Small businesses need you – three ways to attract and retain your community’s businesses

Small businesses need your business as much as you need theirs. Since the advent of the modern banking system, small business owners have relied on regional and community financial institutions (RCFIs) to help them start their businesses, grow their businesses and maintain their businesses. In fact, as recently as 2013 RCFIs accounted for approximately 75% of all small business loans in the United States.

Since then, however, the ranks of RCFIs have continued to decline, mega banks have proliferated, and alternative lending sources such as Lending Tree, Quicken Loans and the Lending Club have provided entrepreneurs yet another source of funding to compete with RCFIs’ share of the small business market. And that’s to say nothing of the myriad non-traditional financial services providers offering innovative payments and digital banking solutions to small business owners.

Fortunately, in spite of the multiple forces working against RCFIs today, this fact remains: small business owners prefer to bank locally. They understand that the relationships and local insight of RCFIs is invaluable to them and their businesses, and something the mega banks and others competing for their business simply cannot provide. But in an ultra-competitive environment, with a seemingly infinite number of options available to small business owners, what can institutions like yours do to continue earning their business? Below are three best practices sure to increase your odds of winning the battle for small business market share in your community.

Invest in Technology

A no-brainer if ever there was one, right? You’d think so, but the reality is that consumers view the mega banks as technologically savvier than their RCFI counterparts because their websites, in many cases, are better; i.e., they look better, are easier to navigate and display equally well on mobile devices. So the first order of business for RCFIs looking to compete for small business clients, or any account holders for that matter, is to update their website. A fresh, modern looking website, that renders equally well on a mobile device, will significantly increase your odds of converting a website visitor into a new client.

Speaking of mobile devices, a survey conducted by ath Power Consulting found that nearly 70% of small business owners would switch banks in order to partake of better mobile banking services – 70%! Your typical small business owner isn’t generally sitting behind a desk all day; they’re hustling to generate new business, take care of existing clients and manage the day-to-day affairs of their company. Providing them a tool that enables them to deposit checks, transfer funds, authorize wire transfers and manage their cash flow while on the go is an invaluable service, one they’re more than willing to pay you for; as much as $100 a month, according to the Aite Group.

Become a Resource

Sir Francis Bacon is credited with coining the phrase, “Knowledge is power.” If ever there was a group this sentiment applied to it’s small business owners. As a RCFI you’re better positioned to provide the knowledge your local business owners need to be successful than arguably any other source they could tap. You’re privy to local housing data, commercial loan data, local zoning data, employment data and much more, all of which are extremely valuable to area entrepreneurs and small business owners. Positioning your institution as the subject matter expert on all things small business related is one of the smartest moves you can make.

As local business owners, and prospective business owners, begin utilizing the information you provide, something magical happens: trust forms. Whether the partakers of the information you provide realize it or not, you have become a trusted resource to them. A phenomena that is particularly powerful with business owners whose accounts you don’t yet hold; i.e., new business. It may take longer for some than others, but eventually they’ll think, “Wow, if this FI is willing to provide all this valuable information to me when I’m not even a client, what would they do for me if I were a client?” Become an invaluable resource to your local business community, and they’ll reward you with their business—guaranteed.

Market Your Wares

“I would’ve used my local bank for everything, if I would’ve known they offered it.” Those are the words of Chris, a small business owner who operates a mobile coffee service in Austin, TX, when asked why he doesn’t use the mobile business product his local bank provides. A sentiment all too common among small business owners. The same ath Power study cited above produced one particularly tragic finding: in 839 in-branch visits by prospective small-business customers, nearly 40% of bankers failed to mention the mobile banking services they offered. The savviest consumer in the world can’t buy something they don’t know about. To gain more business clients, you gotta tell ‘em about all the great business products and services you have to offer them, and what those products and services will do for them.

Which really isn’t difficult, and dovetails nicely into point number two about positioning yourself as the small business subject matter expert in your community. Billboards, radio, print ads and statement stuffers will likely always have a place in your marketing budget, but there are other, more effective means of getting the word out, which also happen to be less expensive and serve to position you as the invaluable resource you’re aiming to be. Examples, in no particular order, include: creating a business resource center on your website, chock full of valuable small business related info; producing a small business blog, where your in-house commercial loan officers and others can provide valuable tips and information; host workshops or seminars in-branch where small business owners, and aspiring small business owners, can learn about things like managing cash flow, accessing lines of credit and how the commercial loan process works; spread the word via Twitter, Facebook and other social media outlets; and last but not least, educate your front line folks on all the valuable products and services you have to offer small business owners.

Conclusion

It’s no secret in banking circles that business banking clients are a good thing. They maintain higher balances, are more willing to pay for products and services than retail account holders and the relationships you build with them result in greater lending opportunities. What doesn’t appear to be as widely known, however, is just how badly business owners need you. They need your technology, your expertise and your support. By investing in the tools they need, becoming the resource they need and making them aware of both, you will absolutely grow your business, their business and strengthen the communities you both serve in the process.

Are you a good banking solution or a great one?

“Sometimes you have to leave today’s good for something great,” an account holder recently summarized about the interactions with her long-time, hometown bank. This got me thinking—from a consumer’s perspective, all the work we do can often be summed up in a single word. So, what differentiates a good banking solution from a great one? And when and how is that determination made?

This account holder’s perspective was that, while her good bank adequately delivered on the features they offered and had provided an acceptable level of service, she had no expectation for innovation—even if she never realized she wanted any. Overall, she had no complaints as she didn’t know what she didn’t know and the institution had provided a sufficiently good experience with classic banking products and delivery.

In contrast, her new, ‘great’ bank was simply more innovative than she expected. She was attracted by the bank’s technology reputation and ability to open an account online, and once she was enrolled there was no slowing down. She learned she could utilize the bank’s technology to do everything important to her, including mortgage and lending via apps and e-signatures. Though not groundbreaking in the financial services industry, this convenience and self-service experience was entirely new for her. The ability to e-sign loan documents from her phone while in a meeting or deposit a check from her kitchen table was exactly what she needed at this time in her life.

When asked what makes her relationship with her new financial institution better than the first, she remarked, “This great bank constantly innovates and releases new features that I not only adopt and use regularly, but—in some cases—have become very dependent upon, especially through my mobile devices.” “The feature just appears. It looks and feels organic, and there is no bumpy enrollment or adoption process. I love this bank and their attention to me as a technology user.” Couple that very positive emotional response with great call center service and this institution has created a self-described loyal customer who, without a branch interaction, evangelizes their great banking experience as though it were a hot new mobility app—which, in reality, it has also become.

In the business of banking, it is easy to forget about the significance of emotional connection to a brand or experience. Traditional banking functions such as checking a balance or withdrawing money from an ATM are not emotional experiences. Or are they? If someone is heading out for an evening and cannot find an ATM or must pay a fee through a non-affiliated ATM, there is negative emotion associated with the irritation of not having easy access to their cash. If banking requires an appointment or lengthy wait at a branch, away from an individual’s life, the experience can be emotionally negative before it even begins. Conversely the examples noted above transformed an individual who was simply an account holder into an excited, vested and emotionally connected cheerleader for the brand. Emotional connection is a very real part of whether your business is characterized as good, great or any of many other single word descriptors. And fortunately today, reinforcing that emotional connection through technology makes that much easier than a generation or two ago where branch location and new account opening gifts were among the only tools available to keep customer experience positive.

We’ve touched on ‘good’ versus ‘great’ from a consumer’s perspective, but how does that work from the service side of the counter? Is simply investing in new technology enough? The answer is both yes and no. Yes, a technology investment that is properly marketed and deployed can increase customer happiness with your brand and increase feature adoption in the near term, but the pendulum can swing in the other direction by investing in the wrong technology and/or deployment method. Here are some key questions to ask:

  • Does a new feature fit naturally into the digital channel or is it a third- party offering that looks “bolted on?”
  • Does the offering’s workflow feel the same through all your electronic channels?
  • Does it match the workflow the user would experience in the branch? (an easy miss as many institutions stop thinking about the downstream affect at feature rollout.)

“Future-proofing” requires investing in a strategy that allows new features to feel organic on the digital platform and to the account holders’ interactions with your brand. In a world of rising consumer expectations, spending the time up front to map an experience that feels the same wherever an account holder touches your brand is important. This can oftentimes be as simple as using the digital channels with the account holder in the branch, so workflows don’t just feel the same, butare the same. For example, using a tablet equipped with your electronic offerings to help solve an account holder’s problem in the branch keeps your servicing touch points aligned in both form and function. This continuity through every interaction subtly and repeatedly reaffirms your institution’s commitment to innovation and account holder experience.

Today’s account holders are choosing their financial institutions for their commitment to thoughtful, relevant innovation. So in the year 2014, it’s important to ask yourself: what’s your innovation reputation?

Star Parker and FI Advocacy

I attended a meeting recently where syndicated columnist Star Parker was the speaker. Star is also the founder of CURE, the Coalition of Urban Renewal and Education. Regardless of what you might think of her politics, writing and activism, Star has an amazing life story and she tells it in a captivating manner. What I found most interesting is how passionate, energetic, and plainly honest she was about her ideas. At times animated, at times forceful, and always with great conviction, Star enthralled the crowd for an hour, then stayed for another 2 hours shaking hands, taking pictures, and talking with attendees. The conclusion I drew was that we should stop searching for alternative energy sources; instead, we simply need to figure out what is powering Star Parker and tap into that to power our cities.

What’s my point in talking about Star’s performance at this event? It’s this: who is the equivalent advocate for financial services that is writing and speaking on behalf of banks and credit unions? Who is passionately sticking up for the valuable role that financial institutions play in our economy and our communities? Who is exposing the truth about online banking and payment services that are nice to look at but don’t provide fundamental protection and safeguards (such as FDIC insurance)?  When a columnist like Leonard Pitts of the Miami Herald writes a column that excoriates banks for having the temerity to charge for basic services (Valdosta Daily Times column, Tuesday Oct 11, 2011), there was no outrage. No one wrote a column challenging the basic assumption of the article—that you shouldn’t have to pay to use your own money. What Mr. Pitts and so many others get wrong is that banks DON’T charge customers to use their own money. If you have money in your pocket, you can use it as you will. What banks and credits unions do is give you access to your money, at a time and place of your choosing, so you DON’T HAVE TO CARRY IT ALL WITH YOU! It’s access to money, not the actual use of money, that incurs a charge. It’s no different than when I take a suit to the dry cleaners; it’s my suit, but I pay for the service they are providing to it. When you consider ATMs, retail point-of-sale, and online merchants, there are literally millions of places where your money is available to you on demand. There is a cost to the financial institution to provide this access, a cost that used to be offset by other fees. Most of those other fees have now been eliminated or dramatically reduced by laws and regulation.

The fact that banks and credit unions are expected to provide the accessibility to money that they do and then be criticized for charging a fair fee for their services is unlike any other good or service we purchase. Financial institutions should not be embarrassed about their fees—they should proudly advocate for the valuable services they provide.  Now, if we could only find a Star Parker-like advocate to speak on their behalf…

Customer Experience: From the I to the O

I ran across a thought-provoking article from our friends at GonzoBanker. The crux of the article deals with one bank’s frustration with increasing their efforts at “customer experience” without experiencing an associated increase in new account acquisition (via referrals) or account penetration with existing customers. The banker quoted increased the level of knowledge that his branch staff had on products and services in order to increase the perceived “value” of his FI’s services.

My immediate thought was that the banker did what “he” thought would create a better experience for his customers. I believe there is a big disconnect with what most financial institutions management “thinks” creates a great customer experience and what customers think is a great customer experience. We’ll call this the “I-Focus”, an internal effort at improving the customer experience. Let me be clear, I am not suggesting that an I-Focus isn’t valuable. It’s just incomplete. What’s missing is the “O-Focus”, the outward look at what drives customer behavior, preferences and activities. Customers are voting with their time and wallet: they want more mobility, more engaged self-service, more freedom to access the bank at a time and place of their choosing. No amount of additional training classes for branch staff will enable the type of experience that customers are electing. And this is not just a financial services issue; they are selecting self-service for shopping, travel, entertainment, and much more.

Start by determining which customers you want to keep (I’d suggest the profitable ones, however you measure that) and the customers you want to acquire (Gen Y and Gen Z potential customers represent acquiring $41 trillion of wealth over the next 30 years …) and then find out what is a great experience for them. Ask them. No, I don’t mean a SurveyMonkey email, I mean really ASK THEM! I find when I ask someone about what makes an experience memorable for them, they will always offer up something. Then categorize these in a meaningful way and determine what it will take for your FI to get from what you offer today to the experience the targeted customers want. Determine the O-Focus first; then determine the appropriate I-Focus course of action that will create the appropriate environment for the desired increase in new accounts and total account penetration.

Starbucks is selling coffee. Amazon is selling books, music, lots of stuff. These are commodities, nothing special. Both of these entities have created an “experience” and work diligently to continue to make that experience special. They know that the experience is emotional and is different for different customers and create an environment where that experience is valued. Now go into O-Focus mode and do the same.

With everyone talking about adopting virtual branches lately…

Think you have a true virtual branch?  Maybe not, read on …

If I defined a “branch” as being:

1. A place where customers could perform basic banking transactions

2. Staffed by trained professionals

3. Had all of the equipment and services needed

4. Had its own budget

5. Had a senior manager overseeing its success

Would your current online offering fit this definition of a virtual branch?

I find that most financial institutions have a limited view of what the virtual branch is and what it can (or should) be.  As I have conversations with bank and credit union professionals about the virtual branch, I am amazed by comments that lead me to believe that there is a great deal of myths and misconceptions about what the virtual branch is and can be.  In this series of blog posts, my goal will be  to examine these myths and dispel them, using verifiable facts and data and adding my own color and opinions to each component of this series.  It is my hope that as you examine all of the evidence that you would not leave the discussion unaffected.

You may decide to ignore the truths of what the virtual branch has become, but this  will not change the fact that this method of access  has (or soon will be) your largest branch, by both number of primary customers/members and financially.  The question is whether you will strategically address it as your largest branch or continue to view the virtual branch (I’ll refer to it as VB throughout the rest these posts) as just a tactical operational expense.

The types of myths I will address in this series will cover subjects like:

1. Our end users do not desire the VB as their primary channel

2. Devices such as smartphones and tablets are channels (Spoiler note: your customer is the channel!)

3. I can’t charge for any online banking or mobile activity

4. Only young people are interested in online banking

5. Online/Mobile banking is just an operational expense

6. I should abandon online and concentrate on a mobile only strategy

7. End users don’t care about a consistent user experience

8. My customers/members do not expect our institution to offer the same experience as Apple, Google and Facebook

9.My customers/members don’t use smartphones and tablets very much if at all

10. A compelling user experience will not engage the end user to do more with our institution online

11. We do not need to treat our online banking as we do a branch, it’s completely different

12. We have plenty of time to offer more advanced services in our community, we are not competing against larger regional FIs

While not comprehensive, this list will give you an idea of the subjects that this series will cover.  So stay tuned and setup a reminder to check this blog often so you can see the latest post.  And whether you agree or not, send me a reply. I am particularly interested in those that would challenge my assertions, .  Perhaps you will change my mind on an issue or I might wind up changing yours, either way, I welcome the conversation.