What the Best Community Banks Are Doing Right

Every year, we have the honor of presenting the Banking Choice Awards, in which the top community banks and credit unions are recognized for providing outstanding service to their customers and members. The New York Banking Choice Awards were announced in April at the Banking New York Conference, and on June 28, winners will be announced for Connecticut, Massachusetts, New Hampshire and Rhode Island at the Best Bank Expo.

The Banking Choice Awards are based upon the results of the Banking Benchmarks®, the largest and most comprehensive measure of banking customer experience in the world. The Benchmarks are independent of any financial institution and conducted by Customer Experience Solutions.

Our banking benchmarks delve into 53 different metrics about each institution customers use for banking services. These include the metrics used for the Banking Choice Awards: Overall Quality, Customer Service, Tools & Technology, and Community Contribution. Rankings for Overall Quality, Customer Service, and Tools & Technology are based on people’s responses concerning their primary banking institution. The final category, Community Contribution, is based on the responses for institutions that they are aware of but do not currently use, making it a reputation-based ranking.

There are consistencies among the winning community banks that can be used as a guide to improve your community bank CX:

Community Involvement

Community Banks who earn Banking Choice awards are among the most active in their communities. But they’re not just active – they know how to make sure their community involvement is visible to the community so that the people they serve are aware of the efforts they make to support them. Our surveys show that when a community contribution is accompanied by marketing spend to promote it, the impact to the bottom line can grow by more than 350%.

Technology

Winning community banks not only offer the same technology to their customers as larger banks but also have ensured their employees are trained to use it and can help members navigate it – without losing the personal touch that sets them apart. Staff training is typically one of the top reasons that people decide to switch banks, according to our benchmarks.

Personalized Service

Banking choice award winners are adept at providing exceptional customer service. They pride themselves on their ability to know their customers well, make more informed and faster decisions to help them with their financial needs. They know their customers. 

Customer Experience

What we’ve learned from our benchmarks is that not even better rates can pull a customer away when they feel valued and listened to by their community bank. In fact, customer experience is the most important differentiator. Customers will pay more for better service.

You Can’t Take Advantage of the Opportunity without Knowing Where You Stand

With 1.24 million customers ready to switch banks, there is a lot of opportunity for community banks and credit unions to grow, but it’s going to take not only delivering on customer experience but knowing where your bank stands in comparison to your competition. When you know what your customers and prospects think of your bank, you can make informed decisions to attract more loyal banking customers. Request your benchmarks now.

Community Banking Challenge: Anticipating Problems

Although every bank prides itself on customer service, no bank is perfect. Our Benchmarks gather millions of customer reviews across thousands of banks, and on average, 12% percent of banking customers tell us they have encountered a serious issue or mistake with their bank within the past six months. Some banks are higher, and some are lower. None are zero.

The good news is that reacting to and fixing problems is where community banks often excel. The lack of hierarchy allow staff at community banks to address concerns and remedy problems quickly. And our surveys show that, on average, 79% of those customers said that when they told the bank about the issue, they are happy with how the bank resolved the problem. Some banks are better, with several in the Northeast US approaching 95%, while several others are well below 50%. (Please contact CES if you want to know how your customers rated you).

While that is a pretty good resolution rate, resolution is only possible if the customer tells you about the problem.  Unfortunately, not all of them do.

Banks are not always aware of mistakes.

Continue reading “Community Banking Challenge: Anticipating Problems”

How Can Your Community Bank Outgrow Competitors by 100%?

Did you know that one of the biggest ways you can become more competitive as a community bank is to provide a better customer experience and better customer service? It seems simple, doesn’t it? Just give great service, provide a great experience, and watch your business grow. But of course, only one bank per community can actually be #1.

Unfortunately, providing exceptional customer service is not as simple as it seems for a number of reasons. But the biggest reason community banks and credit unions aren’t competing more effectively is that about 95% of them believe that they’re already giving the best customer service and experience. This problem is compounded by the disconnect that happens between what banks say and what they do. Ninety-six percent of bank CEOs say that customer experience is a top priority; however, when you ask on-the-ground managers who are charged with providing that experience, only 40% say that the customer experience is actually a day-to-day priority at their banks.

What We Know about Your Bank Customers that You Might Not Know

Your customers don’t always complain. How do we know? We ask them. When we collect the hundreds of thousands of ratings directly from customers to form our benchmarks, we ask them whether or not they have experienced a significant problem with their banks in the last 6 months. On average, 13% of those customers across the Northeast said that they had, and at the individual bank or branch level, the percentage was as high as 40%. The problems ranged from errors on statements to mobile app issues to rude tellers.

We asked the customers surveyed if they had told their banks about the problems they had experienced. The sobering truth is that over 50% of them said that they had not told their banks. That means they are upset with their banks, but they are keeping it to themselves. Quite often, this makes customers susceptible to the  next $200 offer to open an account elsewhere. They may even be actively looking to end their relationships in their entirety. As every banker knows, customers almost never say goodbye; they simply stop engaging. They open new accounts elsewhere, and they slowly draw down their balances until the banks are left with empty sleeper accounts. In 2017, 11% of US consumers changed their primary banks, and almost never did their banks see it coming until it was too late.

The way to understand the satisfaction—and vulnerability—of your customer base is not actually that difficult: you ask them. On a regular basis. You can do that internally, by recurrently surveying a representative sample of your customers. The drawback with that method is what is called respondent bias. If you ask 1,000 of your customers for their feedback via a mail survey, an email survey, or a phone survey, who do you think will respond? The very happy customers will respond. The very unhappy customers will respond. But the ones in the middle are far less likely to respond, so the result is a partial view of your customer feedback at best and a highly inaccurate one at worst.

A better and more accurate way of gathering customer experience feedback is by using a third-party, objective source that does more than survey the happiest and unhappiest customers. This can be done by targeting all customers (your and your competitors’) though a random population survey. In that way, happy customers, unhappy customers, and everyone in between are proportionately likely to give their feedback. You end up with a far-more accurate, far-less skewed picture of your customer base. This approach has the added advantage of possibly providing your results in comparison to your competitors, so you can see if you really are beating the competition. This approach is also typically much cheaper than a single-bank approach, since the costs are shared across many banks. On the flip side, the disadvantage is that you typically cannot customize the individual questions if you have a large market research department that prefers to create and distribute its own surveys.

Delivering on Customer Service

Your bank can grow 100% faster than the competition if you simply focus on delivering exceptional customer experiences. But you can’t just assume your bank is already doing that. Nearly 95% of banks think they are exceeding their customers’ expectations and doing so better than the competitor across the street. But such an assumption is not based on fact. There is enormous opportunity to improve your ability to grow your community bank or credit union, but it starts with knowing what existing customers and prospects think of you compared to your competitors. Take action now and request our benchmark study for your region.

Can Community Banks Compete with Big Banks on Electronic Banking?

Electronic banking is a disruptor to banks in much the same way that Amazon was to brick-and-mortar book stores when it first launched its online retail business. As a business owner, you either find a way to meet the level of service and convenience being offered, or you simply lose a piece of the market. Yet when so much is uncertain, including future economic security, how do you justify investing in technology when you’ve based your whole business platform on providing a personal touch?

Banking and technology have always been great partners.

Technology has always made banking more efficient and more profitable, and today’s fintech revolution is one of the fastest growing industries – worth over $12 billion. From the introduction of ATMs to check clearing and credit monitoring, technology makes banking easier for banks as well as their customers.

Fintech is a natural fit for community banks willing to make the investment. Some community bankers and credit unions avoid digital upgrades because they see them as threats rather than improvements that can make them more competitive in the industry. But most of the digital innovations available – payment apps, mobile wallets, online money management tools, mortgage loan apps – are simply enhancements to existing services.

It starts by recognizing that consumers want both the technology and the human touch.

Community banks have the opportunity to bring to their customers the best of both worlds: the personal, in-the-community, fabric-of-society human touch and the state-of-the-art technical convenience fintech allows. From online banking to mobile check deposits to customized apps, new technologies do not have to be a threat. And most consumers want both. They want to be able to come into their local branches, sit down and talk with someone, and know that there are human beings keeping their money safe. They also want to be able to bank at midnight, move money from one account to another from their phones, and make investment decisions while sitting in their living rooms watching TV. Based on our surveys, most millennials want the human touch when it comes to banking.  And most baby boomers want the convenience of electronic banking.  Why not give them both?

Community banks know their customers and can expand the innovation in fintech.

This is not merely pie in the sky. It’s happening on the ground as this is written. Some banks are choosing to build the reality themselves. Eastern Bank in Boston created an online lending platform that makes loans of up to $100,000, with decisions in minutes. Like many other banks that have developed some internal digital expertise, they now provide the solution externally and license it to other banks. And there are still plenty of high-quality managed services available in the market from the likes of Fiserv, FIS, Jack Henry, COCC, et al.

Community banks can embrace fintech without sacrificing their personalized, customer-driven focus, and these banks can indeed survive and thrive. Credit unions and community banks simply cannot rely solely on personal service as the entire premise of their existence when consumers clearly want more. They want not just personal service but personalized technology as well. Fintech is a solution that will open doors for community banks, allowing them to peel away less-than-satisfied big-bank customers who are ready for a best-of-both-worlds solution.

If Your Bank is a Strong Contributor to the Community, Do You Get Recognition For It?

Many community banks and credit unions pride themselves on the contributions they make to their communities. This includes supporting local charities, funding scholarships, planting trees or otherwise helping their neighbors. While these great acts can certainly be their own reward, community banks also deserve public recognition for their great works. Other than the obvious benefits to the community, the contributions a bank makes to its community have two strong benefits for the bank itself.

The first is the influence on prospects, or non-customers. Many prospects learn about potential banks from advertising or from community involvement. Our studies show that advertisement is generally more effective at raising awareness among prospective customers than community works alone. Indeed, this is why many banks set aside large budgets for traditional marketing campaigns. However, our studies of bank customer behavior show that while ads are better at driving awareness, community contribution can be more effective at driving consideration. The latest results of the Q2 New York Bank Prospect Benchmark show that community contribution increases prospects’ consideration of your bank by an average of 126 percent. Not a bad side-effect! And for smaller banks with lower awareness, the increase is even higher.

Anyone wishing to receive the New York Bank Prospect Benchmark results can contact Customer Experience Solutions for the specific community contribution results as rated by each bank’s own prospects. All of the data cited in this article is based on that study.

Community contribution increases consideration by prospective customers by 126 percent.

The second impact that community contribution has on a bank’s business in on its current customers. When current customers see their bank’s involvement in the community, it can improve the esteem they already have for their bank. Our research has shown that the positive impact can increase their loyalty to the bank, meaning they are less likely to leave and more likely to increase long-term spending with their bank. The latest New York Bank Customer Benchmark report showed that recognition of community contribution increases customers’ share of wallet significantly with their bank and their long-term loyalty goes up by 88 percent.

Community contribution increases current customer loyalty by 88 percent.

While it is probably not a big surprise to some that contribution to the community has an impact on the top and bottom lines, many banks are not actually getting the benefit they should be. Many community banks and credit unions spend a lot of money and effort contributing to the community, but their current and potential customers simply don’t know about it. This is very frustrating to marketing and community giving leaders in some banks, and a wasted opportunity for many. It is very important to know just how much recognition you are getting for your good work, and how you can improve that ROI. The challenge for banks is breaking through the clutter to ensure your customers and prospects appreciate your contribution.

In our research, we saw that in one specific market, two community banks had equivalent amounts of community involvement in terms of gifts to charity, hours volunteered by their staff, sponsorships, etc. However, one of the two banks was rated 275 percent higher in terms of community contribution by their respective customers and 388 percent higher by non-customers. While each bank did similar levels of community outreach effort, one was using much more efficient channels and co-opting local nonprofit partners to get the word out. Not coincidentally, the bank with the better outreach is currently achieving stronger growth in new customers, especially commercial customers.

The first step to getting the maximum credit (and business impact) from your community contribution, is to understand how you currently stand with customers and prospects, in your specific market and in relation to your competition. Do your current customers see and appreciate your good work? Do your prospects? The second step would be to make reasoned adjustments and tweaks to the programs to see what the impact is. A bank may need to improve its community outreach to gain greater recognition, or it may need to emphasize different types of community involvement to broaden its exposure. Spring and summer are times of increased giving and involvement in community affairs so recognition can go up. But it can also be harder to differentiate since other institutions are increasing their involvement as well.

The third step is to measure how much the changes have moved the needle in terms of recognition of community contribution. And just as importantly is to track the impact that they recognition is having on awareness of the bank and consideration to use the bank in the future. Tracking your ratings over time will show you exactly how your community contribution, and all other marketing efforts, are truly impacting how your prospects and customers view you. This will allow you to fine tune your programs so you get the maximum benefit for the bank while doing the maximum good for the community.

So as the weather grows warmer, consider your community involvement activities – what are you currently doing? Are you sure you are getting the credit you deserve? What can you do differently? And most importantly, what you can you do to make sure your current and prospective customers see what you’re doing?

The New York Bank Benchmarks are based on over 75,000 unbiased consumer and business reviews in New York State, gathered in May-June 2017.  

*Community Contribution Rankings, Q2 2017, as rated by banked adults in New York State:

  1. Watertown Savings Bank
  2. Tompkins Trust Company
  3. Glens Falls National Bank
  4. Adirondack Trust Company
  5. Canandaigua National Bank
  6. Richmond County Savings Bank
  7. Rhinebeck Bank
  8. Jeff Bank
  9. Ulster Savings Bank
  10. Adirondack Bank
  11. Solvay Bank
  12. Canandaigua National Bank & Trust
  13. Ballston Spa National Bank
  14. Walden Savings Bank
  15. Tioga State Bank
  16. Bridgehampton National Bank
  17. Fairport Savings Bank
  18. Saratoga National Bank
  19. Tompkins Bank of Castile
  20. TD Bank

 *This is the contribution that the public sees, and does not necessarily line up with the actual level of community contribution.

Originally published in Banking New York 3Q 2017

Finding Success as a Community Bank, Part 1: Challenges and Opportunities

Small community banks and credit unions face rising pressure in today’s economy to compete with large, multinational banks. This challenge to remain relevant has existed for a long time, but it has become increasingly difficult to remain so in an expanding age of globalism and corporate consolidation. Understanding how to attract new customers, while simultaneously employing a multi-generational approach, is critical to continued success and sustainability. It is possible for small banks and credit unions to compete – and even thrive – in our current market, but it requires focus, purposeful action, and a recognition of their unique strengths and advantages.

Opportunities Abound

For community banks, competing against megabanks can be a daunting challenge, but there remains enormous opportunity. In 1990, the five largest banks controlled less than 10% of all bank assets. In the last 25 years, that share has jumped to 44%. Today, approximately half of all new accounts (two-thirds of which are opened by Millennials) are established with the largest four banks (JPMorgan Chase, Wells Fargo, Bank of America, and Citibank). However, according to our own benchmark studies, an average of 13% of those megabank customers – as high as 20% in some markets – prefer a community bank.

Success Factors for Community Banks and Credit Unions

One of the most important success factors is to offer flexible, customizable services that allow your customers to choose what they want and when they want it, regardless of their age, income, schedule, or relationships. This is not only true for the younger customers but is becoming a key driver of loyalty for Gen Xers and Baby Boomers. Despite Millennials opening new accounts with larger banks, many still want the personal touch: As of June 2017, over 45% of Millennials said they preferred in-branch interaction over electronic interaction with their banks.

Keep it Personal

Most consumers are still searching for a personalized banking option, and community banks that take the important steps to capitalize on that demand will thrive. Look at examples of successful organizations from other industries that are facing the same general issue: competing with large corporations. Find out what local restaurants are doing to compete with fast-food retailers. Discover why the local auto mechanic is so successful when a chain auto-repair shop is right around the corner. The basis of any functioning business is a good relationship with its customers.

Some trends may favor large, multi-national banks, but deliberate, personalized attention can not only even the playing field, but tip the balance in favor of a community bank or credit union. With an understanding of your competitive advantage as a small, local financial institution, you can capture plenty of loyal customers that will bring success. Contact us if you would like customized benchmark reports for your region.

Next month, we’ll continue our Community Bank Success series by exploring Community Bank and Credit Union Marketing.