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Why a community bank needs its own mobile banking app

Senior Business Analyst and Financial and Banking IT Consultant, ScienceSoft

Community banks have always been experts in face-to-face, customer-centric interactions which earned them popularity among Americans. But is this enough today to retain existing customers and gain new ones?

Turning to the strategy of banking giants, branch-based banking is no longer driving the growth making them invest in mobile banking development. E.g., Bank of America has been selling off hundreds of branches as it turns toward the mobile banking market by tripling the budget for digital banking initiatives in 2016. Thus, staying aside from major banking trends can result in additional risks for the development strategy of community banks.

Mobile banking app for community banks

Moreover, due to the rising interest in mobile banking, in 2011 the Federal Reserve conducted the first survey devoted to consumers’ use of mobile financial services. Since that time, consumers’ engagement in mobile financial services has continued to increase, reaching 43% in 2015. Those community banks that keep up with existing tendencies can gain additional benefits revealed further in the article.

Facing high competition from digital banking adopters

1. From banking leaders

The number of mobile banking users continues to grow at the nation’s largest banks. JPMorgan Chase announced the largest number of mobile users amounting to 22.8 million active mobile customers in 2015 (a 19.5% year-to-year increase). Wells Fargo reported a 14.9%-year growth reaching 16.2 million active customers of mobile banking. Bank of America claimed to have 18.8 million active mobile users, which represents a 13.8% yearly growth. As stated in a recent report from Javelin Strategy & Research, for the first time in the US banking weekly visits via the mobile channel exceeded branch visits.

As the appetite of banking giants to attract mobile banking users grows, they will target community banks' customers. A recent survey conducted by J.D. Power and Associates shows that the biggest banks got higher scores in overall customer satisfaction than their smaller peers, primarily due to mobile banking development initiatives. It has surpassed all other channels and has become the most satisfying one. It means that if major banks continue driving customer satisfaction through mobile banking, community bank customers can switch to more attractive proposals.

2. From non-bank financial companies and retailers

For example, Walmart has developed a free mobile application and a variety of check cashing and wire services such as GoBank and BlueBird, delivered in partnership with Green Dot and American Express respectively. Several financial services providers, such as Moven and SimpleBank, offer banking designed specifically for smartphones. Their solutions have no maintenance or overdraft fees and target customers nationally due to the absence of branches. Fintech solutions can also offer numerous customer-oriented tooks typically unavailable at community banks (e.g., Mint, Yodlee and HelloWallet focus on providing personal finance management tools for customers.)    

It all signals a fierce competition in banking which is defined by a variety of institutions offering financial services. That is why staying ignorant of existing trends means losing a market share.

So how to win the competition with banking giants that have much more marketing resources and abilities to introduce more services?

Community banks should consider mobile banking

Possessing limited financial resources means that community banks need to define a mobile banking strategy as opposed to just introducing a mobile banking application.

To drive mobile engagement, a community bank should focus on its main competitive advantages that stand it apart from all other types of banks. Satisfying those specific needs of existing and potential customers will help a community bank to address their target market with a more innovative proposition.

Based on our practice in mobile banking apps development, we translated community banks’ core competencies into the following elements of a mobile banking strategy:

1. Upholding the personal touch, remotely

Though larger financial institutions have allocated significant financial resources to support their initiatives in mobile banking development, community banks have a deeper awareness of their customers due to the enduring focus on meeting the needs of locals.

A mobile app can help community banks retain long-time customers, even when those account holders have relocated outside the community.

Besides, mobile banking can bridge the gap for customers in geographically remote or rural areas. Supporting this idea, Jeff Dick, CEO of MainStreet Bank at Fairfax, said that mobile banking technology allows them to be much bigger, which they use as a growth strategy instead of physically putting branches everywhere.

2. Fostering the use of customer-specific features

E.g., given the fact that a higher proportion of older consumers who generally use small local banks are still likely to use checks, the majority of community banks reasonably introduced the function of mobile check deposits. Yet, Futurion’s latest 2016 Mobile Deposit Benchmark report revealed that community banks had no net growth in the adoption of this feature over the past 3 years! This dead point may result from poor customer experience or pricing. That is why all community banks should not only apply new features, but also consider how to make current mobile banking functionality user-friendly.

3. Taking into account both individuals’ and business customers’ needs

In a recent study conducted by the Aite Group, 86% of community banks had the standard function of paying bills via their mobile app, while only 49% had the tools to help customers with budgeting. Only 48% included the feature to categorize expenses, which may be of additional value for businesses. These missed opportunities can result in customers switching to other financial applications widely available on AppStore and Google Play. 

4. Catering to local businesses

Community banks can benefit from the cumulative effect brought by the joint use of banking CRM software, ERP, etc.  and a mobile application. E.g., a banking app can locate and display the nearest merchants that provide discounts based on users’ preferences and location. By helping to drive sales to partner merchants, community banks will have more chances to incentivize credit card transactions and increase the number of loyal businesses and customers. Such a decision will connect community banks with merchants and customers within a system of convenient payment services.

5. Considering shifts in consumer tastes

Those community banks that amplify their effort to satisfy the needs of the older generation as their long-term and most trustworthy customers should think of the directions for future growth. The 2016 Millennial Money Mindset Report underscores that nearly 42% of millennials want to use exclusively online banking services. This growing population never knew the world without technology. It implies that a mobile banking application can become an effective interactive tool that would appeal to a younger generation of community banks’ customers.

Conclusion

Convenience and seamless transactions are going to be the major factors for banks’ success in the coming years. Providing a remote access to most banking operations, a mobile banking application will undoubtedly become one of the main means to drive customer engagement and satisfaction.

Those community banks that are having hard times keeping up to the competition with banking giants can still catch up by introducing mobile banking apps. Serving locals’ specific needs, community banks can better engage existing customers and attract new ones winning back their market share in providing relevant and convenient services. As said by Terry Griffin, Vice President of the Chicago area of the Community Bankers Association, “once the technology has proven itself, it’s worth utilizing.”

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