4 Ways Community Banks Can Better Serve Members

In the last few years, community banks have been forced to adapt their processes and operations.

“Prior to the pandemic, community banks primarily served their local community in-branch,” says  Alex Gonikman, CEO and Co-Founder of TrueNorth. “This all changed in 2020, when (like with many other businesses) these community banks had to introduce or extend their digital capabilities in order to be able to meet their customers’ evolving needs.”

But how effectively are community banks’ technology systems supporting those digital capabilities — and how well are they meeting customers’ needs?

Now is the time for community banks to answer those questions. Many community banks continue to rely on systems designed and implemented to service the needs and support the processes of representatives working inside the branch. Now, those same systems are expected to have an omnichannel presence — serving customers directly through web, mobile, and in-branch capabilities.

Consumers, who spend more than eight hours of their day with digital media, hold that omnichannel presence to high standards. Consumers compare their banks’ digital experiences not to those of other banks, but to those of the big digital players (like Amazon, Google, Netflix, and Apple Pay) that set their expectations.

Investing to compete

Community bank leaders recognize that improving their digital capabilities using new technologies is increasingly important. (Research from the Conference of State Bank Supervisors (CSBS) has found that the percentage of community bankers who reported that the adoption of new technology is “extremely important” doubled in the three years from 2019 to 2022.)

Before they can implement those new technologies, however, community banks have to make some strategic decisions. They need to decide why they want to continue to be in business, what they're going to provide as products and services, and how they're going to deliver those products and services in ways that attract a next-generation customer.

“Younger customers are often more demanding and technically savvy, wanting personalized, curated financial services, all available at the touch of a button,” says Gonikman. “This is a big leap in capability that community banks are being faced with in order to attract their next customer base and remain relevant in today’s market.”

What it takes to attract the next generation of customers differs for every bank depending on their current state and objectives — creating difficult decisions about what to invest in, and when.

Unfortunately, community banks can't have a one size fits all focus. They have to first understand what they're trying to do to increase deposits and revenue, and use that to determine what investments make sense for them. One bank might determine that digital onboarding is the answer because it will help them attract more retail customers; another might determine it needs to concentrate on making loans more available to small business owners and creating ways for them to handle their accounts receivable and accounts payable through all-online capabilities.

As banks determine what online capabilities and digital transformation initiatives make sense for their goals, they have many options. The following five initiatives may deserve a spot on community banks’ roadmaps as they look to better serve their members or attract new ones.

1. Make account openings easier

Now that Forbes Advisor research has found that more than three-quarters of American consumers (78%) prefer to do their banking via mobile app or website, community banks need to make that possible from the very start of the customer relationship.

According to Insider Intelligence, half of all community banks and credit unions used digital account opening to field not even 5% of their new checking account applications in 2019. Community banks have likely increased online account openings since then, but not all have made online account openings possible or simple. (In 2021, PwC found that 20-25% of consumers would prefer to open a new bank account digitally but could not do so.)

By sticking to in-branch-only account openings — or making online account openings so complex that customers abandon the process — community banks risk losing new customers to digital-only challengers and large banks that allow customers to open accounts online in minutes.

2. Improve loan speed

Those big banks and digital-only challengers are offering other products, too — such as personal and small business loans. And since many of those non-community banks are relying on automated underwriting solutions and algorithms, they can make lending decisions fast.

Given their smaller size, community banks are used to having a leg up on their peers regarding loan speed. (In 2018, small banks were found by the Federal Deposit Insurance Corporation to be almost four times as likely as large banks to be considered by competitors as being faster at making loans.) But without technology investments into improving decision times, community banks will fall behind.

3. Expand payment capabilities

Loans aren’t the only thing speeding up. Consumers want — and increasingly, will expect — faster payments: PYMNTS researchers found in 2020 that nearly a quarter (24%) of consumers “would be willing to switch to financial institutions that offer real-time payment availability.” In addition, one-third of consumers believed “it is ‘very’ or ‘extremely’ important for them to be able to send money in real time,” and even more (35%) believed “it is ‘very’ or ‘extremely’ important for recipients to have immediate access to their funds.”

Community banks need to think beyond same-day ACH if they want to meet the payment expectations of consumers (especially Gen Z). Steps they may want to take include joining The Clearing House (TCH) RTP® Network, preparing for and ultimately adopting the FedNow service, and exploring push payments — also known as push-to-card or card disbursements — that allow banks to send money directly to a customer’s credit or debit card.

4. Provide educational content/opportunities

Community banks have built their businesses on relationships. And in an increasingly digital landscape, they need to invest in digital ways of growing those relationships. Using content (like videos, articles, and webinars) to educate and inform their customers is one way to do that.

Community banks’ customers — or potential customers — should ideally be able to easily navigate through the bank’s website or app and find what they’re looking for, be it information on interest rates, insights into what products the bank offers, or resources on how to improve their personal or business finances.

In Conclusion: A unique roadmap for every community bank

Ultimately, there are many efforts community banks may want to put into play to better meet customers’ needs. But community banks can’t know exactly what initiatives are right for them until they design a priority-driven roadmap for their unique transformation journey.

Working with a technology orchestrator can help community banks design and implement the right digital transformation roadmap. Find out more about TrueNorth’s services, skills, and solutions here.