Now a few months after Bank Transfer Day, we wonder how happy the switchers are with the online services of their new community bank. Does it have an iPhone app? Is it easy to use? How about its web-based online banking? How far does making a statement by bailing on a big bad bank get you if the bank you switched to starts annoying you? How long will the love last?
Much has been made of the occupy wall street movement being digitally connected. Media portraits of OWS people often mention iPhones, regular tweeting, Facebook posting. It might only occur to people inside the banking industry that such young, digitally connected citizens are also highly likely to be regular users of online banking. They are also highly likely to be users of mobile banking, and may even use a smartphone as their exclusive way of interacting with their bank.
You won't normally see an OWS person visiting a branch (unless they are closing their account!). These are the same people banks have been building online banking services for, the future earners that most banks want to woo and keep.
One thing is clear in all of this: with OWS and the general sentiment toward big banks likely to continue for a very long while, community banks are looking at an opportunity.
The odds against community banks
The online services of community banks are sometimes quite good. But community banks have a few things working against them.
1. Online banking vendors lack UX competency
The vendors that sell the software community banks use to deliver online services have products that are very inconsistent. It is unusual that a community bank can buy online banking software off the shelf that is as easy to use as say, Bank of America's online banking. This is not universally true, especially since the online banking user experience of some national and regional banks is often less than stellar. But generally bigger banks spend more time and money tweaking online banking based on usability testing and other best practices in user interface design than most vendors who sell software to community banks do. In fact many of these vendors do no user-centered design of any kind, and their products show it.
It is not simply a matter of features. Most online banking software has many of the same features that big banks have. They have mobile banking of some kind. They have PFM--which all looks good if you are making a feature comparison grid. But too often a feature is implemented by a team that isn't lead by user experience designers.
2. The banks also lack UX skills
The situation gets worse with community banks because they are also very unlikely to have UX competency. New implementations of online banking software are usually lead by teams made up of marketing (product people who may have ideas about what the customer wants but aren't completely sure how to translate that into interactive designs) and IT (who may have some previous experience programming or doing systems administration prior to becoming a manager). For vendors, most of the pre-sales discussion and post-sales work is focused on the complexities of transitioning from one system to another. There might be quality assurance testing. There might even be some kind of user acceptance testing, but there rarely is any kind of the higher level work that UX designers would do. If the user experience is sub par, it is likely to stay that way.
3. The core systems dilemma
None of this would be too terrible if community banks were not frequently hamstrung by their core systems (the software that makes the bank itself go, and which online banking systems must interface with in some way). Instead of being able to pick an online banking vendor based solely on the quality of the user experience it provides out of the box, too often community banks are stuck picking from a very short list of vendors that have an interface to the core system API.
But community banks have a few things in their favor
Despite all the challenges, community banks do have a few things in their favor besides the current swell of public sentiment.
1. They can be more nimble
Because they are smaller, they have nothing like the kind of organizational and systems complexity that big banks deal with. Community bank teams are smaller and smaller teams are often more effective getting things done. All of this depends on having a clear understanding of the goals of the project from the top of the org chart. It can't be a skunkworks project. It has to be complete organizational transformation, a top-down recognition that delivering banking services in the 21st century is all about making a good digital customer experience.
2. They are a bank
Community banks have one big thing going for them. They are banks. For years we've been hearing that Silicon Valley is going to come up with a model that is going to dis-intermediate the banks, that we are going to see a service that makes good on the promise of PFM, account aggregation and simplicity, and render banks obsolete. It hasn't happened because it turns out starting a bank from scratch is something very few are willing to try, regardless of how big or how much money they have. This is why there is no Google Bank or Bank of Microsoft, and why services like Mint have little impact.
So community banks have an advantage precisely because they have a bank charter of their own, because they know how to operate as a bank and be regulated as a bank.
What should community banks do? The manifesto.
OWS is sometimes criticized for not having a clear agenda. Community banks should.
1. Pretend you are a startup
Startups invent or reinvent. Community banks need to do the same from within their organizations. Startups attract top talent not because they pay more, but because they are trying to change something. Hire employees and contractors based on their experience developing good customer experiences in any industry (not just banking). Hire people who are used to accomplishing a lot quickly with few resources, and give them the power they need to get things done. Remove anyone who is standing in their way. The payroll of your average community bank is much more than your average startup. Think about it.
2. Develop products that are online products
Part of the problem that all banks have is that they have way too many products. A long product list doesn't work well online for a variety of reasons, the principle being that complexity is the bugaboo of good customer experience. There's a reason why BankSimple (now Simple) is simple. Overhauling online services is likely to mean overhauling products too.
3. Let the lawyers innovate too
Compliance and risk often put the brakes on innovation at banks big and small. As well they should. Banking is serious business and when compliance and risk get out of whack bad things happen (like back in 2008). But what is often missed is that risk and compliance also can innovate, and indeed must innovate to make everything work the way it should.
If we were running a community bank, the first thing we would look into was what was needed to expand our footprint to serve more customers online (whether we had branches in the area or not).
Looking forward
Humans have a higher tolerance for pain if they are working toward a goal. And for now the goal for many consumers is to use community banking services. How long this will last is anybody's guess, but it is surely community banks' opportunity to lose.