Three Keys to Fueling Growth and Differentiation in the Modern Banking Landscape

Greg Smith

May 30, 2023

With the recent bank failures, it's no wonder there's been a lot of media coverage of the banking industry. Customers' trust erodes when they see story after story and anticipate more upcoming risks - real or perceived. But even in this market, we don't believe it's the time for banks to bury their heads in the sand.

Here we explore why creating a customer-centric strategy in three key focus areas will build customer trust through personal differentiation and fuel your bank's growth.

There’s a lot of noise around the banking industry these days. Loud noise. Failing banks. Government takeovers. Financial ruin. If you were to listen to the media, you might think all trust in regional financial institutions was lost. And the truth is we’d be foolish in publishing this post if we tried to convince you that everything is rainbows and unicorns and that the banking sector isn’t still facing lingering risks.

The truth is, it is. Among them has been the steady stream of rising interest rates over the past year and the decrease in value that banks face with their long-term investments that are sensitive to those increases (although Chairman Powell recently hinted that the Fed may be done raising rates for the foreseeable future). In simple terms, those rate hikes can reduce banks’ equity and increase risk with the result being that they have more liabilities than assets.

Add to that the fact that regional and mid-sized banks are the nation’s largest lenders for commercial property development (a quarter of most U.S. banks’ assets are commercial real estate loans) and that many of those loans are coming due in the next couple of years. When they do in fact come due, there’ll be a need to refinance and the higher rates naturally mean there’ll be an increased risk of default that banks have to consider.

But we’re strong believers that now’s not the time to pull back and wait for things to “blow over”. There are strong signs that amidst all the media coverage “the U.S. banking system is sound and resilient.” According to Axios, “Even if you include Silvergate, the crypto bank that shut down without failing, the 2023 banking crisis remains reasonably contained.” Many industry experts and top execs also believe that the crisis is over and that although the sector still has some tough economic conditions in front of it, “no other prominent lenders appeared to have a similar set of urgent challenges” to those that recently plagued SVB, Signature Bank, and First Republic.

Of course, consumer confidence in their deposits is going to be key to stability and mitigating the risk between assets and liabilities for banks going forward, but for those banks that are still interested in growth (which, let’s be real, is still the goal) then customer-centricity is key. And that means that the recent, so-called crisis isn’t the only challenge banks face in standing out, and more importantly growing. Customers generally have no concept of how their bank is different. Or how their bank’s products, services, and tools meet their specific needs at just the right time.

To help illustrate that point, below we’ve taken a closer look at the current market—going beyond just the recent headlines—and we dive into three key components for growth as banks make their way into the modern banking landscape.

Banking is Both Underwhelming and Overwhelming

In blunt terms, banking has become a sea of sameness. Regardless of the institution, customers are presented with the same workflows, identical offerings, and experience the same limitations—because most banks are being powered by the same platforms with almost no differentiating customizations.

That sea of sameness that customers are being presented with comes down to the fact that 90% of new and existing banking platform deals are won by the same firms. In other words, regional banks are commoditizing the banking experience by deploying the same out-of-the-box technologies and identical workflows as their competitors.

When there’s no clear differentiation, there’s nothing to compare against, so both the existing experience and the process of picking a new bank becomes underwhelming. Customers aren’t motivated to switch because the perceived effort outweighs the reward and there’s simply not enough differentiation from bank to bank.

Meanwhile, big national banks like JPMorgan Chase are rapidly introducing new offerings, with 26% of their growth in spending focused on technology including new product creation, startup acquisition, infrastructure update, and the ability to harness data in new ways. It can feel overwhelming and impossible for regional and super-regional banks to keep up, much less stand out.

It’s a Digital-First Race to Next

Next gen customers in all aspects of banking expect digital-first, personalized, self-service solutions delivered through intuitive interfaces. The less work on their part, the better.

Their expectation is that anything can be done at any hour of the day and that those experiences are seamless and follow them across channels. That applies to their banking needs as well. They don’t simply want to conduct the “day-to-day” tasks of banking online. They expect that more complex banking transactions can happen with minimal clicks and in the palm of their hand. In fact, according to Forrester, over half of US online adults with bank accounts expect that they can complete any financial task they have via mobile.

75% of millennials would switch primary financial organizations for a better mobile app.

There’s also been a strong movement toward digital-only service providers—disruptors if you will—of specific financial services solutions. According to a recent Forrester report, 44% of all adult banking customers and close to 60% of Millennials are open to managing their money with institutions that are not traditional banks. That same report also indicates that these direct-to-consumer Fintech disruptors are ranking much higher on differentiation with customers than more traditional banks.

For mid-sized, regional, and super-regional banks this poses the challenge of losing share of wallet and eroding customer loyalty. Not insignificant concerns by any means.

So how do banks stand out and, more importantly, grow, when their customers don’t even know who they truly are? When they have no concept of how their bank is different from that upstart they just saw advertised in their Instagram feed, or for that matter, what they offer that specifically meets their unique needs?

Three Components for Growth in Modern Banking

To both narrow and deepen engagement with customers, there are three key areas of focus critical to creating differentiation and contributing to growth.

Strengthening the Foundation

Without a proper foundation, there’s nothing to build on. This is exactly why the first key area of focus is centered around strengthening your foundational layer. This must be fueled by a solid understanding of what your unique target customers care about most. By homing in on the foundational components behind the most impactful channels, you can avoid the pitfalls of trying to upgrade everything at once. You can move beyond the sea-of-sameness, out-of-the-box platform solutions that have become table stakes.‍

Keys to success:

Developing a deep understanding of how your services and products are currently being delivered to your customers and the experiences your customers are having with them.
Understanding what your customers value most, from account origination through onboarding to capitalizing on additional products and services as their financial needs evolve.
Reviewing and analyzing your banking software vendors through the lens of the insights garnered by the understanding highlighted above.
Seeking assistance in accelerating digital transformation from objective outside experts.
Freeing your teams from repeatable technical tasks like platform upgrades, migrations, and user provisioning so they can focus on growth-centric improvement.

Create Impact

There are certain moments when customers are interacting with your brand where they are most receptive to innovation. Where they’re hungry for something more, something different, something better, and at times, even something that maybe your bank doesn’t offer or that doesn’t exist yet.

It’s important to recognize those moments—the moments that matter—and capitalize on them in a meaningful way. To target the moments in the customer journey where the experience can be amplified with improved self-service. Where digitally-enabled services can be layered in to help customers open accounts, reach goals or find information about loan products. It’s these moments where simplicity shines through the clutter. It’s these moments that deliver impact.

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Keys to success:

Achieving alignment on feature prioritization across channel leadership and functional areas.
Validating impact on user engagement metrics and customer retention.
Upskilling teams in CX, product development & lifecycle management, and niche technical knowledge.

Get Personal

When you create personalized experiences, you intertwine your customer with your brand in a way that’s almost impossible to pull apart. But, dynamic personalization requires understanding your customer beyond just the segment they fall into. It means you need to know what their unique goals are. And personalization requires responsive technology and flexible data environments to help you anticipate those needs and truly drive delight.

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Keys to success:

Data Strategy and platform migration to generate actionable insights across the core systems.
Crafting and exposing APIs that enable tailored front-end experiences.
Personalization platform evaluation and software selection.
Narrowing user segments across personal banking or the commercial banking channels.

The Right Partner Can Help

‍You don’t have to do it alone. Finding the right partner to help you start your journey can make all the difference.

At G2O, we understand banking and all the complex intricacies that go into making sure your customers have what they need. We can help you acquire new customers, enhance your segments, retain and expand your existing customer base, and control costs.