Digital Neighborhood Banking
Digital neighborhood banking means using the bank's digital platform to extend the neighborhood beyond the traditional range - to engage personally & with customers & non-customers alike
Photo by Tapio Haaja on Unsplash
New Neighborhood Banking Models
In the last issue, I discussed the ongoing need for neighborhood banking. While people, small businesses and corporations are accommodating more mobile and other browser-based ways of accessing banking services into their lives and business routines, all will still want in-person interactions with bankers.
Will this be uniform? No. Not all people and companies will respond in the same ways. Not all customers will use the same ways to interact with bankers, banks every time. Neighborhood banking won’t be one thing. It’s not about building more branches, but it might include new branches. They will be branches for the future, though, not for the past:
There’s no silver bullet, but bringing digital everywhere will help you accommodate different customer needs for personal interactions.
I’ve identified some emerging models and a new digital neighborhood banking model.
Curbside banking
One model for addressing neighborhood banking needs is curbside banking – as Citizen’s Bank in Edmonds, Oklahoma deployed pretty early on during the pandemic to respond to customer needs to transact with a teller or banker. Curbside banking serves an important need for services to the community when people can’t or are afraid to enter the branch itself. It follows on the explosion of curbside food take-out and shopping that both local restaurants and national chains have instituted since March 2020.
Micro-Branch
Bryan Clagett identified the “BankoMat’ — a much smaller “micro” footprints that banks could adopt to bring branch banking to specific locations. The BankoMat makes a point: identify where customers are and be available there. Not a new idea (remember banks inside grocery stores?), but perhaps more practical in a pandemic-influenced business environment. As consumers, for example, change their behavior to limit trips outside their homes depending on public health concerns, creating micro-branches that they can
With humor perhaps, Clagett also points out the importance of knowing the real needs in the bank’s neighborhood with the floating branch.
While funny, it also makes a lot of sense. In a community where lots of customers spend time on boats, this ability to service the boating neighborhood makes some sense. In a digital age, this bank might think about how customers being on boats may affect their payment and transaction behavior as well as their communication needs.
Appointments
Bryn Mawr Trust is moving to limited walk in service towards an “appointment only.” Interestingly, this model seems to be the result not only from increased use of mobile and online banking and pandemic lockdowns, but also from most of its corporate employees working from home. Forced to learn to work with remote employees, the bank decided to rethink its branch service in the face of a long-term pandemic.
As to its 29 branches, Bryn Mawr says many will be “limited-service drive-up locations,” with others remodeled as “client centers where we will physically meet with clients via appointment only,” instead of the old walk-in-anytime service model.
Perito sees Bryn Trust as a model: “Now would seem to be the time to make these changes.” He expects other banks to make similar announcements as they report grim first-half 2020 profits later in July.
These new models for neighborhood banking address the declining need for large physical branches and increasing need to create new ways to operate physical branches. I believe there is a new model for neighborhood banking – one that does not rely only on – but can include - the physical branch: Digital neighborhood banking. (Yes, if digital is everywhere, then “digital” is redundant.)
Digital Neighborhood Banking
The problem with neighborhood banking in my neighborhood is that the banks in each neighborhood seem restrict themselves to the customers who see or know them in their neighborhood. The banks in one physical neighborhood don’t appear to understand the opportunities for them outside that neighborhood. So, with the traditional scope of neighborhood, the banks literally don’t see, know, care, or attract customers who might benefit from their services because they live in a “neighborhood” they have defined as “less affluent” or “downscale” or otherwise disqualified. They aren’t the right demographic. This is the way banks have figured out where to put physical branches — which physical neighborhoods do they want to be in.
Yet in the case of the credit union I mentioned at the start of this, all of the people who live in other neighborhoods qualify to become members. How many of the people in those neighborhoods know about the credit union, much less are members if only to take advantage of car loan rate? How many people who didn’t want accounts with larger retail banks know about the credit union?
Similarly, how many people would use the community bank if they understood just how many PPP loans that bank wrote? Or if they knew that the bank lent their favorite coffee shop owner the money to open a second location?
Now, of course building branches in all of these neighborhoods costs a lot of money. I don’t discount the idea of creating physical branches in some new physical neighborhoods. But why limit expansion to the physical? Why not tie the physical and digital worlds together? (yes, I’ve heard of the word “phygital”)
Identify new local digital neighborhoods
In 2020, soon 2021 and beyond, neighborhoods don’t have to be restricted by physical residence. Digital neighborhoods can include physical neighborhoods of course. Unlike traditional Philadelphia neighborhood thinking, people don’t have just one neighborhood. We live in many. Some of our digital neighborhoods overlap; some are exclusive. Some digital neighborhoods overlap with our in-person neighborhoods. Digital means we don’t have to shop, eat, and get our hair cut in the same physical neighborhood just because that’s the way it’s always been done.
Digital neighborhood banking – or just neighborhood banking because everything is digital – isn’t just about providing the same traditional banking products and services. It could be a way to create an umbrella for all those neighborhoods. But not just that. Digital neighborhood banking facilitates the networking and exchange between and among neighborhoods.
What could a digital neighborhood banking model look like?
To think about what digital neighborhood banking could look like, I thought about the World Central Kitchen. (yes, I know it is not a “perfect” example. It has plenty of challenges and failures as well as successes.)
The World Central Kitchen Model
The World Central Kitchen is an innovative model for emergency food services. WCF is a non-profit but it was started by a chef, Jose Andres. It is scalable, yet intensely local – Everyone needs to eat, of course, but WCF responds to the specific needs of the people in specific localities. Who they fed and where during the US Federal Government shutdown in 2019 is different than who they fed and how people in cities and rural areas hit hard by the pandemic and job loss:
and how they are preparing to feed people in Mexico waiting for Hurricane Delta:
Key to the success of a project is identifying the people who need help and provide it in the way that accomplishes the goal of feeding them. WCF doesn’t use the old definitions of who needed food - for example, impoverished people. US Federal employees who had full time jobs but during the 2019 shutdown didn’t have money to buy food and pay their other expenses. For the US elections, WCF partnered with local restaurants to provide food for citizens waiting in long lines to vote.
Why do I think this is a new model for neighborhood banking? WCF has transformed chefs, many of whom have been working in high end restaurants, into a team who address the food aspect of crises around the world. The organization has dynamic models of food delivery that are depend on the type of situation. It is a intensely local and relies on partnerships at the international, national and local levels to identify and meet needs. The models change depending on the new data, who needs the food and past experience and failures. The organization allows new models to emerge: Based on its experience in Haiti, WCF created culinary arts school in Haiti to help train chefs who can, in turn, feed others. In other words, WCF facilitates the connection of food, people who need food, people who cook food and people who want to learn to cook food.
What does this mean for banking?
As the Citizen’s Bank survey showed, despite the pandemic, consumers and business owners alike still want in-person advice regarding personal finance as well as help with complex transactions and business financial decisions. To do these things at the physical branch might be challenging for a couple of reasons:
The pandemic. As the pandemic re-appears in a region, city, country, governments may restrict both public mobility and bank in-person operations.
Scale. Providing face-to-face conversations for all consumers in every neighborhood is hard to justify now. Yes, consumers want face-to-face conversations but they are visiting the branch less frequently. Which means more banks cannot afford expand the branch into neighborhoods.
Capabilities for Neighborhood Banking
Banks that want to facilitate digital neighborhood banking must be able to work with all of the business and IT teams — including groups like marketing - and to leverage digital banking technology. The bank - and the digital banking platform must be able not only to deliver transactions, but also to reach out to people and companies in the “neighborhood.” What are some of the capabilities that your digital banking solution - and your bank - must do or have?
Reconfigure or create advisory services and products that are personal, individual and local. This goes for consumers, small business owners, and commercial customers. Don’t assume you can offer advice the way you did before. Before the pandemic and before so many customers starting your mobile app more frequently and using Zoom in their daily lives.
Create a customer experience approach to offer as many ways to communicate and engage with customers as possible. Let the customer lead the way in talking with you. Offer multiple pathways to interact with customers. Avoid thinking of a single path – such as “all customers will use video conferencing to talk to a relationship manager or branch manager.” This means coordinating, managing and deploying many types of technologies – such as video, in-person, voice-to-voice, text-based. Financial institutions like Vanguard already incorporate this into their approach to customer experience design.
Update voice & chatbots to provide advice and face-to-face interactions. Many banks have deployed chatbots to have conversations with customers — that tend to resemble texting with an avatar than a conversation with a human. Many chatbots (and not just those deployed by banks) are rules-driven and confined to a specific set of questions and answers. They don’t actually learn anything. The experience can be more frustrating than being caught in an endless customer support IVR loop. Extend chatbot technologies to provide advice, real advice based not on rules but on natural language processing technologies. An example of a company that provides this is Uneeq.
Know the ideals and priorities of your customers. Promote them – and not just through sound bites. Think through loyalty and rewards programs, products and services. Many years ago, a new community bank put up posters in a local & beloved coffee shop. The bank had provided financing and the posters made that connection. The people in my neighborhood prioritize patronizing local small businesses and those posters made that connection to the neighborhood priority – and created a connection between the bank --through its customer -- to the community.
Be a good neighbor. Connect people and businesses through money and other interests/needs. To do this, you must create digital banking architecture to support partnerships, ecosystem and these networks and neighborhoods.
Reach out to non-customers. This is a corollary of being a good neighbor. An obvious way to do this is to provide digital bill pay capabilities to non-customers. This is a capability that makes even more sense when people who usually pay their bills in cash at the biller may be unable to do so. Public transportation may be limited or the bill payment center is closed. PGW in Philadelphia closed all of its payment centers in March. blip is an app that can do this. (Full disclosure: I am advisor to blip. However, they didn’t know that I’m writing this. Well, I guess now they do.) Banks in other bank markets such as Latin America have been offering this capability for years.
Use Open Banking and a digital banking architecture to create the products, services that leverage knowledge of neighborhoods and support connectivity.
Remember: Banks and digital banking solutions do not create a neighborhood. They can encourage, support & nurture them.
Who publishes this newsletter?
I’m a former Gartner analyst, now an independent analyst & consultant. I’ve worked in and covered the banking industry for 27 years. I think & write about digital banking — but also indulge my other interests, women in tech, startups - especially those in the US Midwest & South Eastern Europe), leadership & change, and AgTech.
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