The time of bank branches
One of my first jobs I had in college was working at a local bank branch. For those of us who are fortunate enough to have started off our banking careers in the front-lines, you may still remember the euphoria you felt after you had a real customer come to your window for help for the first time
Yet, even then I started noticing that there were many days where the bank branches I rotated at had almost no customers come in so I always wondered if branches were even needed except for a few days out of the month.
New technology eats away at branch services
Sure enough, a decade later the proliferation of new technologies such as online banking, Zelle, Venmo, Paypal, etc. have significantly decreased the central role that bank branches once played for consumers. As a consequence, branch closures in the U.S. almost doubled from 1,156 to 1,947 from 2012 to 2019.
Is it time to go digital?
As we’ve seen with retail stores, going digital to serve banking consumers is a strategy that is becoming more and more in vogue.
But what does “going digital” even really mean? The short answer is no one really knows because by the time there is an agreed upon definition, it would be less of a new frontier and the window of opportunity would have already started to close. We believe that in banking going digital means delivering value-added products and services through technology that consumers use today. Thus a digital bank must offer ways for consumers to discover and learn about products/services online, apply and open up accounts online, and interact as well as transact on a day-to-day basis using any device.
But how does one make this shift from a traditional brick and mortar bank to a digital bank? At Prelim, our account opening technology is used by a number of digital banks to bridge the gap and complete the onboarding process for new customers so we would like to share some of the lessons we’ve learned.
Digital Bank = new brand
We’ve seen the most successful digital banks, create entirely new brands. Doing so will reduce brand risk and potential cannibalization of products offerings that may conflict with branch offerings.
Marcus by Goldman Sachs
A well known example is Goldman Sachs and their Marcus brand. Traditionally, since 1869 Goldman has traditionally stayed away from mass market consumers and in recent years has shifted their strategy to retail consumers. To execute on this new strategy, they thoughtfully introduced a whole new campaign to appeal to mass market consumers with the Marcus digital brand and thereby created one of the most successful digital banks that has won over $55bn in new deposits.
Source: Goldman Sachs 3Q 2019 Conference Call and Press Release
Invest in a modern website
It may seem obvious, but if you are going to digital you will need a website which most banks already have but you will also need a modern website. Ideally, the website will work on desktop, tablet, and mobile and be designed and built to appeal to consumers who have come to expect beautiful and functional websites. You can expect to pay some where north of $10,000 and potentially over $100,000 so this will not be cheap but will pay dividends in the long run.
One of the banks we work with, Rockhold Bank did a great job to update their website with the help of a vendor.
As you update your website, we recommend focusing on a few goals:
- Make login/signup to online banking obvious/easy
- Make product offerings easy to understand
- Get the consumer interested in opening an account
- Provide a way to open an account online (we will discuss this later)
- Track user metrics (Google Analytics, etc)
Market your bank offerings effectively
Since our company, Prelim is hired to help banks complete the application process for new accounts we have to rely on banks to attract customers to the application. When we ask banks how they plan on marketing their products and services, the most common answer we get is some form of social media such as Facebook, LinkedIn, and Twitter. Even though these are great platforms, there is no silver bullet — the journey to go digital and thrive will be fraught with challenges and setbacks since you will be entering new unchartered territory for your bank.
As we previously discussed in our previous blog posts, comparison websites such as Bankrate.com and Depositaccounts.com refer millions in new deposits to banks that work with us today.
Even if you can get hundreds of thousands of eyeballs on a monthly basis, you still need to sell the consumer on an account with you. I think the most common mistake we see is that banks offer too many products and productize offerings that are not consistent with what consumers really want. So do your research and focus on what consumers care about and limit the menu of products you offer and make them simple enough to understand!
Lastly, make sure your product is differentiated from other digital banks whether that is higher yields, more points on debit cards, or more banking fees waived so the consumer has a reason to choose you versus the next bank since “free checking” is not enough.
Offer an online way to apply directly from your website
Your digital bank may not be supported by branches or call centers so you have to provide a way for consumers to apply from your website without having to come into a branch. There will be new challenges such as verifying identity of your new customers, receiving the initial deposits electronically, and meeting compliance requirements in a digital world.
The time to go digital is now!
We work with bank executives from small to large and we’ve learned that there are scores of projects and priorities already competing for limited resources and going digital is usually not high on the list for the majority of banks. Yet, we see billion dollar technology companies like Google and Apple that don’t have a banking background allocate resources to venture into possibly becoming digital banks with the recent Google Cache project and Apple Credit Card.
Banks + modern software
We know that banks don’t usually employ teams of software developers, designers, and product managers since if you are a bank, you focus on new customer acquisition and servicing those accounts not building software. So we knew that banking software providers have to build great software that is both useful and easy-to-use to bank users and consumers with the same level of quality and usability as Google, Apple, Facebook, Instagram, etc. that end users are now accustomed to using in their everyday lives.
Even if you wanted to go digital, up until recently there weren’t that many providers that offered reasonably priced, modern software and many banks bought solutions from their core providers that didn’t specialize in digital banking so we know that banks have been undeserved.
Our company, Prelim is the world’s most intelligent, mobile-first platform that can power consumer and commercial banking product originations in the digital age.
Contact us today at firstname.lastname@example.org to get started on the path!
Heang is the CEO and Co-Founder of Prelim and previously spent 15 years in banking at Goldman Sachs, Wells Fargo, and Bank of America.