Key takeaways
- Community and regional financial institutions must prioritize customer experience to keep their customers’ attention and avoid losing ground to fintech companies and digital payment options.
- Delivering an outstanding customer experience involves blending traditional community banking strengths like personal relationships with new technology to better understand your customers and meet their specific needs.
- Pivoting to a risk-based rather than compliance-based approach to managing risk and compliance can also help to maintain your reputation with customers as well as protect your business more effectively.
The financial services business climate is faster and more complex than ever. Today, traditional community financial institutions must compete for customers with not just each other, but fintech companies and new digital payment options, all while breaking through the noise of countless other demands on customers’ attention.
How should an institution’s CEO adjust its growth strategy to succeed in this environment? Keep reading to find out, plus why doing so also requires a new approach to managing risk.
How should community financial institutions adapt to compete in today’s attention economy?
Winning customers’ attention, in today’s attention-starved environment, doesn’t mean creating a flashy ad campaign. Instead, it’s about meeting your customers (and potential customers) where they are by blending new technology, such as online account opening, with timeless community banking fundamentals. It’s this combination that helps your institution stand out from the plethora of large national banks, fintech companies and other digital payment alternatives competing for your customers’ business.
Here are key actions CEOs can push to help drive growth and customer retention:
1. Win on customer experience
Customer experience (CX) is what a customer experiences during their every interaction with your financial institution, including marketing, account opening, customer service and branch visits. CX is the single biggest strategic asset for community and regional financial institutions, because smaller institutions are better positioned than big banks and fintechs to build long-term, human relationships with customers that lead to organic growth.
2. Understand your customers better than ever
To deliver that superior customer experience, you also have to understand what your customers want and need. To do this, do a deep dive into your customer data: Develop data-based personas, map your customer journeys, explore how you can provide more automated personalization and offer proactive services rather than waiting for your customers to come to you.
3. Use AI when it makes sense
AI can help you analyze your data to learn about your customers more deeply. But you can also create customer-facing AI tools that provide instant answers to questions and personalized recommendations for products or services that fit a particular customer’s specific needs.
Leaning into AI also helps give your employees more time to focus on the human aspects of their job, like customer relationships or complex problem-solving. However, you can’t just throw AI on top of ineffective processes or bad data and expect it to perform miracles — your foundation has to be solid before you add in AI.
4. Reduce friction wherever you can
Friction kills CX. Nobody wants to wait for a slow app to load, navigate a clunky UI or struggle to set up a password for their new bank account. Reduce friction in your customer service experience wherever you can, as this is often an area where newer fintech companies will shine.
Conducting a friction audit can help you accomplish this goal. During the audit, you’ll identify specific friction points within your customer experience and prioritize which ones to solve based on impact.
5. Offer a consistent omnichannel experience
Whether a customer is stopping in the branch, opening a new account online, or calling your contact center to apply for a loan, they should feel like they are having a consistent, cohesive experience. This omnichannel approach is both a powerful branding exercise and an implicit promise that you will always come through for your customers.
6. Measure whether you’re delivering for your customers
How quickly and smoothly can you deliver what your customers want? This is the essential metric you need to track, measure and seek to improve on, and someone in your C-suite should own it.
7. Earn (and keep) customer trust
By taking the action steps above, you’ll also start earning meaningful customer trust. This is a long-term differentiator for community and regional financial institutions: The sense you’re looking out for your customers in a way that a fintech or a Wells Fargo never could. A frictionless omni-channel experience is also especially effective at building trust.
While this might surprise you, how you manage risk and compliance also affects customer trust. And right now, the moment is ripe to change your approach to one that fits better with today’s business climate.
Financial institutions should pivot to a risk-based approach to compliance and risk management
Even as technology, markets and customer expectations are evolving faster than ever, regulatory agencies have pulled back on some of their traditional compliance oversight responsibilities. As a result, financial institutions have new flexibility to reallocate their compliance and risk management budgets from a compliance-based approach to a risk-based approach.
Rather than approaching compliance as simply a box-checking exercise, a risk-based approach is more adaptive and better suited to navigating today’s risks and business realities. This strategy seeks to:
- Broadly assess your risks and compliance challenges.
- Identify risks as high, medium or low based on potential impact to your institution or customers.
- Prioritize mitigating risks that are higher impact so that you allocate your resources more effectively.
- Implement new or more effective controls to mitigate higher impact risks.
- Conduct ongoing monitoring and reassessment to ensure that your risk-management and compliance efforts continue to focus on where they’ll do the most good.
A risk-based approach protects both your institution and your customer experience
Risks are evolving as fast as the rest of the business environment is. By following a risk-based approach, your institution is able to constantly adapt as new risks emerge rather than getting locked into a compliance checklist that may no longer adequately reflect the latest risks in areas like cybersecurity or AI.
Taking a risk-based approach is also a powerful tool to help protect your reputation with customers. Essentially, a risk-based approach goes hand in hand with your growth efforts by mitigating your risk of incidents that could hurt your customer experience (or draw attention to your institution for the wrong reasons rather than the right ones).
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We advise financial institutions on growth, performance, risk and technology. Let’s talk about how your institution can continue to attract customers, deliver an outstanding experience and achieve your growth goals. Start a conversation.