Regional banks: Going digital or going down?

  • Posted on December 16, 2021
  • Estimated reading time 5 minutes

This article was originally written by Avanade alum Tara Beaton and Simon Amarasingham.

Today’s regional banks are under threat from well-known and big brand mega-banks that span cross-country, peer-to-peer payment services, and digital-only fintech start-ups. It’s a bit like David going up against Goliath: the fight is as mismatched as it is unavoidable, but (as with David and Goliath) the way to win is to pick a nimble and effective weapon and become expert at wielding it. The problem is that many regional banks have not even picked up a weapon yet.

The appeal of regional banks is in their close ties to the communities they serve. They are not distant, faceless corporations, but the people you know from your own town. In ye olde days, when a trip to the local branch was required for every transaction, these smaller banks excelled at the personal touch. The message and the medium were in perfect sync.

But we’ve bid adieu to the good old days and now more banking happens on our phones and laptops. The consumers who made regional banks profitable have moved online, and the Goliaths are muscling in (sometimes with their digital-only brands) due to large investments in MarTech and big data that increase their reach and automate their personalization programs.

The odds seem stacked against regional banks, which typically have small budgets and small teams. Further, the data also shows that regional banks spend less than 20% of their marketing budget on digital. However, regional banks still have an ace up their sleeves – their community connection – so if they can optimize their digital presence, they can re-ignite close connections with their customers and communities. Alas, most ‘make do’ with a flavorless online experience and spend very little on their martech stacks. Meanwhile, large incumbents and FinTech companies are spending more each year to expand their share of wallet.

The question is: without the budgets available to the biggest banks, how can a regional bank close the experience gap with their clients and prospects?

The case for personalized digital experiences
Although price often plays a role in the customer decision-making process, it’s not always the deciding factor. In a recent study, more than half of people said they would switch brands after just one or two bad online experiences. Also, key findings for banking motivators revealed the weight of service and personal care experiences such as flexibility to temporarily pause loan repayments and easy options for contacting customer service like online appointments were notable.

“Great service” and “feeling valued by a brand” often matter more than price. In a 2021 customer expectations report, 82% of customers said they spend more money on brands that deliver great service online.

Customers care deeply about their experience and expect to interact with businesses seamlessly across multiple platforms and channels. Expectations for a frictionless experience require not only cross-channel integration, but online and offline integration to ensure an optimal and personalized experience. It’s no different for banks. Customers don’t want to waste time searching for information on financial wellness or home loans; instead, they want personal and custom messaging and immediate access to the information that matters most to them.

You need a platform that allows you to build contextual messaging, drive loyalty, and shape the future customer relationship. To do so in a scalable manner requires reliable data about what your customers want so that you can deliver it to them.

The journey to digital starts with a single step
While the battle seems to be going in Goliath’s direction right now, there’s still plenty that regional banks can do to overcome the odds.

There are many elements that need to come together to build an online banking ecosystem that will continue to deliver the optimal customer experience far into the future. Not everything can be done at once, but each step forward to advance martech capabilities can prove valuable in its own right – a stepping-stone to the next experience.

For example, Adobe’s suite of marketing products includes tools for content management, data capture and analysis, and personalization. Each product is self-contained, but when combined, create a robust solution; one that could give you Goliath-like strength, even if you’re only a David-sized business.

“It’s too expensive!” we hear you cry.

Well ok, we’re not shopping at the dollar store for this stuff, however we would argue that the cost doesn’t matter. That’s because a robust personalization system offers a strong return on investment and can help you build long-term customer loyalty. Think of this not as an expense, but an investment toward achieving a stable profit center.

Don’t believe in the power of digital personalization? There’s plenty of data out there to prove it’s worthwhile. But one of the most convincing recent studies revealed that personalized calls-to-action converted 202% better. Imagine the profit potential for your bank.

According to an online article with Forbes about data-driven personalization reaching a tipping point in the banking industry, forward-leaning banks should plan to capitalize on their greatest asset – customer data – due to the rapid demand for personalized experiences, since banks that fail to invest now risk impacting customer growth and retention later.

Many smaller banks face seemingly undefeatable competition. But Avanade can help arm you with the powerful personalization weapons needed to meet and exceed your targets along with your customers’ expectations. It all starts with picking up your slingshot, putting fear aside, and taking careful aim.

Is there any specific area of customer experience your bank wants to improve? If you’re already at the top of your game, what’s the secret to your bank’s customer experience success? Let us know on our socials.

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