The Financial Brand Insights - Summer 2023

#2 banking publication in the world. Nearly 2 million readers, and host of the fastest growing annual conference in banking.

SUMMER 2023 VOLUME 4 - ISSUE 2

6 WAYS TO STRENGTHEN ACCOUNT HOLDERS’ TRUST PAGE 4 ZEN AND THE ART OF PREPARING A BANK FOR CHANGE PAGE 14 REVENUE OPPORTUNITIES AND ENHANCED SMALL-BUSINESS RELATIONSHIPS PAGE 20

INCREASE CORE DEPOSITS AND BUILD TRUST PAGE 24

DIGITAL ACCOUNT OPENING HOW THESE 5 INNOVATIVE LEADERS DESIGN HOLISTIC DIGITAL EXPERIENCES PAGE 8

WINTRUST FINANCIAL

COMMUNITY AMERICA CREDIT UNION

WINTRUST FINANCIAL

SOUTHSIDE BANK

MERIWEST CREDIT UNION

IN THIS ISSUE

4 6 Ways To Strengthen Account Holders’ Trust 8 Build a Customized & Holistic Digital UX that Endures 14 Zen and the Art of Preparing a Bank for Change 20 Opportunity Knocks: Business Credit Card Programs 24 What Will You Do About the NIM Squeeze Crushing the Industry ? 28 Small But Mighty: How Credit Unions Flourish 32 Drive Growth Through Nonfinancial Partnerships 36 Reimagining Bank Data for Deeper Engagement 40 The Loyal-Not-Loyal Small Business: Meet Undeserved Small-Business Needs

46 Top 5 Merchant Payments Trends to Watch for in 2023 50 A Deep Dive into Planning a New Operations Center 56 How Banks Can Build an API-First Culture 60 An Effective Approach to Training Frontline Bank Staff to Promote Digital Growth 64 Your Financial Health Strategy: 7 Ways to Get Started 68 It Takes 3 to Make Hybrid Work Go Right 74 How a Bank’s Data Strategy Is Critical for Delivering Business Outcomes 78 Making the Financial Education Connection 82 3 Steps to Stretch Marketing Budgets in a Recession

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

By Alkami 6 WAYS TO When a handful of regional bank failures began to make headlines this spring, retail and business account holders who never thought twice about the banking system suddenly had questions about how safe their money was. Rather than ignore the elephant in the lobby, banks and credit unions must take the opportunity via service outreach to reinforce with account holders precisely why their financial institution deserves full confidence and trust. And “reinforce” does seem to be the right word. In the immediate aftermath of the recent bank failures, consumer trust in banks actually rose somewhat, according to a Morning Consult survey of 2,190 U.S. adults conducted from March 13-15.

The bank failures and generalized worries that swept through financial services in March are abating, but banks and credit unions have a golden opportunity to forge stronger bonds with account holders. Now is the time to reach out and remind them why their financial institution deserves their full confidence and trust.

STRENGTHEN ACCOUNT HOLDERS’ TRUST

Seventy percent of those surveyed said they trust banks to do the right thing, compared with 66% who said the same in February. In the March survey, 81% of regional bank customers expressed trust in banks, higher than the 78% of national bank customers who did so. However, the numbers were a bit softer for community bank customers (71%) and credit union members (67%) . The survey also showed a generational split, with 78% of Baby Boomers saying they trust banks, compared with 66% of Gen Xers and Millennials and 62% of Gen Z respondents. So there is room for improvement.

Economic uncertainty, increased competition, technological advancements, and a more-demanding consumer are forcing banks and credit unions to demonstrate greater customer centricity. Achieving this means rethinking the sales process, collaborating with third-party providers and partnering with consumers for increased financial wellness. — Jim Marous, in the Banking Transformed White Paper: State of Digital Sales & Engagement in Banking

4 THE FINANCIAL BRAND INSIGHTS SUMMER 2023

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

While the federal government is taking significant steps to keep confidence in the banking system high, regional and community banks and credit unions have a key role to play, too.

METHOD 3 Underscore that the financial institution sees its account holder relationships as long-term partnerships. Does your bank or credit union offer retirement planning and wealth management services? Does it have a particularly long average time servicing mortgages it holds? Does it take a comprehensive approach in its product portfolio that covers everyone from teens securing their first debit card tied to their parents’ account, to first home purchasing programs, to planning distributions to heirs? Does it provide programs that help small businesses grow? These are the kinds of financial wellness programs that inspire trust.

METHOD 5 Clearly and simply explain that

METHOD 1 Publicly offer transparency on business practices. Recently, there has been an outpouring of public statements made on social media and in traditional media by executives of small and midsized banks and credit unions, and some seem to have embraced the fireside chat model. One example is this television appearance by Jim Tubbs, CEO of Lake Ridge Bank of Wisconsin, who calmly and clearly discussed the differences between Silicon Valley Bank’s operational strategies and their own.

automatic FDIC and NCUA insurance coverage means the vast majority of account holders never have to worry about keeping their nest eggs intact no matter what happens to the economy. It’s a message worth sharing on digital banking sites, in email outreach and statement mailers, and even via lobby signage. If the financial institution’s overall percentage of insured deposits is high, that bears mentioning as well, as it delivers a message of stability and community engagement.

The community banks in this country, we know, are strong and resilient. And I think banks need to reassure their customers that they are strong and resilient, and the government needs to do exactly the same thing. Regional and community banks and credit unions can provide services that larger banks can’t replicate. They know the special features of their markets and the people who are active in those communities. — U.S. Treasury Secretary Janet Yellen

Some ways financial institutions can enhance confidence among account holders include:

at the 2023 American Bankers Association annual summit in Washington, D.C.

METHOD 2 Emphasize security measures that show the financial institution takes proactive steps to protect accounts from fraudsters. Do you require multifactor authentication when account holders log in from unrecognized devices? Does your system employ artificial intelligence and machine learning to detect and stop phishing, pharming and malware attacks? Clearly communicate these and other security and fraud protection steps in a way that conveys the amount of care taken to keep accounts safe and secure.

METHOD 4 Play up community ties, including

METHOD 6 Cultivate personal banking relationships. Account holders who think of themselves as having a trusted banker they can go to for advice, as opposed to simply having an account at a faceless institution, are more likely to feel confident in their bank or credit union. Campaigns emphasizing that someone at the financial institution is ready to communicate with account holders one-on-one about their banking needs help to add a friendly face to the institutional façade. Tailoring communication channels based on generational preferences can enhance the success of such a campaign. Account holders who don’t like phone support might embrace the opportunity to get financial advice via text.

everything from the decades the financial institution has served the community or region to the investments it has made in creating a better life for residents. Celebrate not only the years the bank or credit union has been in business, but also mark significant anniversaries with account holders. If they’ve been with your financial institution for a decade and purchased their first home with a mortgage you originated, remind them of the length and depth of that banking relationship—and express how much it is appreciated. From a broader perspective, financial institutions that showcase the community-enhancing business and civic projects they’ve funded can generate significant trust and goodwill. Look for ways to promote projects that resonate with younger generations in particular, to help build their confidence in the financial institution.

Financial institutions with deep knowledge of their account holders can — and should — use that special level of understanding to build trust. As a partner in digital banking and financial technology to small and midsized, regional and community banks and credit unions of America, Alkami monitors all industry and market news. We will continue to be a resource of technology and thought leaders in digital banking, data analytics and marketing. Learn more at Alkami.com. ▪ About Alkami: The Alkami Platform is a cloud-based solution for all your digital-banking needs. Our market leading UX that rivals the most progressive neobanks combined with a data set that rivals the largest megabanks enables you to adapt quickly to changing market needs, keeping your users more engaged and driving long-term growth for your FI. The information provided in this article does not, and is not intended to, constitute legal advice or recommendations; instead, all information, content, and materials are for general informational purposes only for which Alkami disclaims all liability. Sources mentioned are only for the convenience of the reader and shall not be construed as a recommendation or endorsement by Alkami with respect to the content.

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

Account opening is a make-or-break moment for financial institutions to lock in customer relationships, and they can’t afford to pause when the competition is intensifying. Following these tips can help banks and credit unions design a personalized, holistic digital experience that will endure. BUILD A CUSTOMIZED & HOLISTIC DIGITAL UX THAT ENDURES

Top Technologies US Banks Are Prioritizing in 2023

Digital account opening

55%

Data analytics and reporting

47%

Digital lending

41%

Mobile banking app

40%

In-branch technologies

36%

Customer relationship management (CRM)

34%

Online chat/virtual/video/bot

16%

Financial wellness

10%

Other (please specify)

11%

there is no question that customers will increasingly look for greater convenience, fewer hurdles and personally matched product and service options from their financial institutions. Digital Options Suited for Your Goals In a 2023 Cornerstone Advisory survey, 76% of banks and 87% of credit unions reported having launched a digital transformation strategy or initiative. And a report by Aite- Novarica puts investing in onboarding in the top 10 business banking trends for 2023. The ability to offer a holistic, omnichannel experience is critical to meeting the expectations of the marketplace. The flexibility to choose multiple banking products in one application with the freedom to pick up and finish in any channel with or without human engagement empowers customers and prospects to open accounts on their own terms. The results are two to five times more accounts opened and funded.

By NCR Terafina

The right account opening solution can be a great foundation for a holistic growth and engagement strategy. Here is where a first impression sets the tone for relationships, where financial institutions present the best of what they have to offer and where they can learn the most about customers’ and prospects’ preferences and behaviors. The convenience of being able to open an account or transfer funds from a desktop or mobile phone, no matter the location, has been key to customer growth and retention. Amid rising economic uncertainty, it’s more imperative than ever that financial leaders continue to build upon their digital experience. The baseline expectations are a robust digital capability, an engaging customer experience, an omnichannel presence and personalization that speaks to customers. Don’t make the mistake of pausing the development of digital strategy, as

Investing in onboarding starts to grow into a competitive advantage: Onboarding is going to become even more critical when it comes to the adoption of new customers. For those that continue to lag, business customers will start looking to third parties and open banking initiatives to bypass the hassles they’ve come to expect during [financial institution] onboarding. — Aite-Novarica

8 THE FINANCIAL BRAND INSIGHTS SUMMER 2023

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

Getting the most out of your digital investments means you’ve carefully thought about features that are most important to your customers, tools your internal teams need to successfully deliver and flexibility for future scalability. — Vijay Krishnan Co-Head of Delivery for NCR Terifina

• Engage: A 2023 trends report by EngageWare states that “although the majority of today’s banking takes place digitally, just because a channel is digital doesn’t mean it can’t have a human touch.” There are still opportunities to have human engagement digitally, such as online appointments for one-on-one conversations. Financial institutions should talk to customers and members directly to understand their needs, expectations and feedback. Try conducting surveys in addition to hosting focus groups. • Prioritize: Once customers' or members’ needs have been identified, prioritize them based on their importance and impact on the financial institution’s goals. They can be categorized by urgency, revenue potential or customer/member satisfaction. By taking a customer/member-centric approach and actively seeking to understand their needs, financial institutions can develop products, services and solutions they’ll get the most out of, exceed their expectations and build long-lasting relationships. Remember to keep an open mind and remain flexible as needs shift over time. As Erin Keller, Vice President and Director for Consumer Digital Products

insights they possess to inform how to best meet the needs of their prospects and customers. User- facing technology that allows for A/B testing offers a tremendous advantage in understanding preferences.

Karl Geisler, Senior Vice President for Digital Strategy at CommunityAmerica Credit Union, a $4.7 billion-asset financial institution headquartered in Lenexa, Kansas, notes that, “Getting feedback from the tools our

Vijay Krishnan, Co-Head of Delivery for the leading digital account opening and omnichannel sales platform, NCR Terafina, affirms that the first steps are critical. “When choosing an account opening solution, it can be difficult to determine where to start, as the options are vast,” Kale says. “Getting the most out of your digital investments means you’ve carefully thought about features that are most important to your customers, tools your internal teams need to successfully deliver and flexibility for future scalability.” Consider the following: • Understand the customer's journey: Work to understand where the customer is going from start to finish. Map out the process and identify pain points or obstacles that may deter them from completing the process. Optimize the user experience to minimize friction and improve the customer journey. • Personalize the experience: Leverage data and analytics to create an experience that resonates with customers. Use the data to understand their needs, preferences and behavior to provide customized recommendations and offers. • Ensure security and compliance: Digital account opening solutions must comply with regulations and ensure that customer data is safe and secure. Make sure that the solution meets these requirements, as customers will not trust the financial institution with their information if they do not feel secure. • Integrate with existing systems: To ensure a seamless experience for customers and improve operational efficiency, it is necessary to integrate the digital account opening solution with existing systems such as core banking systems and marketing automation tools. • Invest in complementary third-party integrations: Work with providers that can easily integrate with a financial institution’s digital account opening solution, whether it is funding, identity

verification, lending or a document management system, for example. • Continuous improvement: Monitor the performance of the digital account opening solution and gather feedback from customers. Use this feedback to make continuous improvements and optimize the solution to meet changing customer needs. By following these tips, financial institutions can ensure that their digital account opening solution is effective and efficient and provides a great customer experience. Barb Jacklin, Senior Vice President

members and prospective members use helps us continue the refinement of what we offer members and how we present it to them for the best possible experience. Data like, which products or promotions are performing the best, what channels are seeing the most activity and where are we seeing application abandonment, are all valuable insights for developing a member-centric experience. The visibility into the member’s journey also has enhanced the front line and our member service center's ability to deepen member relationships and accelerate growth. It’s a game-changer.” To offer the best customer experience, consider including the following while developing a financial institution’s digital strategy: • Research: Conduct market research to understand the target audiences' pain points, challenges and preferences. This can involve assessing industry trends, competitive analysis and customer/ member feedback. • Observe: Observe customers' or members’ behavior, preferences and interactions with the financial institution’s products or services. Analyze customer/member data, track website analytics and monitor social media activity.

and Head of Retail Product and Digital CX at Wintrust Financial, a $52.9 billion-asset banking company headquartered in Rosemont, Illinois, suggests, “Look for a platform

at Wintrust Financial, states, “We view customer experience trends as an evolutionary journey and are ready to meet users' changing needs and

that can handle any account-type application and can be deployed in-branch, at the contact center or through your mobile channel, even if you’re not ready to do it all at once. We can make modifications to what we offer our customers and how we present it based on the data our account- opening platform gives us.” The Customer Experience ZAG Interactive reports that “each year consumers expect more from websites, so dated or frustrating sites will be negatively perceived, and potentially hurt brand loyalty. Consumers will have heightened demand for a simple, easy to use site that gets them where they want to be quickly. Brand loyalty will continue to be fragile so brands need to work hard to ensure that they consistently provide a positive customer experience.” Identifying customers' needs requires a combination of research, observation and engagement. It’s woefully common to find institutions are not fully leveraging the data and

preferences. We’ve invested in technology with a flexible, scalable, modular architecture. Knowing that the technology we’ve put in place today is ready for whatever may be down the road gives us tremendous confidence in our strategy.” Omnichannel Is a Must According to a recent McKinsey report, “as banks continue to make progress in digitizing the customer experience, they must also remember that omnichannel includes the critical human side of the equation. To maximize sales, banks must effectively combine digital and human channels to create a seamless omnichannel offering.” Customer expectations are high and they do not want a multitude of options when it comes to communicating with them. For financial institutions, trying to keep up with where customers are in their onboarding journey is necessary in nurturing

By taking a customer/ member-centric approach and actively seeking to understand their needs, financial institutions can develop products, services and solutions they’ll get the most out of, exceed their expectations and build long-lasting relationships.

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

loyalty and increasing revenue and this is where having an omnichannel presence is crucial. This approach is designed to meet customers where they are, regardless of the channel they choose and to provide a cohesive experience that is mindful of their individual preferences and behaviors. A critical component of this engagement is the visibility and flexibility to provide real- time assistance from a branch, call center or mobile channel no matter how an applicant has approached the financial institution. In a 2023 Zendesk Trends Report, 62% of customers think experiences should flow naturally between both physical and digital spaces. A Citizens Bank Banking Experience Survey also found that 69% of consumers prefer banking online some or all of the time while 65% agree that they prefer human expertise when receiving financial advice. In addition to providing a seamless conversation between all channels and incorporating human knowledge, an omnichannel space should offer multiple product solutions throughout the customer onboarding journey. We’ve all conducted online shopping for something in particular and somewhere along our shopping process we notice other suggested products that may be of interest. Such should be the case when it comes to banking.

return is a recipe for success that banks and credit unions simply can’t afford to ignore. Personalization Matters A 2023 banking trends survey conducted by Arizent found “platforms which gather and analyze customer information to create personalized solutions, are among top technology priorities.” The reasons are compelling. Demonstrating that the financial institution values and understands customers' individual needs and preferences is important to building lasting relationships. Personalizing interactions with customers creates a more meaningful and engaging experience, which can help build trust, loyalty and advocacy over time. This starts at the proverbial front door. If an online applicant has an existing account with the institution, the platform should provide a simplified process for opening a new account type. Responsive, dynamic technology is essential when it comes to providing relevant recommendations, targeted promotions and tailored communications that meet their specific needs and interests. Personalization can also improve sales and ROI by increasing customer engagement, conversions and customer lifetime value. A report by Accenture found that personalization features can lead to increased customer satisfaction and loyalty. The report states that “75% of customers are more likely to buy from a company that knows their name and purchase history and makes recommendations based on those factors.” While the goal to attract and retain new customers will always be a strong focus for banks and credit unions, it is equally important to demonstrate personalization solutions to their existing customers. Retaining existing customers is just as important as gaining new business. No matter how long a customer has been with an institution, they want to feel as though they matter. When discussing customer engagement for 2023, Rivel suggests that “banks and credit unions should cater to their existing customers as if they are brand new to their institution, constantly demonstrating what they have to offer them.” In the same way that digital technology should be personally targeting new customers, the technology should also be retargeting existing customers with the

latest updates, products and services based on previous experiences. Data and analytics also inform how personalization can be maximized. Data tells the story of who the customer is, what they need and how best to help get them what they want. Dinesh Kale, Co-Head of Delivery at NCR Terafina, notes that “the introduction of new products and cross-selling capabilities are just a couple of the personalized opportunities that can come out of having a digital platform that provides clear analytical information. It’s these kinds of specific personalizations that can make or break whether a financial institution has a new customer or loses an existing one.”

Gene Fichtenholz, Vice President of Digital Strategy & Engagement at Meriwest Credit Union, a $2.2 billion-asset financial institution headquartered in San Jose, California, notes that, “It’s not enough to just

How to Be a Valuable Partner to Consumers in Difficult Economic Times Free Report: This 22-page report from Franklin Madison explains where banks and credit unions can help consumers, stand out from the crowd and engender loyalty: by helping with their financial health and wellness.

have the technology in place for members to pick and choose the products they want. You have to demonstrate to them that you took note of the products and services that they researched and have yet to obtain, or where improvements have been made and how it best benefits them. This is why having a clear understanding of what the data tells you about each member is beneficial. From there we can make recommendations or enhancements through various channels that best suit that specific member.” Give customers and prospects the flexibility to open more than one account type in a single application. Resist the temptation to throw everything available in front of them or promote products based on revenue targets. Instead, make use of cross-sell technology that allows for A/B testing and performance reporting along with simple back-office modifying. Reporting that is readily understandable and instructive gives financial institutions the power to make adjustments fast. That’s key to executing data-driven personalization successfully. ▪

Cindy Blackstone, Chief Retail Officer at Southside Bank, a $7.6 billion-asset organization

headquartered in Tyler, Texas, notes, “Customers value ease, consistency and flexibility, and having an

omnichannel experience is imperative to meeting those needs. Investing in seamless technology that offers a variety of products across multiple channels, where our customers will receive the same level of engagement, has not only improved customer relations but it’s also allowed us to tap into additional tools on how we can promote our products based on customer needs and preferences.” In addition to allowing financial institutions to diversify their communication methods to enhance the customer experience, omnichannel banking presents an opportunity to grow more accounts across lines of business in the same investment. In today’s ever-changing economic climate where uncertainty reigns supreme, maximizing a financial

To learn more about building a lasting and personalizing digital experience for your financial institution visit NCR Terafina, at www.terafina.com .

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12 THE FINANCIAL BRAND INSIGHTS SUMMER 2023

ZEN AND THE ART OF PREPARING A BANK FOR CHANGE

By Jeffery Kendall Chairman & CEO at Nymbus

For leaders of small or midsize banks tasked with how to help their institutions thrive amid economic uncertainty, I have some advice: Buy a motorcycle.

Let me explain.

My work provides the opportunity to speak with a lot of people in this position. Many leaders are worried about seismic shifts that are happening fast — and many leaders know it’s time to change but are overwhelmed by the scale of the task. Others aren’t sure how to begin. Small and midsize banks are still the backbone of our economy, so it’s critical that they stay strong while adapting. To do this, strategy-first organizations must prepare for a future they can’t see coming. But can they get ready for the unknown? That’s where the motorcycle comes in. Motorcycles Are My Thing Many evenings you can find me fine-tuning, tweaking and attending to the small details that make my Ducati hum. It’s not because I’m a perfectionist, or even because I’m in love with the chrome. It’s because using my skillset for an unrelated project gives me a fresh perspective on my work. Focusing on details that could save my bacon on the road forces my brain to step back from my daily grind. The result? Fresh insight I couldn’t have gained otherwise.

An avid biker, Nymbus CEO Jeffery Kendall finds inspiration in the classic book “Zen and the Art of Motorcycle Maintenance” — and he thinks bankers can glean transformative lessons from it, too. By reflecting on past experiences, learning from mistakes and recognizing the patterns that emerge, bank leaders can develop a better understanding of the direction to take and the steps required to create groundbreaking solutions.

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

roar of the engine, these days I make sure to wear top-quality earplugs. Once I might have opted for the shiniest chrome, but now I often choose a part that will last a lifetime. For banks that have built a generational legacy on servicing customers in their neighborhood, it might be time to reconsider what local really means. Rethink Relationships, Grow Deposits Obviously, banks need more deposits to power lending and grow. But deposits are shrinking across the board, coming down from the lofty heights of the pandemic. According to the FDIC, total deposits at insured institutions were up an incredible 21.7% in 2020, but those gains have been halved each year since. In 2022, deposits grew just 5.2%. That’s some significant brake pumping at a time when growing deposits is critical (Figure 2).

You look at where you're going and where you are and it never makes sense, but then you look back at where you've been, and a pattern seems to emerge. — Robert M. Pirsig in "Zen and the Art of Motorcycle Maintenance"

From career-specific tools for nurses, lawyers and truckers to inclusion- centered niches that support and celebrate families, LGBTQ+ and pets, the options are endless.

Bank leaders can take the same stepwise approach. Embracing the inevitable unknown develops new mental pathways that help them hedge risk by: • Helping their organizations get ready for the future • Educating customers about risks, rewards and financial literacy • Building partnerships that prioritize agile modernization Robert M. Pirsig’s classic 1974 book “Zen and the Art of Motorcycle Maintenance” is a great read, and as you might expect I find lessons about banking transformation there, too. One quote particularly sticks with me as the character Phaedrus searches for meaning in life: "You look at where you're going and where you are and it never makes sense, but then you look back at where you've been, and a pattern seems to emerge." In the pursuit of innovation in banking technology, the path may not always be straightforward. However, by reflecting on past experiences, learning from mistakes and recognizing the patterns that emerge, bank leaders can develop a better understanding of the direction to take and the steps required to create groundbreaking solutions. This is a challenging time in our business, but it’s also a time of opportunity for inspired leaders at banks and credit unions of all sizes. There’s plenty of news about the outsized impact of behemoth banks, but we know that smaller, agile institutions are critical to keeping the economy upright, particularly in communities that rely on their lending power.

Smaller Banks Are as Important as Ever

are growing their market share by identifying a niche community and investing in relationship-building with geographically dispersed customers. Michigan State University Federal Credit Union, for instance, recently launched a fully digital CU called AlumniFi. This digital platform builds on their already strong relationship with 500,000 Michigan State University alumni to offer tools and support

According to economists from Goldman Sachs, U.S. institutions with less than $250 billion in assets support half of commercial and industrial loans in the country, 60% of all residential real estate lending and nearly half of consumer loans (Figure 1).

Figure 1

In the United States, institutions with less than $250 billion in assets account for:

for the next stages of their financial life. Similar products exist for any number of

communities. From career-specific tools for nurses, lawyers and truckers to inclusion-centered niches that support and celebrate families, LGBTQ+ and pets, the options are endless. Banks can find a niche and build a brand to help solve their problems. By focusing on what they do well — under- standing customer needs and building relation- ships — smaller institutions can build incremental momentum through robust partnerships with organizations like mine to overcome some of the technical obstacles. Making these kinds of shifts can be challenging, no matter how critical they are to success. So how can bank leaders adjust their mindset and build momentum for necessary change?

Year-over-year increase in total deposits at FDIC insured institutions Figure 2

50%

60% 45%

+5.2%

+10.6%

Commercial and industrial lending

Residential real estate lending

Consumer lending

+21.7%

The future of the U.S. economy may hinge on the ability of community banks to continue lending. Luckily, local institutions are well-positioned to keep doing what they do best: build relationships with commercial, industrial and individual clients to help them understand and mitigate their financial risks. This is the legacy of community banks — these institutions must keep serving this function so customers can understand the changing nature of their financial reality. To keep thriving, smaller banks should lean into what they do well: growing deposits on the strength of relationships. Here’s another lesson gleaned from motorcycle maintenance: Our perspective and relationships can change and grow over time. As much as I love the

2019

2020

2021

2022

How to Prepare for the Unknown

When I’m out in the shop working on my motorcycle (some call it tinkering), I’m shifting my perspective, building new neural connections to form new ideas. Bank leaders can apply the same mindset to their organizations. Shake up stale or unproductive meetings with a new agenda format. I love EOS’ Level 10 Meeting methodology for this reason. When we restructure our leadership meetings, we force ourselves to think about old problems in a

So what’s to be done? The answer isn’t simple, but it’s clear. It’s time to incorporate modern digital products that broaden the bank’s customer base beyond what is traditionally considered “local.” It can be tempting to think a bank has maxed out deposits when it’s built a geographic fence around customers. But it’s the digital age, so location doesn’t have to be the primary brand driver anymore. Local and regional financial institutions

To keep thriving, smaller banks should lean into what they do well: growing deposits on the strength of relationships.

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

new way — demonstrating the value of change to even the most resistant parties. Change is the name of the game, especially in today’s market. The Covid-19 pandemic was a stark reminder that big, long-term change is sometimes unpredictable. Yet when we’re as ready to change as we can be, we become more resilient and adaptable for whatever comes next. I recently had an insightful conversation with my colleague, Allison Netzer, and a dear friend and great thinker in this space, James Robert Lay, author of “Banking on Digital Growth.” As we discussed the challenge of personal and organizational change, James Robert said something about change that really stuck with me. “It’s about bringing everyone together, because that’s how we learn. A culture of collaboration leads to innovation, and those micro-innovations can put the wind in your sails that leads to momentum.” Allison elaborated, “The outcome we’re all seeking in our industry is momentum. You tend to get momentum from small revolutions of the wheel, not just hitting the gas. So, the more we can make small changes, the more we’ll generate momentum.” It’s so easy to get stuck, to feel like we can’t break out of the path we’ve been in because the result could be catastrophic. The reality is, change isn’t just important — it’s necessary and inevitable. To prepare for change, leaders must start now by shaking up routines. They can start now by doing something differently and challenging teammates at all levels of the organization to think in new ways large and small. Change a meeting, listen to a new record, go for a hike or work on a bike. When these sorts of shifts are happening with individuals throughout the organization, it can become flexible and nimble, ready to adapt to the next challenge — even unanticipated obstacles lurking around the next bend in the road. Deliver on Modern Banking That Customers Want If I ignored my bike maintenance, I would risk critical failure. Responsible bank leaders must face the necessity of digital modernization and must understand that customers want more than just an app or, worse, a mobile version of the bank website. Customers are ready to shift their deposits to institutions that provide a secure, reliable digital

The banks and leaders that are able change their mindset and products to provide these services will grow deposits and thrive, redefining how we think about community and building momentum for innovation long into the future.

Stop Chasing Transactions and Start Building Relationships

banking experience. According to a recent survey by J.D. Power, about 30% of customers have shifted an average 37% of their deposits to a secondary financial provider, indicating increasing flexibility among financial customers. They’re eager to support banks that share their values and invest in their community. And they need help understanding how to save, borrow and grow their wealth. The banks and leaders that are able to change their mindset and products to provide these services will grow deposits and thrive, redefining how we think about community and building momentum for innovation long into the future. Motorcycle maintenance also allows us to exert some influence on the future. When my tires are fully inflated, my lights are bright and my oil is fresh, I know my bike can handle any turns my route might require. Proactive bank leaders are tuning up their organizations, too. They’re investing in partnerships that can help them make incremental changes that build to a sustained shift in how we bank, and how we think about what comes next. ▪ About Nymbus Nymbus has disrupted the financial services market as an alternative to legacy business models. With Nymbus, any size financial institution can quickly launch a full-service digital bank or migrate to our award-winning core. Whichever growth strategy is right for you, Nymbus buys back decades of lost time to engage and support the entire digital customer journey.

Create truly personalized experiences for every customer with every interaction.

Total Expert Customer Intelligence monitors your database and identifies customers who are ready to take the next step on their financial journey—allowing you to engage them with personalized messaging at the moments that matter.

Learn how Customer Intelligence can help drive growth and customer loyalty at TotalExpert.com/customer-intelligence

18 THE FINANCIAL BRAND INSIGHTS SUMMER 2023

Revenue opportunities in the small-business market segment abound for alert financial institutions. By offering a commercial credit card program, institutions can enhance their small business relationships and profitably grow their card portfolios. And with upgraded administrative tools, managing the programs has never been easier for businesses or card users.

purchasing power to associates travelling or buying on behalf of the company, and delivering spending insights. For a financial institution, as the provider of the service, the offering can help attract and retain an important client segment while generating new and higher revenue streams. That’s because business purchases tend to have high-ticket prices and advantageous interchange rates.

By Fiserv

The Sound of Opportunity Small business clients have heard it all before: they can stand up to intensifying competition by taking their fate into their own hands. Small businesses can and must push themselves to excel, and they can do this by enhancing productivity, creating operational savings and engaging their associates. Go, fight, win! It’s a lot easier said than done. One area where financial institutions can help small businesses achieve these worthy goals is with a commercial or small-business credit card program. The programs represent a real market opportunity for all participants. For small businesses, the programs deliver important operational benefits, including providing

WHY BUSINESS CREDIT CARD PROGRAMS MAKE SENSE, AND HOW FINANCIAL INSTITUTIONS’ BUSINESS CLIENTS CAN EFFECTIVELY MANAGE THEM

Mercator Advisory Group, now Javelin Strategy & Research, forecasts a 14% growth in small-business credit card transaction volume by 2023.

14%

Providing a small business and commercial credit card program can complement a financial institution’s consumer credit offering, enhance small-business and commercial relationships and deliver a solution built specifically with business clients and their employees in mind (Figure 1).

Figure 1

Small business credit card transaction volume

Small business credit card transactions will exceed $700 billion by 2023.

$387

$363

Mastercard + Visa American Express

$342

$329

$322

$318

$300

$295

$274

$273

$265

$256

$246

$234

$220

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$210

$201

$195

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2015E

2016E

2017E

2018E

2019E

2020E

2021P

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20 THE FINANCIAL BRAND INSIGHTS SUMMER 2023

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

Small-business decision makers are seeking faster processing speeds, better controls and easier digital experiences . Small business managers say that manual processes should be eliminated or done at a lower cost.

Small businesses are resilient. Offering them a credit card program can help them operationally while delivering a solid revenue opportunity for a financial institution .

So, what does a best-in-class solution look like?

An outstanding solution should enable small business clients to issue credit cards — whether physical or virtual — to their associates and completely manage their credit card program. Analytical information available via the solution should be designed to help businesses clearly understand the overall performance of their program and where their funds are being spent. The application should also promote higher administrative engagement with integrated capabilities, including: • Easy navigation and a simple user interface • AI-enabled expense management and approvals provided through customized workflows that streamline administration and review processes • Statements and payment information • Thorough analytics that provide complete program visibility and business insights into spending trends, merchant spending and credit-line use • Spending breakdowns • Real-time card controls, including locking and unlocking a card, establishing spending limits and enabling merchant category restrictions • Spending controls with financial and audit documentation tools • Reduced overhead with cardholder self-service capabilities A comprehensive platform will also enable card-using business associates to use the application easily. Businesses should be able to promote heightened employee engagement with

Answer the Call with a Card Management Solution The reasons for offering a small-business and commercial credit program may seem obvious, but the need to help small business clients thoroughly manage the programs on a daily basis can present significant obstacles to adoption. Fortunately, card and spending management capabilities continue to improve, enabling issuers and their clients to take advantage of new administrative solutions. Managing small-business credit card programs should be easy. With new approaches, financial institutions can help their clients consolidate management activities and tasks into a single solution. When analyzing and selecting options, financial institutions must be sure that all roles within a company – business owners, managers and employees – can seamlessly interact with a single, easy-to-use, online application. The solution should empower business cardholders to pay, see transactions, get a card and complete expense reports. At the same time, the chosen tool should also enable business owners and managers to view employee accounts, open new accounts, manage credit lines, view and approve expense reports and create spending analysis reports. A total solution can solidify a financial institution’s competitive position as an innovative payments provider. Get the Details Right According to Mercator Advisory Group, small- business decision makers are seeking faster processing speeds, better controls and easier digital experiences. The overall message from small business managers is that manual processes should be eliminated or done at a lower cost. In a Mercator survey, three different terms in related categories summarize businesses’ most frequently mentioned

Businesses Expect Manual Processes to Be Eliminated

About 25% of open-ended responses around future expectations were related to an improved digital experience.

Knock, Knock Small businesses are resilient. Offering them a credit card program can help them operationally while delivering a solid revenue opportunity for a financial institution. By making these programs more appealing with easy-to-use administrative tools, financial institutions can help business clients increase their efficiency and grow when opportunity knocks. ▪ About the Author Surender Chauhan is Vice President, Product Management for Card Services at Fiserv. He has over 20 years of experience in the financial services industry, including management, project management and technical roles at TSYS and SpendLabs – a fintech startup he cofounded and which was acquired by Fiserv in 2021. At Fiserv, Chauhan is responsible for managing the small business suite of card-based banking solutions. About Fiserv Fiserv, Inc. (NASDAQ: FISV) aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover ® cloud-based point of-sale and business management platform. Fiserv is a member of the S&P 500 ® Index and one of Fortune ® World’s Most Admired Companies™. Visit fiserv.com and follow on social media for more information and the latest company news.

25%

Technology Need for latest generation technology Automation Faster processing, central control and reduced manual intervention Artificial Intelligence Use of AI in conjunction with automation to improve the experience and eliminate errors Source: “Insights From Recent Mercator Study: Commercial Card Users Underscore the Importance of Card Spend Management Tools,” Mercator Advisory Group, March 2022

As card offerings for business continue to evolve, financial institutions have an opportunity to deliver an integrated experience to program users. New capabilities should feature interactions with other technology management systems, enhance reconciliation to appropriate accounts and provide spending insights and reporting.

easy-to-use features, including: • Lost or stolen card reporting

• Statement access and payments • Trending information regarding associate spending Providing small business clients and their associates with self-service tools can increase their engagement and deliver streamlined experiences. By staying proactive and taking advantage of these innovative, automated and expanding capabilities, credit card program administration can be enhanced and made more efficient.

Providing small business clients and their associates with self-service tools can increase their

engagement and deliver streamlined experiences .

spending-management needs: technology, automation and artificial intelligence (AI).

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

WHAT WILL YOU DO?

What does all this mean and how do community financial institutions move forward in a tough landscape? It starts with one very important question: What’s an account holder worth to a financial institution? This often comes down to the cost of acquiring a new consumer compared to their lifetime value. Once consumer acquisition costs are known, institutions are much more motivated to increase the rewards offered. This would get a new consumer onboard and present the opportunity for cross-selling. Rewards are especially valuable because they build solid relationships between account holders and the community financial institution. This level of trust is formed on a foundational relationship first and ensures consumers stick around for the long haul. The reality is, community financial institutions are losing deposits — often faster than anticipated. And they’re not alone. Billions of dollars left U.S. banks at the end of 2022, and it is continuing into 2023, accelerated by the panic that rocked markets in March. Deposits are running off partly because the extra cash influx that occurred during the pandemic is now being spent down, but today’s unstable economic environment is also having a profound impact. The dollars that are leaving the fastest are typically in the lowest earning categories for consumers. What’s the financial institution’s highest rate CD? How much of its CD portfolio’s balance is replacing funding that used to be in checking, savings, and other low-cost sources of deposits? Even if the CD deposits fix the short-term liquidity crunch, it leaves community financial institutions with hot money that they will be fighting to retain every time there’s a reprice. Keep consumers by focusing on what you do best Big banks and neobanks are in a race to win new consumers, which often comes at the expense of building a lasting relationship with them. This is a huge area where community financial institutions

By Kasasa

The trend of compelling rates and recent bank closures has resulted in deposits fleeing institutions at an increased pace, resulting in a massive need for liquidity. Furthermore, the gap between what banks are paying on deposits and what’s available in the market is the widest it’s been in modern banking history, creating significant net interest margin compression. These are unprecedented times; it is imperative that financial institutions act. Community banks and credit unions cannot continue to rely on their traditional funding solutions right now. Raising CD rates and trying to match or beat the competition in today’s environment is going to be very costly and potentially risky. For community banks and credit unions, it’s rough out there right now. Everyone in the industry is scrambling for core deposits and net interest margins are getting squeezed. Rising rates on CDs are tightening margins further and leaving financial institutions with hot money they'll be fighting to retain every time it reprices. What does all this mean and how can financial institutions move forward in a rocky landscape?

THE FINANCIAL BRAND INSIGHTS SUMMER 2023

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