We recently caught up with Kevin Mullins, COO at Sevier County Bank to talk about the state of community banks. Not only does he have 117,000 Twitter followers, but he first became a CFO at age 25. He served as a CFO for 26 years and has been a COO for the last 3 years. He believes that community banks must embrace technology, focus on being personal, and improve financial literacy of account holders.
Will digital technology help or hurt community banks? Do you see it changing the industry in the next five years?
When I graduated college, digital technology was relatively new and did not receive much attention in banking. As it’s become more and more important over the years, it is clear to me that bankers need to embrace it. If you ignore it, you will become a dinosaur.
An example I like to refer to is how trucks made the railroad business less relevant. In the early 20th century, railroads generated significant profits and returns for shareholders. However, as trucks came along and made it more convenient and economical to shift their product around, they began to disrupt the railways. At the time, the railway companies kept claiming that they were not in the trucking business, and so they focused on business as usual. We all know where that led them. If they had acknowledged what was happening and instead said that they are were in the transportation business, things would have turned out much better for them.
This relates directly to our industry today. We are starting to see that Millennials embrace everything mobile. I have two daughters and they always have their smartphone in hand.
Account holders are demanding more technology in the mobile channels and you have to completely rethink how you interact with them.
As for the branch, I feel the emphasis needs to shift from concern about square footage to concern about a higher level of technology. Having kiosks and WiFi available is an important step to accommodate this strategy. Taking it a step further, if a customer comes into the branch and needs someone to speak to, they can push a button for help and someone can assist them with their needs.
With the rise of technology, what do you see as the value proposition of community banks?
We think about everything on a very personal level. For instance, we have a Director of Customer Experience. Their entire job is built around making sure that customers have a good experience from start to finish. They look at mobile, customer phone calls, and their overall satisfaction with us on every level.
For the younger generation, we have a nice mobile app that appeals to them. We will begin to offer rewards through digital channels and give them the attention they desire.
We are also considering satellite radio and Pandora to reach the younger audiences. We have digital billboards that we change out periodically, and we change the website frequently to keep people coming back.
How important do you think financial literacy is? What programs do you have in place to help educate your customers?
Financial literacy is critical. In the past, I have offered free classes on how to save, do basic budgeting, understand compound interest, etc. This helps customers work towards purchasing their first home, and helps them prepare for retirement and other major life events. Because of this, I have witnessed customers being loyal for decades — back to when their parents opened an account with us.
In the past, I have also been involved with school systems, and we are currently going into schools and helping students with financial literacy education. For the 1st and 2nd grade, we read to them using ABA and ICBA materials. For the 3rd-6th grade, we talk to them about savings in a practical way. We talk about how many days of saving twenty-five cents are required to buy a video game that is on their “wish list.”
How are you applying financial literacy to the digital age?
We are contemplating using YouTube videos that focus on how you can reduce fraud, as well as similar financial literacy principles to what we have in the classroom. As a result of this, we focus on email campaigns and have competition between staff members to see how many up-to-date emails staff members can obtain. We are improving our database and making sure it is current and accurate. This will assist us to help improve our customers’ needs.
In all of your years making technology changes at various community banks, what have you learned about implementing cultural change?
You have to start with the staff first. If the staff is not using the product or technology, they will not feel comfortable recommending it to customers. If I can prove to my staff that we have a tool that will make them more productive, I have never had one person who said they were not interested.
Another thing I have learned is to use data to make more informed decisions. Rather than relying on Excel, we execute reports from our core system. This data provides superior results that are not otherwise available, which is fundamental in our analysis.
What is the future of community banking?
Community banking is becoming more difficult due to regulation. In all the years I have been in the financial services industry, I have seen massive new regulations occur as a direct result of economic booms or downturns. If there is a recession, usually new regulations are put in place to try to prevent something similar occurring again. However, as regulators go too far, they realize they are putting too much strain on the economic system and then go the other way, by providing regulatory relief. With new regulations, there always seems to be unintended consequences.
At the moment, there is a huge amount of new regulations and keeping up with it is occupying a tremendous amount of our time. The number of applications for starting a new bank right now is near zero and this, as well as a failure to adapt to technology, is going to cause further industry consolidation.
While there will be further consolidation, there will always be a place for community banks. The ones that survive are going to have to embrace technology and utilize the efficiencies that technology provides. A large portion of technology will most likely be outsourced by looking at fast-moving companies, with good track records.