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PCBB Banc Investment Daily June 15, 2015
Banc Investment Daily
June 15, 2015

Quietly Moving Forward

There is a monastery on Mount Serat in Spain where the religious order mandates young men must maintain silence upon entering. All is not lost though, as the men do get a chance to utter two words once every 2Ys. The story goes that one young initiate after completing his first 2Ys of training, was invited by his superior to make his first two-word presentation. "Food terrible," he said. Two years later the invitation was once again extended and the young man exclaimed, "Bed lumpy." Frustrated by this, the superior looked at this young monk and said, "You know, all you've done since you arrived is complain."
Studies find that community financial institutions may find customers given the same chance as the young monk may utter two words of their own on how to make their experience better - "better technology." Technology has changed the banking game for both banks and customers. In key area after key area, small business owners and consumers are embracing mobile and online technologies, which they view as making their banking experience more personal, simpler and more efficient.
According to an ath Power Consulting 2014 retail banking study, 91% of respondents say they use online banking with their primary bank. In addition, 63% say they use online bill pay, 45% say they use mobile banking services and 38% say they want to receive texts and alerts over their mobile devices from their banks on a regular basis.
An extreme level of acceleration has occurred in the adoption of mobile banking and this is because 75% of Americans now have a smartphone. Given that, almost 50% say they have used mobile banking in the last year. While the use of most banking channels is flat, mobile has doubled over the past year and this is good news for banks in that it is a far less expensive channel at about 4 cents per transaction vs. $4 for a teller deposit.
The key for community institutions is to leverage technology in your own way, as core providers roll out new services. At a base level, core provider costs may rise, but the offset is that other costs at the customer level can be reduced. In addition to lower costs, there is a treasure trove of information in the data gathered from electronic access. Banks can use this information to refine offerings and enhance customer experience. Over time, this will enable banks to more effectively communicate and match products and solutions to customers. This should help banks maximize the ROI of customer acquisition and retention programs in a multi-channel environment.
Taking a deeper look at mobile banking, we again go to the ath Power study. It finds mobile banking usage already reached about 65% of Americans in 2014. This channel seems destined to increase in the next decade to eventually rival online banking (at over 90% in an Internet Banking Survey).
To leverage data-driven marketing, consider that research shows mobile use is also associated with income: 52% for those making $100,000+; 47% for those making $50,000 to $99,999 and 38% for those making < $50,000. If the customers who have the most money also care the most about technology, then your marketing dollars should reflect that preference. It's up to you to change the way you operate as consumer preferences shift.
As one industry wag put it, before long banks won't have street addresses, they'll only have IP addresses as more consumers demand their financial institutions offer great technology solutions. We don't fully agree, as we still believe customers want to talk to bankers for more complex needs, but things are shifting quickly.
At this point the stakes are clear. Banks must have good tech offerings focused on customers and that are capable of shifting over time. Consider what a nice situation it would be for your team to be contacted by a customer with a two word comment after a 2Y silence who simply said "Good Job." This will be the future of community institutions that quietly and efficiently move forward.