What does the future look like for regional and community banks?
Banking executives from across the United States discussed the unique challenges they face in competing against their larger counterparts, what they’re doing to adapt to recent trends, and how they can gain the highest return from their technology investments.
In a discussion moderated by Banking Dive’s Anna Hrushka, executives from CNB Bank, Stockman Bank, and Quontic Bank, spoke about the ways they’re continuing to position their financial institutions to compete with some of the largest banks in the nation — and digitizing their operations has been vital.
This blog details 4 of the top issues on community banking leaders’ minds. Watch the entire discussion of how banking executives are tackling these issues in-depth.
Unique Challenges and Opportunities for Community Banks
With many banks still dealing with the fallout of COVID, community banks are re-aligning priorities to meet the needs of customers:
“The pandemic certainly presented us with some challenges, but I’d say more so opportunities,” explained Steve Steve Schnall, CEO of Manhattan-based digital bank Quontic bank, a certified community development financial institution with zero locations. “One is the remote workforce. We had not planned to deploy a 100% remote workforce and that’s something we’ve embraced and we’ll probably remain that way permanently. Second is the need to deliver our products digitally. We had only one branch pre-pandemic, and we were planning to convert to a digital-only bank, but the pandemic really caused us to accelerate that.”
Yarrow Diamond, CNB Bank’s SVP of Innovation Solutions, stressed how crucial it is today for regional banks to match their larger counterparts when it comes to serving today’s digital-first customers.
“In the pandemic and even before that, there was such a push to be able to provide digital relationship building on top of the in-person. And so as a smaller bank, being able to provide all of the same technology that those big banks have, has become critical in order to stay relevant for our customers as we go forward.”
1. Capitalizing on the Flexibility of Remote Working
Many banks’ return-to-work plans have been paused or delayed by the emergence of new COVID variants. Is remote working here to stay then, or do regional banks plan to go back to normal as soon as possible?
For Quontico Bank remote working has enabled great flexibility in hiring talent:
“The good news for community banks is this is a new frontier of remote working. Our CTO lives in Alabama. Our CSO lives in Vegas. Our CMO lives in DC. Our Chief People Officer lives in Indiana, and it goes on… If you can embrace remote working, you can cast your net wide across the nation. And all of a sudden you’re finding awesome people. And then, you know, again, cultural shifts, but it’s a solution that everybody should be looking at.”
As Yarrow explained, a hybrid model for has worked best in professionally recruiting and developing new hires:
“We’re offering hybrid or flexible working arrangements. And that’s actually worked for us really, really well. We are still trying to recruit within the community because we’re a big believer in really building that professional development. But when it is needed to look outside, we’re looking outside and expanding that pool. I can expand my net for resources and find them in another state and bring to that, that diverse thought that we may not have achieved previously.”
2. Despite COVID, Community Banks Forging Ahead With New Products & Services
Stockman Bank, Montana’s largest bank with 36 full service locations, pressed forward with its plans to make online account opening a reality for its customers. Stockman Bank Senior VP and Director of Bank Operations Paula Krakowski explains:
“We launched consumer online account opening during the pandemic, which we had started before it hit. We had to reallocate a lot of resources, but of course we went forward with it because we needed to. We’re also getting ready to launch small business banking. We’ve had online banking in place for our larger businesses, but we’re starting to focus on our small businesses now.”
Supporting small business clients and making it more seamless to digitally open an account have also been top of priorities for CNB Bank, which operates 45 full service offices in Pennsylvania, Ohio, and New York.
“We focused on the small business side, they needed the help the most. We went live with an online unsecured credit line approval through funding so they can apply for it, get approved, and get the money all within that one system within a couple of hours,” said Yarrow. “We’re enhancing our online account opening feature to include more real-time features such as biometrics and authentication through voice and facial recognition. It’s really about, how do we meet our regulators’ requirements while also really helping the customer because they couldn’t get out and about over this last year.”
Meanwhile, Quontico is investing in innovative new features to help set it apart in the marketplace.
“We actually launched a couple of new products which were somewhat game changing for us: A Bitcoin rewards checking product, and a wearable debit card ring, which we’re really excited about, which is us as a digital bank trying to differentiate ourselves because it can get very crowded in the digital universe just as it can on main street with a lot of different branches,” said Steve.
With more and more accounts being opened online, financial institutions must also be prepared for new types of fraud, explained Paula:
“With online banking, we’re seeing any attempt to piece together information on our customers by phone. So ID Verification has become very important for us. We’re always looking for ways to better identify our customer before we make any kind of changes.”
3. The Future of Branches
Our panelists weighed in with diverse points-of-view on a question being pondered by most banks today: Are branches on their way to being obsolete?
For Yarrow, branches will still play an important role in the future, but one evolved to meet changing customer needs:
“What we’re doing with branches is reducing the space required for ‘bills and balances’ and expanding more for relationship activities. How do we help you do a virtual site visit for a new property that you’re looking to build? Or how do we engage you with the community? So the community can come in and use more space at the brick and mortar that we buy, and we become that center hub.”
For Steve at Quontico Bank, it’s just a matter of time before branches in major urban centers are a thing of the past:
“In a rural market, I would agree the branch survives for a lot longer than it does in a more urban market. But if you were to just project it out, to me, it’s so obvious… We don’t go to the movies anymore. We used to go to the travel agent and sit at their desk and plan your trip. You don’t do that anymore. And you could go industry by industry, by industry. Bankers are going to start asking themselves, why am I paying for all this real estate?”
4. What Role Will Community & Regional Banks Play?
Several large-scale mergers and acquisitions coupled with a dramatic growth of fintech services have greatly impacted the banking industry in recent years. Hrushka asked the panel about what these changes hold for community and regional banks.
Yarrow believes that focusing on the individual customer’s needs be it online or in-person will be crucial for community and regional banks to retain customer loyalty.
“It’s really down to looking at the person that you are going to service… Whether it’s the person that’s used to being able to have in-person expertise and someone that’s right there for them. And that’s their personal banker. Well now how do we make them feel that same personal banking experience online? You have to be prepared to still service that person both in-person and online. That’s what’s going to allow us to continue to service the person, not the personas, not the segments, but the people that we know have built those relationships with us.”
Looking to the Future
Dynamic changes have been the norm for community banks in light of a rapidly changing market and with that customer needs. What lessons can banking executives take moving forward? As Paula explains, making once complex processes simple is key:
“I think what we learned is we need to reduce the complexity. Some of our processes are so complex. How do we simplify and get our customers just the service they need without all the information overload?”