Reflection and Ruminations

By Kevin Tweddle

Every year around this time I reflect on where the industry has been and where it’s headed, and this year’s ruminations speak to an unprecedented rate of change. From new payments systems gaining momentum to increasing community bank/fintech partnerships and the dawn of open banking, we’re experiencing a seismic shift not just in the products we offer, but in how we do business.

Which leads me to question what’s driving this evolution. From my vantage point the key driver has been solving for the needs of future customers.

The oldest Millennials are pushing 40 and are well established in the financial services landscape, but with Gen Z—the elders of whom are college-aged—we have a digital native group with new expectations. With nearly a quarter of this group reportedly spending upwards of 10 hours on their mobile device daily, technology will likely play a role in their financial lives as well, but perhaps not in the way you might expect.

Increasingly, I’m seeing evidence that this new generation of customer will seek out digital solutions to simplify transactional occurrences—like paying a friend back for dinner. This “transactional” banking can, and will, evolve through new digital technology.

But, when it comes to more complex financial transactions, Gen Z is seeking a banking relationship that they can trust. Fewer than 30 percent of Gen Zers are willing to share their personal health, wellness or financial information online. And 45 percent would not open an account with an online-only bank, with 70 percent indicating that’s because they want a physical bank location.

This shows the importance of both transactional and relational services for this generation. They demand ease of transaction, coupled with knowledgeable advice from experts. In short, Gen Z is looking for that high-tech, high-touch banking that is the sweet spot of community banks.

When viewed through this lens it’s easier to envision why open banking, which improves the digital experience to simplify transactions, has gained traction. We’re also seeing financial literacy built into digital offerings to support ongoing education and extend relationships with customers through value-added services. Community banks are also looking to leverage data and analytics to personalize the customer experience, humanizing the digital solution. And, most importantly, we’re continuing to offer real relationships with our customers, because it matters just as much today as it did 100 years ago.

It’s trendy now to talk about customer experience, but that concept simply speaks to the way community banks have always operated. So, while how community banks do business may change to support a digital-first customer, why customers choose them won’t. Times may be changing, but community banks’ relationship banking model remains a critical differentiator that will serve them well in 2020 and beyond.

Kevin Tweddle is chief operating officer for ICBA Services Network.