A recent road trip for our annual beach vacation got me thinking about…banks. Not the omni-channel, application-enabled, smartphone friendly ones that many of us urbanites are used to, but the ones that have doors, windows and associates that you are familiar with.
As we stopped in a small town in southern Georgia it really struck me the lack of what many of us see as basic services - a few gas stations, a small hardware store, a real estate office, a couple of mom and pop restaurants, and that was about it. There were no banks – I was in what has been termed a “bank desert.” If I wanted to deposit my cash into my account, I had a problem. As someone who rarely carries cash anyway this may not be much of an issue, apart from the traditional Girl Scout Cookie sales at the start of the year. However, if someone wanted to talk to a human face-to-face about a small business loan or how to help with a mortgage, it meant getting back on the interstate to find a brick-and-mortar bank in a larger town or city.
Southern Georgia is not alone in this growing trend. The Wall Street Journal has reported that of the 1980 counties defined as “rural,” over 30% do not have a locally own community bank with 35 counties having no banks at all. For those small business owners whose customers are cash orientated, it is a huge problem. Time is something that we all do not have enough of, and adding an extra trip to the next town takes consumers away from running their business or spending time with family.
With fewer branch locations, the banks need to rethink where they should be situated – AI has long been used for optimizing resource placement and rural bank location should be no exception. Once the most appropriate location has been determined, banks then need to rethink the in-person experience for their customers. Gone are the days when people were happy to pick up a brochure and figure out what the best product was for their needs.
We all know that people are expensive; deploying video facilities to allow the experts to engage remotely is key. The banks also need to support those experts with the information and guidance on what the best solutions are for that specific customer. There typically may not be one single option, so the ability for systems to produce a set of differentiated offers is key.
One such approach has been termed the Alternative Deal Structure – where an optimization engine is used to generate a series of appropriate and differentiated offers. This capability was first deployed in the auto finance segment with the objective of reducing the back and forth associated with buying a car. Today, leading organizations are using this across personal and small business financing. Ideally the visit to the branch is a one and done experience, but for higher value transactions that will likely not be the case. This is where the an omni-channel engagement model kicks in – initial session in the branch followed by mobile alerts on the status of the application, mobile uploading of documents to meet the stipulations of the credit facility, and rounding it out with electronic document signature.
The reduction of bricks and mortar banks has a significant impact on the services that are available in rural areas. The Census Bureau states that 97% of the USA is defined as rural, yet it holds less than 20% of the population. This will drop further as more people move into urban areas. Along with small business owners, those with low incomes lack access to basic financial products and will often turn to high interest lending options. With over 80% of the US population having access to a smart phone many banks see themselves being able to “mobile technology” their way through the closing of branches, but I think they are missing the point. Customer experience goes way beyond an app - being able to talk to a human being across a table for a big financial decision is important.
I am a firm believer in an organization focusing on its core business; probably one of the reasons why I was never a fan of the idea to make banking facilities available through the US Postal Service in rural areas. Banks should stick to banking and let the US Postal Service stick to logistics. With the same idea in mind, I have yet to get a good cup of coffee while having an oil change and I suspect it is the same in some of the age banks. If I wanted a coffee in the town I stopped in that prompted this blog, I would go across the street to the family owned restaurant – assuming I had cash of course.