Digital transformation offers many long-term benefits for community banks and credit unions. But there are also strategic challenges, such as how to test new products and services without affecting the identity of your core brand.
One effective solution is to launch a greenfield digital bank that is distinct from your current brand. Leading financial institutions (FIs) like Goldman Sachs have found success with this strategy; Goldman’s digital brand Marcus has an identity and customer base that is very different from its more traditional brand. The tagline for Marcus is “You can money,” and its image is centered around helping people achieve financial success. Though Marcus is backed by the Goldman Sachs name, it sets itself apart as a simple, accessible banking option for digital customers.
In much the same way, smaller FIs can grow their customer base by launching a greenfield bank. In fact, developing a digital brand can drive powerful results that might otherwise be inaccessible for community banks and credit unions. Specifically, a greenfield bank offers FIs:
While launching a new digital brand may not make sense for every FI, it is ideal for community banks and credit unions that are looking to innovate, but may be hesitant to make changes too quickly. In this piece, we explore how developing a greenfield bank can benefit your FI—and which strategies are key to ensuring your success.
Today’s consumers have high expectations for digital experiences based on their interactions with sophisticated brands like Amazon, Uber, and Google. As customers have grown accustomed to speed and convenience, local FIs that provide a similar level of service are best positioned to meet those expectations. On the other hand, poor or inefficient digital services could pose a risk to the relevance and growth of local FIs.
The legacy banking technology that community banks and credit unions typically rely on doesn’t always make it easy to roll out new products or customize offerings. Fortunately, new platforms can streamline the process and give FIs the power to easily change rates and marketing copy in real time. A greenfield bank is a great way to test out new technologies like online account opening (OAO) before expanding them to your core brand.
One community bank in Missouri is doing just that. In 2019, Midwest BankCentre in St. Louis launched its digital-only brand, Rising Bank. Rising empowered this 115-year-old bank to explore new technologies, test digital marketing methods, and measure how the market would respond to product changes. In its first five months, Rising Bank achieved:
With the launch of Rising, Midwest was able to de-risk innovation efforts and test new approaches to digital transformation. The community bank was then able to take these insights and drive similar results for its core brand.
With the right tools, community banks and credit unions can deliver great service, no matter the channel. In particular, a digital greenfield bank can help smaller FIs compete with megabanks’ online offerings and unlock untapped market share.
Unlike a brick-and-mortar bank, a digital brand is accessible to customers anytime, anywhere. This means you can expand the geographic reach of your business and target new markets without having to build new branches. In this way, a digital greenfield bank can help attract new customers, even on a national scale.
For instance, Cambridge Savings Bank in Massachusetts launched its digital-only brand, Ivy Bank, in order to expand its services nationwide. With user-friendly products and personalized service available online, Ivy is accessible to customers well outside of the bank’s previous geographic range. Plus, with top-of-the-market rates, Ivy is competitive with other offerings in the marketplace.
Hyper-personalization means using data and analytics to develop a deep understanding of customers’ interests, expectations, and gaps in service. Using these insights, FIs can develop hyper-personalized products that address the needs of specific demographics, communities, professions, and underserved groups. By targeting these audiences, your FI can carve out a successful niche and maintain sustainable growth.
“About 70 percent of what you want to know about your customers comes from your internal data,” says Wayne Patenaude, Cambridge Savings’ CEO. “Mine that data, understand it, see how it relates to customer behaviors and experiences, and be able to translate that into actionable strategies.”
One way to test hyper-personalized products while keeping your core brand intact is through a greenfield bank. The data you collect—online interactions, geolocation data, aggregated payments behavior, and so forth—will tell you where the opportunities are. For instance, you could launch an online-only brand that caters to healthcare workers or the LGBTQ+ community. There are a variety of ways for smaller FIs to find their niche and serve underbanked populations.
One of the concerns FIs may have about developing new banking products or strategies is the potential to cannibalize existing business. However, it’s key that your greenfield bank is distinct from your core brand—while still supported by your FI’s experience and brand recognition. When your new brand and existing brand serve different purposes and appeal to different customer bases, the risk of cannibalization is low.
For example, Rising Bank and Midwest BankCentre’s core brand achieve different goals for the institution. As a digital-only brand, Rising appeals to younger demographics and has succeeded in raising significant deposits from a national customer base. Midwest, on the other hand, is community-focused and excels at building relationships in-market. Further, Midwest and Rising avoid cannibalization given their varying interest rates.
Yet both brands have achieved considerable success on digital channels. According to Erin Erhart, Midwest’s SVP Operations, “This year alone, Midwest BankCentre’s digital-only brand and our core brand’s online channel held the number one and number two spots respectively in most accounts opened across our organization.”
A greenfield bank should be designed to complement your core brand in a targeted way, such as providing an opportunity to try out new technologies like online account opening. This large-scale digital transformation project may seem overwhelming, but a good tech vendor will help you find the right approach and determine how to achieve the best results with your digital brand.