On today’s show, we’re going to be talking about digital marketing in the banking industry and the shift from radius-based marketing to digital marketing brought to you by One Touch Video Banking.
Today’s guest is Greg Pellitteri, a former banker, and is currently co-founder and CEO of BundleFI a financial technology, and marketing company that helps community banks and credit unions increase new customer acquisition at a low cost. Bundlefi also helps educate consumers about the value of banking with a local community financial institution and the importance of financial inclusion.
First, there pre-pandemic there was a lot of innovative community banks and credit unions, that we’re shifting their marketing focuses, not away from “draw a circle around the branch” radius-based marketing, but they were shifting focus to digital marketing to acquire customers. Then the pandemic hit, this increased the importance of digital marketing in banking to be front and center. With 59% of customers in 2020 opened an account online, digital marketing in banking industry, played a critical role in online account openings.
Carrie asks Greg, how has it been like for you guys in the shift of, digital transformation in banking, what have you seen in new account openings today vs. 12 months ago
Before the pandemic, most of these financial institutions were not doing any digital marketing in banking. Most of them didn’t have online account opening capabilities. At the time, I don’t think they saw it as a viable option for them because of the technology expense. However, following the pandemic, we increased so quickly in both customer base and staff size just to keep up with digital marketing in banking industry demand from community banks and credit unions. They realized that they were kind of missing the mark with a lot of their marketing efforts at that time. I think they now realize that there is a much better and more efficient way of marketing to consumers who are actively looking for a new banking relationship.
When you go to radius-based marketing, you kind of just blanket the area and it works to some degree, however, what you want to get to is the people that are looking for a new financial institution. The financial institutions have realized that they were behind the eight ball in digital marketing in banking and needed to build their technology or find new technologies that fit into their business models.
Do financial instructions have the right “marketing resources” for digital marketing in banking?
Most internal marketing resources have been with the banks or credit unions for some time, and are used to radius-based marketing, sponsoring local events, doing that blanket six miles around a branch. Can these in-house resources transition to digital marketing in banking industry or is it a completely different animal? Some banks and credit unions are retraining these resources to learn digital marketing in banking, while others are going outside to recruit from retail or other industries.
Greg says, only institutions that are going to have the ability to have an in-house team to do this are the megabanks. Most community banks and credit unions will not have an in-house team to start a digital marketing program from scratch. That would put them 18 months out and, probably miss the mark. Now the megabanks, the Chase’s, Bank of America, and Citibank who have nine-figure digital marketing budgets, can fit it into their budgets. But generally, the smaller community banks and credit unions have to go to the outside to get the help you do this. From digital marketing in banking industry standpoint, to acquire new customers with PPC or paid search, if they are only willing to put a small budget into that a month, they will get nowhere with an internal team. You need an outside team that knows what they’re doing to get into the weeds and find those customers that you’re looking for.
What do Customers want in a new community bank or credit union? DIGITAL
A recent study, when asked if customers were going to be with your financial institution in 12 months, found that customers would jump for more digital services. Two-thirds of Gen Z and three-fourth of Millennials would jump for more digital services. Carrie asks Greg, what are you seeing that consumers are wanting from their local bank that might’ve been different than, what they wanted a year ago?
Greg says they all want a very robust digital banking package. A lot of institutions are still going out there saying, we offer online banking and I’m like, that is phenomenal 20 years ago.
Most generations are looking for a much more robust package being able to connect with other institutions, being able to connect with their friends and family, and colleagues through banking apps. They’re always looking for love reward programs. It is huge. Some of the strategic partners that we work with offer a rewards product through financial institutions throughout the country. So whether it’s a free checking account that you get a reward for or even a paid account, in some instances that give you better benefits and can make the relationship with the institution more robust.
Can community financial intuitions fully open an account digitally? Without coming into a physical branch if your core doesn’t support it?
Now, the biggest problem we see is those community financial institutions cannot fully open an account online and can only take it so far online. They might be able to take it 80% of the way there but then to fully open that account, they make the customer go in person to show a driver’s license or physically sign a document. Customers get frustrated with this and it creates big drop-off rates in conversion and application throughput rate. Second, they can get these new accounts in a digital method, but cannot service them digitally. Well, I know a lot of instances, there’s not a good enough follow through with those digital customers because they’re so used to having that customer come into an actual branch that they’re having a tough time keeping up the digital demand. The workflow has to change to accommodate the bank customers who want digital services beyond account opening.
They need to get a real robust digital program to keep the happy digitally without getting rid of the branch system. I think there will always be some brick and mortars but having some hybrid with less staff less, less cash in the drawer.
A lot of customers are getting around this obstacle by augmenting their digital marketing in banking workflow with tools like video banking. Community banks and credit unions are using video banking to help increase conversation rates and application throughput rates. Besides, using 4k image capture for identity verification to complete the last mile of account opening. Greg points out that in-house education to staff and has to come from the top down. A culture shift has to come from the CEO down to the frontline staff. The days of being so frightened of this stuff that everything’s coming in is a fraud is gone. There’s a ton of ways to mitigate fraud when it comes to operating digitally. And there’s plenty of institutions out there that are digital-only.
What culture changes are needed for digital marketing in banking to be effective?
- From an executive perspective of a financial institution, first of all, staff education.
- Technology is not cheap and there’s no way to do this cheap. If you’re doing it cheaply, it’s going to come out cheap and not work well, you have to look at that ROI. And where does that technology get you in the future? Where does it get you to compete compared to your competition in the area? Now, while I said technology is not cheap to build, you find companies to work with, you can get very inexpensive effective technology to create a total solution with third-party vendors out there.
Don’t Just Think About Customers Now, Think About Future Retention (Digital Servicing)
You’re going to see a more robust customer base, and guess what, the 18-year old that you can get to start banking with you digitally now we’ll have a business in the future. So you have to look down the road and say, what’s the customer base that we’re looking for. And if that customer base is going to increase X in revenue, exponential growth for the institution happens for the next 10 years.
While we’re talking about the digital marketing side in the banking industry, the second critical point is when you’re looking at the ROI, you have to be able to service those customers you acquired digitally. You have to be able to increase the wallet share, number of products for these customers and want to have a digital relationship. Financial institutions have to invest in digital tools like video banking on the servicing side as well, to retain them. The average lifespan of banking customers is two to three years to break even. If you are good at digital marketing and cannot service these customers digitally, then you are in the digital churn game.
What areas are critical for servicing through digital banking? Video Banking for Servicing?
- Relationship management
- Account Reviews
- Lending Products
- Business Banking
- Commercial Lending
- On-screen guidance for applications and online banking
Greg states he’s a huge fan of video banking. I think it’s from the account opening phase, servicing to cross-sell. It is a huge advantage for any financial institution that’s using it. I think it gets the institution feeling better about the process when they can see the person face-to-face. They can look into their eyes, real-time. Also, the digital paperwork in real-time while on video would be very appreciated by the younger demographic.
However, he would prefer it and he’s not a Millennial. It’s going to be more important to have that face-to-face through video to connect directly to the financial institution. People like to bank locally to feel valued and have that high-touch relationship. Community banks and credit unions have to maintain that high-touch relationship and give customers the channel of choice.
What should bank executives prioritize in digital for 2021?
- Build their technology infrastructure. Also, there is a big opportunity in the blockchain.
- Prioritizing their digital marketing efforts.
To learn more about BundleFI or One Touch Video Banking. To download your copy of the White Paper: Digital Bank Transformation: Moving the Needle.
The study referenced above.
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