This morning we're up at Sundance for the MX Fintech Festival talking shop with thought leaders in financial services. We have a master series of panelists lined up, and we'll give the highlights here as they happen.
In the first session, Jana Manley, SVP Digital Channel Group Manager at Hancock Bank, and Melanie Woods, Digital Strategist, formerly with UMB Bank, led a discussion with attendees about how to build an advocacy-centered banking model. When asked, "How do you justify ROI on digital technology and decisions?" Manley said that "if you can provide legitimate value to customers, they become more loyal to your bank and are retained longer." She added, "When I equate those type of services to retention, I translate those services into dollar values." Woods said that when it comes to digital technology, "my message is simple: Do or die."
In response to the next question, "How do you see the digital channel as a path to nurture the account holder relationship?" Woods said that the key is to help account holders with their personal finances right during the onboarding process: "If your banker becomes a frequent part of your life like your doctor or hair stylist, then account holders will interact with the bank on a more frequent basis. Think about the relationship like a personal trainer." Manley said that "it's all about helping the customer at the time they need you rather than having them seek you out."
In the second session, Ian Benton, Research Specialist at Javelin Strategy and Research, talked about what he calls "silent churn," which happens when consumers diminish their loyalty to a institution even though they may keep a product with that institution. It's silent because a financial institution might not realize that some of their account holders have essentially "left" even when they still have an account there. Benton showed that this is particularly troubling for smaller institutions since 67% of potential switchers plan to go to a top 20 bank. He also showed that Moneyhawks, the most profitable account holders at banks and credit unions, are far more likely than any other demographic to choose a big bank. In fact, Benton says, 84% of Moneyhawks are migrating to the top 20 banks, mainly because they seek better digital experiences. 24% of these Moneyhawks are also extremely likely or very likely to switch financial institutions, making them the most volatile of all account holders.
In the third session, Larry McClanahan, SVP Digital Delivery at Fifth Third Bank, talked about the process at Fifth Third Bank to transfer to the digital age. He outlined how the bank has shut down branches in St. Louis and Pittsburg to make way for better digital products. He also asserted that bankers need to factor in the importance of digital maintenance, saying, "if you want a better customer experience and can see that transactions are going from the branch to the digital channels, then isn't digital maintenance similar to maintaining the branch?" He shared that Fifth Third Bank now sees only 13% of transactions occur in branch, but he notes that this segment takes up 77% of total transaction cost. By contrast, McClanahan said, the ATM brings in 12% of transactions, but only takes 12% of the cost.
McClanahan also talked about the need for financial institutions to be more available through a variety of channels. He said that most consumers don't think strictly in terms of 8am to 5pm when it comes to meeting their personal needs, and banks must adopt accordingly.
In the fourth session JP Nicols outlined how much has changed as a result of the 2008 financial crisis. He said that banks are having to worry about re-regulation, while the rest of the world (including consumers) has moved on. And yet when he talks to financial institutions, he finds that they still are thinking with a traditional mindset. Nicols mentioned that he often asks financial institutions how they differentiate themselves from their competitors, and he finds that they all uniformly answer that they have better customer service. "Isn’t it ironic you all use the same word to try and differentiate?" he asked.
Nicols said that it's crucial for financial institutions to think more deeply about what they mean by "customer service." He walked through how the world has changed by saying, "Your buyer has a lot more power and higher expectations." He also said, "We've never had to deal with the threat of substitution until now. But today it’s possible to live my entire banking life without having a relationship with a traditional financial institution by choosing fintech companies such as Kabbage, Simple, and Wealthfront."
Nicols finished up his presentation by going into detail about traditionalists and trailblazers — a topic we covered in our interview with him earlier this year.
In the fifth session, Ryan Caldwell, Founder and CEO of MX, led a Q&A discussion with attendees about the future of banking. One attendee asked what bankers should do to prepare for the future, to which Caldwell said that they need to accept the somewhat dismal fact that certain revenue streams (such as those that come through the branch) will continue to diminish. If banks accept this fact, then they can immediately work to completely dominate more promising revenue streams.
Caldwell said that the future will be automated. Just as Tesla has released self-driving cars to make the driving experience easier and safer, banks and credit unions need to automate the advisory experience so that users get more utility than anything they previously thought possible.
When asked about transactional data, Caldwell said that financial institutions are thinking about everything in the wrong way. "If Google operated the way the bank did, it would charge $5 a month and a search interchange fee," he said. Instead, financial institutions need to follow Google's lead and offer free services so they can gather more and more data. Then, similar to Google, they should use that data to make offers that are legitimately useful to end users. In other words, profit comes through intelligently using data.
To better understand what the Sundance Fintech Festival is all about, see what Bradley Leimer, Head of Innovation at Santander Bank, N.A., has to say here: