In a country with thousands of options, the challenge for a bank to stand out is mighty and existential at its core.
Saddle up, GonzoBankers. We’re gearing up forSmarter Bank LIVE, and your 325+ RSVP responses to our upcoming online event make one thing clear: You want your bank to become more than the branch next door.
In a risk-averse industry, it isn’t an easy task to try the unknown, especially at a time when profits are under attack. It’s sort of like asking Taylor Swift to give up singing to take a job handling financial fraud instead. In our registration batch, a question from one banker says it all: “Can we actually differentiate?”
Short answer: Yes.
But here’s the kicker: It’s not a one-and-done kind of thing. Nor does bragging that your bank is a “fast follower” count as a differentiation strategy. That’s called copying, which isn’t a bad thingper se—at least when it comes to dropping (or reducing) overdraft fees. ButYou Stole My Look, Bank Edition,doesn’t set your institution apart from competitors. Your bank may now offer accounts without overdraft fees but so do plenty of others.
Just this week, Finovate hostGreg Palmersurveyed the event’s audience on what the biggest challenges of digital transformation projects were for incumbents, according toFintech Futures. The results? The vast majority (85%) cited overcoming legacy systems and—ahem—thinking.
But that doesn’t mean bank execs can give up. We’re in an era where competitors include Square, PayPal, Apple, and Chime, and they’re guzzling up customers. According to Cornerstone Advisors research, 47% of consumer checking accounts opened in 2023 are at fintech companies or online banks (not traditional banks). Heck, Apple reported in August that it secured more than $10 billion in deposits with its savings product in partnership with Goldman Sachs. Wow.
Competing with these kinds of tech companies requires something bankers aren’t known for imagination. But that gap must shift. AsRon Shevlin, our chief research officer,blogged:“Banks need to stop playing innovation charades. With the influx of new technologies, the challenge isn’t ‘innovation’ but ‘creativity’—how can banks, at an organizational level, make more creative use of data and technology than their competitors, and how can they help their people become more creative in getting their jobs done.”
The how, of course, is tricky. But here’s some promising news: As someone who has covered banking for well over a decade, I still find surprises in product development. Here are a few striking initiatives that caught my attention in the last couple of months:
Issue biodegradable debit cards While Mastercard will require banks to use sustainable materials in issuing new payment cards by 2028,Bank of New Hampshirehas been issuing biodegradable debit cards since last August. In doing so, the Bank of New Hampshire is leading a trend in the United States on an important issue. According to anAmerican Banker article(subscription required), it takes 400 years for a debit card to degrade. THAT IS WILD.
Deploy mindful budgeting tools If you’re like most bankers, you’ll shudder at the acronym “PFM”—and for good reason. Your bank paid money to make available budgeting tools that hardly anyone used. Well, guess what? That means an opportunity to offer more useful financial health tools still exists.
Your small-business customers need cash flow tools. Ditto for retail customers. If you need a budgeting muse, check outAllo. It’s a newer fintech app that aims to help users take mindful pauses while interacting with their transactions. For example, Allo prompts users to flag and comment on their expenses, like Netflix, as well as asks someone to pick a value or values they want to focus on, i.e. “relationships,” or “play.” The idea is to help inspire users to connect their money habits with their values.
While this is a fintech example, banks could experiment with the broader notion of encouraging money check-ins. Separate Cornerstone research shows that banks can distinguish themselves by offering financial therapy services as money and mental health are closely linked.
Develop your communities Ex. A:Citizens Bank of Edmondregularly hosts a local music festival. While the Oklahoma bank secured an impressive 3,000 attendees for the first one, the events are really bumping these days. “Now, we regularly have 55,000 people come to a bank celebration,”Jill Castilla, the bank’s president and CEO, said on our Plugged In podcast.
Ex. B: Coastal Community BanklaunchedCoastal World, a virtual world designed to market the Everett, Wash., bank’s fintech partners.
It doesn’t end here, of course. It doesn’t end anywhere. But tune in to Steve Williams and Al Dominick on Sept. 27 for Smarter Bank LIVE. They’ll offer more ideas on how to differentiate your bank, among other things.
So what: Yes, it’s hard to try something new. Even harder when your employer is a bank. However the number of unsolved problems in financial services is many. Find one or two. Attempt to solve them. Then, do it again. And again. And again…