The concept of a “principal financial institution” is dead … What now?
This could be the end of the cross-selling ratio in the banking industry – or “products per member” in terms of credit unions. For all but the largest financial institutions, the “full service” banking model may be in decline as a viable strategy.
Not all mid-sized communities, banks, or credit unions agree with this conclusion, but the management of Solarity Credit Union most certainly does.
“The concept of a ‘prime financial institution‘, something we all aspired to be, has been abandoned,” says Mina Worthington, President and CEO of Solarity Credit Union for 13 years. “The reality is that today’s consumer – and tomorrow’s – has a more fragmented banking relationship. They have a checking account here, a credit card there, a money market account here.
Several factors are driving this trend, including consumer adoption of digital banking and e-commerce. Digital technology enabling these functions also makes it easier for consumers to choose financial products from an ever-growing range of providers. And, of course, many of those vendors are mobile fintechs, big tech companies, and neobanks.
“I don’t think we should assume that banking is an intuitive thing for people. It’s a bit like healthcare – very private, very personal, and a little voodoo. “
– Mina Worthington, Solarity Credit Union
Worthington, who worked at National City Bank as well as several other credit unions before joining Solarity, isn’t as worried as she once was that Chime and others like them will dominate retail banking. Many people like such options, but often for a rather limited purpose.
Avoid the “all things” strategy
“People probably want to hear me say that our competitor is Chime and all these other digital players. But I don’t think that’s the truth. Our competition is anyone who is a community player, ”said Worthington The financial brand.
It may sound “retro” to some, but quite the opposite. For several years, Solarity has been elevating its digital game. This includes the completion of the transformation of its six branches into tellerless consulting facilities, as well as the ability to manage mortgage closings remotely.
Worthington acknowledges that a credit union with total assets of $ 838 million and a marketing budget of $ 5 million cannot claim to compete with Chime, let alone one of the mega-banks.
But the CEO has a clear idea of what is needed for a small community institution to remain an option for consumers and small businesses in his markets. Based in Yakima, Washington, Solarity’s 56,000 members come from across the state. While the credit union still tracks products per member (PPM), she says, the goal is no longer to increase that number to four or five.
( Read more: How big do credit unions need to be to survive? )
Getting all of a client’s business just isn’t possible now, says Worthington. “Consumers don’t think that way anymore because they have so many options. “
“Our approach to the new competition,” she says, “has been to ask, ‘What are we doing really, really well? And how can we do more? ‘ “
In the case of Solarity, it would first be home loans, for which they have moved to a direct-to-consumer sales model. Second, Worthington considers Solarity’s checking account to fall into the same category, because even though the check is a commodity, “we have a good debit card and good online and mobile banking platforms, which makes it easy to check with us. “.
The third line of business that they do well is multi-family residential. “We are one of the preferred lenders in the Pacific Northwest for this,” says the CEO.
That said, Worthington is still looking for partnership opportunities to grow the business.
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The early digital leap is paying off
Solarity recognized the importance of digital technology early on, having seen a steady decline in branch transactions for years before the pandemic struck. For example, in 2015, the credit union piloted a small branchless branch (originally called an engagement center) using smart ATMs and video conferencing.
The digital switchover, however, has gone beyond this pilot and beyond online and mobile banking. With the growing importance of mortgages, Solarity has deployed online notary and remote digital fencing capabilities using video technology to share screens and accept signatures.
“People would much rather meet you by video than get in their cars and have to drive to your house and find parking, especially in metropolitan areas,” observes Worthington.
Despite the success of what they’ve done in digital (and the success of neobanks), Worthington believes that the future of retail banking is not all tech, but a combination of well-trained people and technology.
It’s an expensive proposition, she adds, but there’s no getting around it if you want to stay relevant.
“Consumers want it all,” says Worthington. “They want the ‘Amazon experience’ online; they want you to have physical facilities as well and, oh yeah, they want you to have the best price.
All branches have been transformed
As with most traditional financial institutions, the pandemic has significantly reduced the activity of Solarity branches.
Rather than resist this, because of its investment in branches, the credit union board decided it was the perfect opportunity to help members change their behaviors in a way that benefits them. They launched an active education program for members on the benefits of digital banking, knowing that it would further accelerate the drop in branch traffic, which it does.
At the same time, building on the success of its pilot Experience Center, management has chosen to convert its five traditional agencies to the same format.
The credit union ditched the name “Experience Center” and called them all branches, that’s what people call them, says Worthington. Here are, in brief, the key points of these transformed branches:
As mentioned, there are no more cashiers. These people were trained and renamed Experience Guides. Their job is above all to meet consumers when they arrive and show them how to do their banking online, on a mobile phone or using one of the agency’s smart ATMs.
“I think we really missed the mark in the banking industry. Our members and clients don’t see us as a place to go for advice. We want to change that. “
– Mina Worthington, Solarity Credit Union
For more complex questions, advice and problem-solving, the experience guides refer the member to a financial guide via a video conferencing station set up in several partially enclosed offices along the branch. The financial guides are all located in the center of the Solarity contact center.
Worthington believes that a consultative approach is key to the future of community banking.
“I think we really missed the mark in the banking industry. Our members and clients don’t see us as a place to go for advice. And so we want to change that.
Obviously, this requires considerable training. Solarity has done this with both categories of customer-facing personnel. Additionally, the Contact Center Experience Guides are grouped into eight-person “pods”, each with their own supervisor – effectively a coach – which helps create a more cohesive experience.
( Read more: 10 factors that will determine the future suitability of banks)
Why keep branches?
Solarity’s success in educating its members on how to avoid entering a branch raises the question of the future of branches – or even: why not close them rather than reconfigure them?
In responding, Worthington makes it clear that nothing they have done is cost savings. In fact, beyond the cost of the renovation, they hired more staff and more expensive staff. The reasons for the investments, she says, have been to improve the customer experience and help improve people’s financial lives.
“I don’t think we should assume banking is an intuitive thing for people, even Gen Z,” says Worthington. “It’s a bit like health care – very private, very personal, and it’s a bit like voodoo to people. We have to keep trying to be there for them, and there is comfort in the physical location. “
Thus, she does not see the branches moving away. “I see them getting smaller and I see them change.”
“We’ve found that people don’t necessarily want to hand their check over to a cashier, it’s that they want to engage with our staff. Well, they’re still able to interact with our staff in the new branches, ”says Worthington,“ and even on a deeper and more personal level than when dealing with them at the counter.