Last summer, MANTL commissioned the 2021 Banking Impact Report to explore how industry trends are impacting community banks, credit unions, and the communities they serve. We spoke with banking executives, small-business owners, and consumers across every demographic to help us understand what’s at stake for community financial institutions (FIs), and how forward-thinking leaders can navigate what’s next.
In this third part of our deep-dive series, we’ll be exploring how digital-only banks are attempting to capitalize on consumer demands for convenient, personalized banking, and what community FIs can do to retain their customers.
More and more American consumers and small business owners are exploring what digital-only banks have to offer, and demand for these options is growing despite only 7% of consumers and 8% of small business owners saying they trust digital-only banks more than traditional financial institutions (FIs).
Even with this widespread lack of trust, traditional FIs are facing the challenge of staying competitive. They’re taking a hard look at their features, products, and customer service approach as curiosity about new banking options reaches an all-time high.
According to our Banking Impact Report, 47% of consumers are “somewhat or very likely” to open an account at a digital-only bank in the next 12 months, while 43% of small business owners are “likely” to open an account at a digital-only bank in the next 12 months.
While this data predicts an increase in digital-only bank customers over the next 12 months, traditional FIs can continue winning customers by more effectively offering what digital-only options aim to deliver.
As we take a deeper look at the data from the Banking Impact Report, we’ll uncover how community FIs can lean into certain advantages to compete with digital-only options. Not only do community institutions rank higher in trustworthiness, customer service, and community impact, but they also have more proven success offering the value that neobank and fintech providers promise.
Let’s start with why customers look to digital-only options in the first place.
Lack of personalization. In interacting with a wide range of industries, your customers have become accustomed to experiences that demonstrate an understanding of their personal needs and habits. Research from Epsilon shows 80 percent of consumers are more likely to do business with a company that offers personalized experiences.
High fees. The Banking Impact Report showed that 48 percent of consumers listed low or no fees as their top banking need, and many digital-only banking options promise reduced or eliminated fees for customers.
Missing or irrelevant features. Every year, banking customers add to their list of features that a bank must offer to win their business. For many customers, digital tools and options have become non-negotiable. Digital-only banks are able to meet this demand with online and mobile features, but it’s up to customers to understand if these options provide any value outside of a digital experience.
Digital-only banks are eager to snap up a growing population of customers that demand more, refuse to settle, and remain willing to try new options. With that being said, consumers still rank community banks and credit unions as the most trustworthy financial service providers. This trust goes a long way.
The short answer is no. The long answer is that trust between consumers and banks takes time to build. Both of these answers play into the hands of community FIs looking to retain customers and ensure that they’ll still be able to acquire new ones in five years’ time as digital-only options continue to grow.
Trust is a massive part of not only winning first-time customers, but also retaining your customers, upselling them on your entire suite of products and services, and relying on their positive experiences for referrals. Trust is the second-most important factor consumers consider when choosing financial products, outranking price and coming in just behind ease and convenience. Price assigns value to transactions, convenience demonstrates how the transaction will take place, but trust facilitates how customers feel about your FI’s ability to uphold promises regarding all kinds of transactions.
The data about trust for digital-only banks is telling:
Community FIs can use this advantage as part of a two-pronged approach: identify and offer the features and options your customers demand, while also leaning in to this overwhelming “trust advantage” that they’ve worked so hard to build over decades.
Many community FI customers who are interested in digital-only banking options are already getting what these newcomers are offering. Take personalization for example. While personalized services are often one of the claims from neobanks vying for new customers, data from the Banking Impact Report suggests only 8% of customers report neobank offerings to be more personalized than the ones they receive from their community bank or credit union.
Additionally, data from our report shows that consumers rank digital-only banks dead last on a list of five types of financial institutions for several parts of the banking experience. What’s more interesting is that these rankings are for aspects of banking that digital-only providers typically tout as benefits and pride themselves on.
This data clearly shows that despite not being able to leverage flashy marketing and shiny new features, community FIs still have an advantage over digital-only banks for the time being. These FIs have a chance to take action over the next 12 months to maintain and use this advantage in ways that help them win as many customers as possible and stay current with market demands.
MANTL is proud to support trusted community banks and credit unions in their ability to provide digital options that maintain a personal touch in banking. Curious about how MANTL fits into all of this? Schedule a demo with our team here.
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