucial to send the right message, for the right products, at the right time. This is an area where community financial institutions sometimes struggle.

Using predictive analytics can help CFIs centralize data, segment consumers by common attributes, and predict the best product offering for each individual customer so banks and credit unions can personalize experiences. individual products rather than marketing each product to each consumer. This simple, strategic and deliberate solution can be a huge boon for CFIs looking to gain a competitive edge.

The key is for a CFI to use prescriptive rather than just predictive analytics. Analyzing data, such as past customer behavior, allows a CFI to do just that. Thanks to prescriptive modeling, a CFI can continuously optimize the performance of its portfolio. Predictive analytics can send an alert about an account holder who will close their account soon. Prescriptive analytics would send relevant marketing to that account holder to drive engagement and provide recommendations for products or services that would better meet their needs, thus maintaining the relationship.

Step 3: Relentlessly optimize for best results.

Reactive and proactive optimization by financial institutions is critical to success. This is done by responding quickly to breaking news, regulatory changes, search fluctuations, and algorithm updates.

Implementing these strategies requires a dedicated and motivated team to deliver results. Many CFIs simply do not have the budget to create such a force internally. When the need to digitize becomes apparent to community bank or credit union management as a path to maturity and customer relations, a partner with veteran credentials is often the best traveling companion.

Step 4: Embrace coopetition first.

None of these steps will work unless you embrace coopetition with a trusted partner whose long-term success is closely tied to yours.

CFIs must cooperate to be competitive; but above all, they must identify a partner who has a mutual interest in mind. There is a growing number of fintechs looking to partner with banks and credit unions so they can issue loans, while simultaneously building platforms to sell financial products to CFI clients in direct competition with them. . The CFI essentially finances their own destruction. CFIs should verify the business model of a potential technical partner to ensure that the interests (and successes) of both parties are secured in the long term.

Consumers instinctively know that fintechs and megabanks have billions of dollars to build cutting-edge apps and widely market and advertise their products. They think the local CFI doesn’t – and they’re not mistaken.

CFIs are not application developers. They are not marketing companies. Nor are they advertising agencies. They are experts in personalized consumer-focused advice and support when it comes to increasingly complex financial decisions. That’s why CFIs need to partner with a fintech community that can deliver a seamless digital experience that consumers expect AND has their best interest at heart. Then they can focus on their area of ​​expertise: serving people in the community by helping them take control of their finances.

But CFIs cannot do it alone, especially in today’s financial landscape. The pandemic has led consumers to change their banking habits. According to Forbes, the share of megabanks in new current account applications has increased from 36% to 51% over the past three years. Meanwhile, community banks and credit unions saw their share of new account openings fall from 51% to 25%. Additionally, Experian reported that in March 2019, fintechs claimed 49.4% of the unsecured personal loan market, up from 22.4% four years prior. The pandemic has only accelerated consumers’ progress towards digital banking, with fintechs and megabanks benefiting the most.

These statistics are stark, but community banks and credit unions can thrive through coopetition. They need to find a trusted partner who can deliver the digital experience that today’s consumers expect. More importantly, they should choose a partner whose success is closely tied to theirs.

This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.

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