How credit unions and small banks can compete—minus the big budget

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It is a truth universally acknowledged, that big banks have big budgets. Despite that, credit unions and small banks consistently deliver a better customer experience offline.

Just last year, JPMorgan earmarked $11.4 billion for tech spend. To give a little more context, half of banks and credit unions with under $100 billion in assets had technology budgets of less than $100 million…

Big bank annual tech spend chart

This is all to say that the budget gap is real, and it’s only getting bigger.

But don’t be discouraged. Regional banks and credit unions have a competitive advantage that big banks can only dream of.

You guessed it. consumer trust.

By leveraging that trust, you can generate sustainable growth for your financial institution across your community and beyond. And guess what? You don’t need a Scrooge McDuck Money Bin to make it happen.

Members 1st FCU has been a part of the community for 70 years. We have a lot of trust built up and that’s an important component of what we do. Our members are our neighbors and family members, so we’re hoping that, while we may not be able to move or scale as fast as say, Bank of America, we still have to deliver compelling experiences and add value.

Karen Roland, AVP Marketing | Members 1st Federal Credit Union

Turn consumer trust into an advantage

When it comes to trust, banks unanimously rate highly, but let’s unpack that statement a little more.

Out of 47,000 people surveyed for Accenture’s 2019 Global Financial Services Consumer Study, 60% said they’d be willing to share a significant portion of their personal information—but only with their bank. Financial institutions generally do well when it comes to consumer trust because of the investment they put in security, but nobody does better than credit unions and regional banks and that’s because they’re committed to building relationships.

And in case you ever had any doubts, consider this: 58% of consumers would rather do business with a credit union or regional bank than one of the big guys.

Smaller institutions own the in-person experience—and it’s not even close. That’s because they know how to connect with their customers on a personal level and build relationships that last. Beyond that, they’ve spent years creating deep roots in the community. Believe it or not, that still means something.

Why consumers prefer their banking provider - chart

Unfortunately, they haven’t translated that exceptional in-person experience online, with mobile being a particular sore spot.

If you’re a community bank or credit union, digital represents your biggest opportunity right now. By effectively employing web and mobile, you can start building trust and creating more of those meaningful, long-term relationships you’re known for. Plus, you can do it without breaking the bank.

The future of customer experience is digital

Your success in today’s marketplace begins and ends with the digital. Thankfully, if the chart above is any indication, you know how to deliver customer experience offline. It’s just a matter of translating what you’re already good at to another channel.

The thing is, today’s consumer expects instant gratification. Whether it’s same-day shipping, your favorite Thai dish at your doorstep in under an hour, or binge-watching that new show from any device you want, whenever you want—delivering experiences when consumers want them is critical.

Then, there’s the question of relevance. Can you deploy experiences that speak to the individual? These are the new benchmarks of exceptional customer experience, and they’re enabled through digital.

So, you’re probably wondering: Where do I start?

We talk to a lot of digital teams across regional banks and credit unions and while many are making incremental progress in their online experience, it’s still an uphill climb.

First off, they have to contend with a technical debt that’s preventing rapid, full-scale digitization. Then, there’s the issue of poor data infrastructure. And to cap it all off, these institutions have to seriously consider spend. Biting off more than you can chew is a real concern, so starting small is key.

Become the Netflix of banking, with mobile​

Personalization and customer experience are low-hanging fruit. Especially if you can find a vendor that plays well with others. After all, nobody can afford to spend the time or money it takes to rip and replace. By working with a vendor, there’s also the added benefit of getting help fixing up your data infrastructure, so you can start unlocking the insights you need now.

Personalization works. I think that’s the key takeaway. That’s why Bank of America and all the other big banks have invested in it, and they can get a lot of scale, which is great. We’re still very focused on personalization because we know that our members want us to understand them.

Karen Roland, AVP Marketing | Members 1st Federal Credit Union

In financial services, the biggest customer experience gains will be made on mobile. Right now, even the big banks are lagging behind, so improvements there promise to pay dividends. 

Smaller financial institutions need to focus on where they can drive the most impact right now, and that means looking for a holistic, end-to-end solution that deals with everything, from data management to experience design and deployment. So, instead of investing in a bunch of tools that require complicated integrations, look for a utility tool that complements your existing tech stack. 

You don’t need a big budget to start driving impact across your organization today, though it does certainly help. By starting small and focusing on improving customer experience where members and consumers are most active, you can get some quick wins, which will translate into long-term success.

You own the customer experience offline. It’s time to start owning it via mobile and web, too.

Find out how industry leaders are gaining a competitive edge on big banks in our first fintech wine down.

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