The collapse of Silicon Valley Bank in March and First Republic in May of 2023 sent customers rushing to pull their deposits out of smaller banks and redeposit them in larger financial institutions. All of the big banks reported significant deposit increases. While the tide of withdrawals has definitely slowed to a trickle, the damage is done at the expense of small and regional community banks.
So, how can these smaller banks compete and win back the customers they have lost? It’s not a one-size-fits-all answer, but it starts with a focus on the customer experience. It’s simply not enough to put a high interest rate on a CD and expect accounts to fly in the door. Banks that are focused on optimizing the customer experience are growing faster than those that don’t.
According to Zendesk, 50% of bank customers would consider switching banks after just one unsatisfactory interaction with their bank. As a result, focusing on the customer experience in banking has never been more critical.
Let’s face it, the big banks have a distinct technological advantage. They have invested billions of dollars into technology and R&D to expand their digital offerings. In fact JP Morgan invests over $12 billion a year on its in-house technology team (50,000+ strong).
Today’s modern banking customers have high expectations. In a nutshell, they expect immediate service, personalized recommendations, a natural flow between physical and digital experiences and a person to talk to when needed. It’s a tough task. But, smaller and regional banks can still win back these high-expectation customers by focusing on their customer experience.
Our agency has helped many smaller community banks grow to become regional powerhouses. From that experience, here are several key strategies that smaller banks can adopt to enhance their customer experience and regain the trust and loyalty of their customers.
1. Accelerate Digital Capabilities
To effectively compete with big banks, smaller institutions must embrace digital transformation. This involves leveraging technology to streamline processes, enhance online and mobile banking platforms, and provide customers with convenient self-service options. By investing in user-friendly interfaces, seamless account access, and robust digital features, smaller banks can bridge the technology gap and meet the expectations of modern banking customers.
2. Make It Personal
One of the advantages smaller banks have over larger institutions is their ability to offer personalized interactions. By leveraging customer data and implementing advanced analytics, smaller banks can gain valuable insights into customer preferences, behaviors, and needs. This information can be used to deliver personalized recommendations, tailored products and services, and proactive communication, thereby enhancing the overall customer experience.
3. Build Strong Relationships
Smaller banks have the opportunity to differentiate themselves by building strong relationships with their customers. By adopting a customer-centric approach, banks can prioritize meaningful interactions, attentive service, and timely support. This includes empowering customer-facing staff with the necessary tools and training to deliver exceptional service. Building trust and fostering long-term relationships will not only help win back customers but also drive referrals and positive word-of-mouth.
4. Streamline Processes and Reduce Friction
Customers value simplicity and efficiency in their banking experience. Smaller banks can focus on streamlining processes and minimizing friction at every touchpoint. This involves optimizing account opening procedures, simplifying loan applications, and minimizing paperwork. By investing in automation, artificial intelligence, and chatbots, banks can reduce wait times, enhance efficiency, and provide round-the-clock support to customers.
5. Enhance Physical-Digital Integration
Smaller banks should strive to create a seamless integration between their physical branches and digital channels. This can be achieved by offering omnichannel experiences, allowing customers to start transactions in one channel and complete them in another. For example, customers can initiate an application online and then visit a branch to finalize the process. This integrated approach ensures a consistent experience across multiple channels and caters to the preferences of diverse customer segments.
6. Leverage Partnerships and Fintech Collaboration
To overcome resource limitations, smaller banks can leverage partnerships and collaborate with fintech companies. By integrating innovative solutions developed by fintech firms, smaller banks can enhance their digital offerings, expand their product range, and provide customers with cutting-edge services. This collaboration can also help smaller banks stay agile and keep pace with the rapidly evolving technological landscape.
7. Communicate Value and Differentiation
Lastly, smaller banks need to effectively communicate their value proposition and differentiation. By highlighting their personalized approach, local expertise, community involvement, and superior customer service, smaller banks can appeal to customers who are looking for a more personalized and meaningful banking experience. This can be achieved through targeted marketing campaigns, social media engagement, and community outreach programs.
In conclusion, smaller banks can win back customers from big banks by prioritizing the customer experience. By embracing digital transformation, personalizing interactions, building strong relationships, streamlining processes, enhancing physical-digital integration, leveraging partnerships, and effectively communicating their value proposition, smaller banks can differentiate themselves and regain the trust and loyalty of their customers. The key lies in understanding and exceeding customer expectations, delivering a seamless and personalized banking experience, and consistently striving for excellence in all customer interactions.
Could your financial brand use professional help? At Brandon, our team of certified brand strategists and data-driven marketing experts has a wealth of experience in search marketing for banks and other ways of increasing online visibility for clients in the financial industry — via search engine optimization and paid traffic tactics. Further, Brandon’s fully integrated marketing firm can cover the full spectrum of your brand’s marketing needs. To get started with help ranging from a simple website analysis to a comprehensive strategy tailored to boost the performance of all of your marketing campaigns, contact us today.
Scott Brandon
Chief Executive Officer
Scott is the CEO of Brandon and currently leads the Financial Services Marketing Specialty Team focused on driving improved results in an ever-changing, digitally centric world. He serves clients on a wide-range of topics including brand strategy (he is a Certified Brand Strategist), digital transformation, digital strategy, implementation and optimization, product development, research, customer purchase path analysis and marketing programs that drive increased awareness, preference and conversion. He is a proven leader with deep experience in the Financial Services category. He currently serves on the Board of Directors of a publicly traded regional bank holding company and recently led the digital transformation of a large International financial services firm resulting in dramatically increased conversion rates and profitability. When not working, Scott is an avid outdoorsman and enjoys spending time with his family. He serves on the Board of Trustees for Brookgreen Gardens as well as three private company boards.