The Financial Brand Insights - Winter 2022

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

WINTER 2022 VOLUME 3 - ISSUE 4

ACCELERATE DIGITAL INNOVATION

TWO VETERAN BANKING EXPERTS IDENTIFY WAYS TO DRIVE DIGITAL TRANSFORMATION PAGE 12

DIGITAL BANKING STRATEGY BE PRESENT AT EVERY STAGE OF THE CONSUMER BANKING EXPERIENCE PAGE 08 DRIVE DIGITAL GROWTH WITHOUT LOSING SIGHT OF YOUR PATH USING ORGANIC INNOVATION PAGE 40 STOP ACCOUNT MIGRATION BY BUILDING A BETTER DIGITAL BUSINESS-BANKING EXPERIENCE PAGE 44

In This Issue

4 Three Ways Community Financial Institutions Should Invest in Innovation 8 Formidable Forces Shaping the Digital Banking Landscape 12 Reset Your Digital Transformation 16 Targeting the Best Customer Segments for Revenue Growth 20 Engaging Existing Customers Drives Banks’ Cross-Sell Success 24 The Four Myths of Marketing Analytics Platforms 28 How Digital CX Technology Gives Local Financial Institutions an Edge 32 Bank Deposit Growth Strategies to Offset Economic Headwinds 36 Retail Bankers Should Think Twice Before Repricing CDs 40 The Essential Element of Digital Banking Success: Organic Innovation

44 Crucial Payment Changes Financial Institutions Must Make to Halt Business Account Runoff 48 Good Lending CX Is a Key Driver of Growth & Retention 52 6 Things for Banks to Know About Cloud-Based Public Key Infrastructure 56 Combatting the Sobering Reality of Financial Stress 60 How Marketers Should Use Internal Storytelling 64 How Charitable Giving Impacts Customer Satisfaction at Banks 68 2023 Financial Institution Budgeting and Data Strategies 72 Meeting Customer Demand for a Tailored Banking Experience

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THE FINANCIAL BRAND INSIGHTS WINTER 2022

Three Ways Community Financial Institutions Should Invest in Innovation

By April Clobes President and CEO at MSUFCU

It usually feels more comfortable to stay in your bubble or your own swim lane, depending on which analogy you prefer. But by playing it safe, you risk becoming irrelevant. You’ll also miss out on opportu- nities to invest in successful technology companies. Michigan State University Federal Credit Union (MSUFCU) balances remaining true to its roots with being an innovation leader. The credit union, with $7 billion in assets and 320,000 members, was founded in 1937 during the Great Depression to provide loans to the campus community in East Lansing, Mich. Its mission then and now is to provide superior service while assisting members and employees to achieve financial security, their goals, and ulti - mately, their dreams, says April Clobes, President and CEO. There’s nothing in that statement that mentions technology. But technology does have a promi- nent spot in MSUFCU’s overall vision. “Our vision is to create a world-class omnichannel member experience utilizing personalized digital and human services to deliver accessible financial solutions,” says Clobes. It’s a balancing act between the old and the new. Members include Michigan State University students as well as alumni “who send me hand- written notes asking me not to forget about them,” says Clobes. “We have to meet all members where they are by still providing in-person service, not only digital.”

From its in-house innovation lab to its investments in fintechs to the launching of two digital-only brands, a small financial institution shows what other credit unions and community banks can do with ingenuity, collaboration and an entrepreneurial mindset.

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Opportunity for Growth: A subsidiary digital brand enables traditional institutions to offer innovative products and services without impacting their core systems.

Filling In the Gaps: Maybe your institution struggles to attract employees. Technology, such as chatbots, can offset the open spots.

Feedback from a member research panel allows MSUFCU to determine if the prototype is a viable technology that members will respond to before investing too much time or resources. The panel then become early adopters. The lab has percolated several initiatives ready for prime time: CVV Key , developed in partnership with Keyno, is an app that allows members to register their Visa credit card and receive a unique dynamic CVV code each time they use their card online or over the phone. MSUFCU debated whether to create a separate app downloaded from the App Store or Google Play or to integrate CVV Key into their native mobile app. Members had the final say: they preferred a stand - alone app. So far, MSUFCU has seen a significant reduction in credit card fraud. Fin-Life is an app that coaches members through ten financial wellness themes and provides live access to guidance from financial planning experts. Members enter their financial goals and set param - eters and Fin-Life provides advice on everything from saving for your first home to creating and sticking to a budget. More than 20,000 members currently use Fin-Life.

How a Fintech Investment Subsidiary Fuels Innovation As a regulated credit union, MSUFCU has to work through regulatory requirements to invest directly in fintechs or startups. So, it created Reseda Group, a wholly-owned Credit Union Services Organization (CUSO) in April 2021. “Reseda allows us to invest in companies creating technology specifically for credit unions,” says Clobes. “If the companies have great financial success, we can reinvest those earn - ings back into our membership.” Through the CUSO, MSUFCU invests amounts ranging from $250,000 up to $5 million in a diverse portfolio of companies, giving it a minority owner- ship position typically for three to seven years. One investment was in Spave, which created an app that deducts micro-payments from member checking accounts when they make a debit or credit card purchase. The market is MSUFCU’s younger demographic who would like to give to causes but don’t yet have the wealth to make significant donations. MSUFCU’s total investment in Reseda Group to date is 1% of assets or about $64 million. Most investments are in technology companies, but Reseda also recently acquired a printing company, Foresight Group, and an ad agency, M3 Group. In addition to CUSOs, community financial institutions can leverage other options to co-create fintech solutions specifically for smaller banks. For example, Alloy Labs’ Concept Lab facilitates partnerships between startups and banks to launch new products. A Lab Brings Ideas to Market In addition to the Reseda Group CUSO, MSUFCU launched an innovation lab in September 2020. The lab is what Clobes calls a “safe space for technol- ogy innovation.” The credit union selects interested employees to generate ideas for products and services and then build and test the prototypes.

Building a Banking Talent Pipeline

MSUFCU isn’t immune to the talent shortage rock- ing nearly every industry. But its university location feeds its intern program, called Campus 2 Career, which creates a pipeline of software developers, operations specialists, financial educators and more. About one-third of interns stay on after graduation. The credit union also works at creating a work- place environment and culture attractive to new recruits, along with a strong benefits package and flexible work schedules, says Clobes. In addition, the credit union supports Filene Research Institute’s i3 program, a two-year innova- tion leadership program for credit union profes- sionals. However, leadership development can be a double-edged sword since those employees may be recruited by another credit union or fintech. Clobes says she is okay with that as long as the skills and talents the former employees developed working for MSUFCU stay within the credit union industry at large. Since MSUFCU, like just about every financial institution in the U.S., is unable to fill all open positions, the credit union is using technology to offer more self-service options to members. For instance, placing a chatbot on the front-end of their live chat alleviated the need to hire an additional 15 employees.

If every fintech takes 100 members from each of us, they will be successful, and we will continue to erode. — April Clobes, MSUFCU

These subsidiary digital brands enable MSUFCU to reach a younger demographic whose financial needs and habits align with digital offerings while still addressing its legacy membership and not impacting its core systems. The hope is that AlumniFi and Collegiate Credit Union account hold- ers will utilize MSUFCU products as their needs for financial services expand. Clobes anticipates that the brands will launch in early 2023 and that MSUFCU will partner with colleges and universities to offer these brands. Partnership with technology companies is critical to all of MSUFCU’s innovations. Clobes welcomes collaboration with fintechs and encourages other bankers to change their fintech mindset. “If every fintech takes 100 members from each of us, they will be successful, and we will continue to erode,” warns Clobes. Instead, traditional financial institutions should explore how to partner with fintechs and use the best technology to serve members. “We provide a distribution channel for fintechs while they provide technology that allows credit unions to grow revenue and retain member- ship,” adds Clobes. “It’s not a competition, but an enhancement.” ▪

These subsidiary digital brands enable MSUFCU to reach a younger demographic whose financial needs and habits align with digital offerings while still addressing its legacy membership and not impacting its core systems.

Reasons for Launching Two Digital Bank Brands

A further innovation MSUFCU is undertaking is the launch of two new digital brands in partnership with Nymbus to target niche markets. One brand, AlumniFi, will target MSU alumni who may be paying off student loans, saving for a home or want to become financially savvy. The second digital brand, Collegiate Credit Union, will provide high school and college students with straightforward transaction- based checking and savings accounts.

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4 Formidable Forces Shaping the Digital Banking Landscape By Kevin Polinsky Senior Director at CUNA Mutual Group Fintech Solutions

These forces are exerting a transformational influence on how financial institutions can implement digital services. With the right strategy, financial institutions can provide a digital offering that places them at the beginning, middle and end of the consumer banking experience.

Banking continues to see rapid-fire developments that are creating an increasingly competitive envi- ronment. While there is seemingly no shortage of areas requiring critical focus, there are four com- mon denominators that are exerting transforma- tional influence on digital banking.

FORCE 2 Always-on Digital Service

The terms “digital” and “technology” have become ubiquitous for encapsulating what financial institu - tion strategy is often intended to achieve: growth and efficiencies. However, not all digital experiences are created equal, and these terms can mean dif- ferent things to different financial institutions. From the standpoint of members and customers, however, digital should be understood to have a single meaning: simple, touchless, reliable. Turning on a light switch means you get instant light. Digital banking should evoke the same thing. It should be an always-on utility. It's important to recognize that the digital foot- print can differ significantly from a brick-and-mortar presence. Community financial institutions have a high degree of ownership and control of their physical locations — branch location, construction, design, floorplan, number of teller windows, etc. That includes how they design physical elements to best represent their brand and desired experience. In the digital realm, however, credit unions and community banks don’t enjoy that same degree of ownership and control. Although an institution can usually determine the look and feel of its website domain, it has less flexibility around how it presents itself through online and mobile banking platforms. For example, in digital advertising, platform own- ers often constrain how a bank or credit union can present itself, further limiting its digital presence.

FORCE 1 Buying and Borrowing Converge

Borrowing is about enabling consumers to fulfill their purchasing needs. The traditional role of a community financial institution is to provide funding — for a car, a home, a vacation — but people are not necessarily starting the purchase journey with their credit union or community bank. Often, the first point of interaction a person has in their buying jour- ney is with a seller, and increasingly those who sell consumer goods and services are exerting greater influence over where consumers secure funding. This isn’t new; it’s been a fact of financial life since store-branded charge cards appeared several decades ago. However, the trend is accelerating in the current environment of one-click purchases taking place anytime and anywhere. That 24/7/365 buying experience has accelerated borrowers’ expectations for instant credit decisions that happen within the retail experience rather than at a financial institution.

The 24/7/365 buying experience has accelerated borrowers’ expectations for instant credit decisions that happen within the retail experience rather than at a financial institution.

Turning on a light switch means you get instant light. Digital banking should evoke the same thing. It should be an always-on utility .

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The future is omnichannel 50% of FIs will deploy omnichannel account opening in the next 12 months. Will you be left behind? MANTL partnered with The Financial Brand to survey U.S. banking leaders on the current state of omnichannel account origination — and how forward-thinking banks and credit unions can lead the way in 2023 and beyond.

FORCE 3 Velocity Drives Success

FORCE 4 Think Like a Consumer, Solve Like a Fintech

Consumers are increasingly gravitating towards digital offerings that allow them to quickly shift from shop- per to buyer. Speed and ease of use have become the underlying drivers that shape consumer preferences. Understanding digital as a utility means that commu- nity banks and credit unions must focus on velocity to enable growth and efficiency. Many financial institutions operate with legacy technologies built on different components from different providers who are all at different stages of modernization. The resulting ecosystem has numerous vertical points that require continuous integration, maintenance and resources to achieve baseline func- tionality. Often in these environments, decisions are made because of legacy processes and operations. This is a costly model that hampers the institution’s ability to achieve the Amazon-like buying experience that consumers demand. Too often, legacy technology is disconnected and requires staff to assist members or customers in advancing through the process, which effectively limits digital decision-making to operating hours. To support customer-based decisions, financial institutions should consider which capabilities would enable the types of experiences consumers are expecting: 24/7/365 buying, real time decisions, speed, mobility, ease of use, etc. End-to-end experiences should be created to satisfy consumers’ need for speed in the buying process.

Financial institutions must present solutions to customers' problems, challenges, and wants. Fostering and maintaining a trusted relationship between customers and their financial institu - tions is key to achieving success. The core of this approach is to enable a digital offering that places the community financial institution at the beginning, middle and end of the buying experience. The solutions that credit unions and banks employ must provide an end- to-end experience that includes buying, bor- rowing, contracting and funding. As institutions align to deliver these capabilities, they will likely partner with technology providers to enable digital tools that support these functions.

The solutions that credit unions and banks employ must provide an end-to-end experience that includes buying, borrowing, contracting and funding.

Speed and ease of use have become the underlying drivers that shape consumer preferences. Understanding digital as a utility means financial institutions must focus on velocity to enable growth and efficiency.

The fintech landscape is complex, with a plethora of providers and capabilities. Credit unions should look for fintech partners that heavily invest in their own products, support the credit union system and provide capabilities that enable both interest earning and noninterest earning offerings. True providers can deliver these offerings, all while recognizing that project fatigue is real. Now, more than ever, human capital is limited, and the cost of change is greater than ever before. To execute soundly, digital capabilities need to install fast and add value quickly. These factors combined allow credit unions to offer experiences that members seek while operating with a greater competitive force. ▪

READ THE REPORT

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Reset Your Digital Transformation

services for digital banking at NCR. They have over four decades of combined experience working with financial institutions of all sizes on their strategic priorities and digital transformation efforts. They identified three ways financial institutions can think differently about their strategic planning processes and digital transformation efforts to move faster and make a real impact: NUMBER 1 Challenge the Status Quo Financial institutions must stop doing things the way they’ve always been done. Nothing will slow them down more than siloed architecture, legacy staffing models and antiquated processes. True digital transformation requires a hard look at tech- nology, people and internal practices. Banks and credit unions need to think back to the pace at which they offered support to small busi- nesses at the height of the Covid-19 pandemic. In early 2020, they rushed to assist small businesses by providing emergency relief loans through the federal Paycheck Protection Program (PPP). And while they had a bit of a rocky start, their unwaver- ing support and dedication inspired record-high customer satisfaction among small businesses, according to J.D. Power. That same pace and dedication needs to become the norm going forward. Financial institutions must find ways to stay focused on the speed of innova - tion and delivery when it comes to their strategic digital transformation efforts. As financial institutions continue to modernize their offerings, move more to the cloud, utilize application programming interface (API) integrations and realize the urgent need to hone their data skills, they will also need to think differently about how they’re staffing their teams. As they work to gain greater control and bring about change more rapidly, they’ll be leaning into partnerships more than ever, which also means integrating more systems and solutions into their core. That may require hiring for positions they’ve never had or having a dedicated person or team managing partner and vendor relationships to keep silos from forming and ensure that projects and partnerships run smoothly. Trying to move forward with a “jack-of-all-trades” is likely to hinder their efforts in the long run.

By NCR Digital Banking

The past few years have been challenging for finan - cial institutions everywhere. The pressure’s been on to improve customer journeys, reduce operating costs and create efficiencies across the organiza - tion, while at the same time bringing innovations to market to remain competitive. And while everyone talks about digital trans- formation as a means to do this, it’s been no easy feat, and not every financial institution is making meaningful progress. But it’s not because they’re not thinking about it. Most banks and credit unions say digital trans- formation is a top strategic priority. But only 23% of organizations say that digital transformation has been deployed at scale, and 40% of these organiza- tions are not meeting expectations, according to the Digital Banking Report. So, what’s getting in the way? We asked two experienced fintech leaders for insights into how financial institutions can start looking at things differently and make meaningful progress. Erin Wynn is the executive director of product management for digital banking at NCR, and Carrie Nelson is the executive director of client Banks and credit unions must find ways to stay focused on the speed of innovation and delivery when it comes to digital transformation. A pair of veteran digital banking experts pinpoint ways that financial institutions can reset their approach to transformation to stay on track or even accelerate.

Two digital banking experts identify three ways financial institutions can accelerate progress on the road to digital innovation.

CARRIE NELSON Executive Director of Client Services NCR Digital Banking

ERIN WYNN Executive Director of Product Management NCR Digital Banking

Only 23% of organizations say that digital transformation has been deployed at scale.

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Bank and credit union leaders need to be thinking two to three years ahead , because consumer expectations don’t stand still.

By now, banks and credit unions should recog- nize that cross-channel transformation is critical and that digital transformation is not solely about transforming the digital channel. Yes, it’s a signifi - cant component of the broader plan, but digital transformation requires transforming and digitizing all channels to talk to one another. Financial institu- tions need to be thinking omnichannel in everything they do. And this means bringing the digital team, call center, branch operations, IT and all other affected groups to the table. Financial institutions that commit to an open and flexible technology platform will be able to differentiate their offerings and bring forward those essential digital-first experiences. Investing in a platform that offers access to open APIs, developer tools and resources that allow them to control the experience will speed innovation and deployment and create efficiencies across the organization.

technology modifications or enhancements, finan - cial institutions must dedicate the time to internal training and communication — creating advocacy at all levels.

and credit unions are empowered to work with a digital or agile budget. This allows them to keep the momentum and not have to go back in front of a review board, put together a new business case, ask for more funding and spin up a resource team every time they want to make enhancements. The prerequisite for any budgeting exercise is to build a supporting business case to obtain executive buy-in. Wynn, who works closely with financial insti - tutions on their strategic priorities, said one of the biggest mistakes she sees is when “no one is keeping stats on what’s going on within the digital channel for executive leadership to realize the impact of it.” She added that this makes it incredibly difficult to get buy-in on anything digital or support for digi- tal transformation efforts. And while it may seem like an obvious requirement, the lack of supporting data is something she sees all too often. Wynn advised that financial institutions should start by showing the results to demonstrate the value of the digital channel and the need for creat- ing digital-first experiences across the institution. Show how often people are logging in and what they’re doing once they’re logged in. Show the typi- cal profile of a digital banking user, how many other products and services they have, and how often they use different channels. Wynn said the financial institutions that can demonstrate that value upfront are the ones that will be able to get approval and support for a digital budget early on. And they’ll be better positioned to have ongoing support and not go back to the drawing board every time they want to bring new technology to market. NUMBER 3 Embrace a Digital-First Approach Embracing a digital-first mindset — and under - standing that digital-first does not mean digital- only, but instead digital-everywhere — must be at the center of ongoing transformation efforts.

If I’m a call center rep and I’m not comfortable using digital banking, I’m not going to be comfortable talking about it with a client. — Erin Wynn

Digital transformation initiatives also need to be fluid and flexible. Banks and credit unions should always be thinking about and planning for their next initiative. And they need to be thinking two to three years ahead, because consumer expectations don’t stand still. This means they must keep abreast of what’s going on in the market, from the financial services side, and also with the nonbanking tech companies, popular retailers and the like. Financial institutions need to be acutely aware of what consumers are doing now and what experiences they really want and need, which are often influenced by experi - ences they have outside their banking relationships. Not all financial institutions will have the resources to analyze the market this way. But with the right partners, they can stay in lockstep with industry trends without necessarily having dedi- cated internal resources. NUMBER 2 Secure a Digital Budget Banks and credit unions need to be empowered to make change happen quickly in order to speed up innovation and stay competitive. Nelson said one of the biggest challenges she’s seen working with financial institutions is when they’re held back by a “project” budget. She said that “historically and traditionally, financial institutions think about things from a project perspective.” This legacy way of operating can significantly slow down even the most forward-thinking financial insti - tutions. Nelson sees the most success when banks

“Everyone needs to be all-in and using digital. If I’m a call center rep and I’m not comfortable using digital banking, I’m not going to be comfortable talking about it with a client, explaining how to do something,” said Wynn. Every financial institution will have unique strategic priorities and measure success differently. No two digital transformation strategies will look the same. But to be successful and keep up with shifting consumer expectations, market pressures and internal demands, banks and credit unions need to be flexible, adapt quickly and effectively deliver digital-first experiences across all banking channels. And to get there, they need to challenge the way the financial institution has always done things, shift to a digital-first mindset at all levels and have the technology platform and support to move faster. Listen to our Hard Truths About Digital Transformation webinar recording to hear the top-of-mind digital transformation questions for banks and credit unions and more advice from NCR and partners. ▪

I believe that banks and credit unions that are focused on the platform and data are the ones

that are going to be ahead of the game. — Carrie Nelson

“I believe the banks and credit unions that are focused on the platform and data are the ones that are going to be ahead of the game,” said Nelson. Wynn said the financial institutions that have not yet upgraded their legacy technology and committed to a platform need to take a hard look at the opportunity cost of doing nothing. She added that they need to keep a few things top of mind when selecting a partner: require visibility into the roadmap and ensure an understanding of the upgrade process and support model beyond implementation. One last and vital piece of advice Wynn added was the importance of creating employee advocacy throughout the organization, not just client-facing team members. Any time there are

One of the biggest mistakes digital bankers make is not keeping stats on what’s going on within the digital channel to enable executive leadership to see its impact.

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Targeting the Best Customer Segments for Revenue Growth Banks can increase earnings potential by understanding customers' demographics, creditworthiness, income distribution and personal interests. By combining data-driven objectives and customer insights, banks can target, reach and convert the best audiences to achieve growth goals.

By Allison Wilson Vice President, Strategy and Client Experience at Amsive

Start with Your Business Objectives First and foremost, establish or revisit the key business outcomes the bank wants to accomplish. It feels obvious, but specificity is key to achieving meaningful results. The difference between winning and losing sometimes comes down to how specific your objectives are. Instead of saying, “We want more checking accounts,” bankers might consider saying, “We want 3,500 new bank households before year-end at a 55% return on marketing invest- ment.” Why? Understanding the objective drives audience selection and testing tactics within that audience.

What brands are your customers loyal to? What do customers do in their free time? What’s their next big life decision? Many banks can’t answer these questions. And if they can, they know the answer for some but not all of their customers. Yet, responses to these questions and others like them hold the key to unlocking revenue potential in 2023. With the current interest rate environment, increased regulation and the growth of fintech competition, certainty can feel far-fetched and further away. To outmaneuver these changes, a bank’s marketing and its entire business needs to be focused on the right people. When you invest in understanding your customers and your best marketing audiences, you can achieve, and exceed, your desired business outcomes.

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interests of your customers. Ask yourself and your team: • Do we know the demographics of our customer base? • Do we know how our customers from one part of the business are using and interacting with other services and products we provide? • Do our customers want to stay in the same job or do they change jobs often? • Do our customers travel in their free time? Having such insights tips the scales in your favor as you position your business against your competi- tors. When you truly know your customers, you can increase revenue in the short term and the long run. And growth is a top priority for most leadership within financial institutions. There are great business cases to reach a wide variety of demographics. Your best audience can look different than even your closest competitor’s audience. Instead of focusing on who you think you should be targeting, it’s better to understand your existing customer base, which is already driving your profitability. The graphic below (Figure 1) illustrates an exam- ple of a representative bank’s existing customer base versus the ideal customer qualities the bank might prioritize for growth.

Deeply understand the ideal audience , and the rest of the bank’s strategy and campaign tactics will fall into place.

Changing the Narrative: When launching the next marketing campaign, don't just say 'we need to onboard more customers' and leave it at that. Goals must be specific — and actionable.

What kinds of jobs do customers hold? What’s their income potential? Your team might know. But what do your customers do in their free time? Do they travel internationally? Do they love heading to Walmart? Or maybe having gourmet food delivered? These answers are out there. And while they might feel like one-offs, they are the key to developing data-led strategies for your marketing and business tactics.

Marketing Rests on Understanding Your Audience Deeply understand the ideal audience, and the rest of the bank’s strategy and campaign tactics will fall into place. You’ll know how your best customers do or don’t interact with technology, so you’ll know which channels to use. You’ll understand their habits, so you’ll be able to connect with them at just the right moments. You’ll know about their interests, so you can develop messaging and creative that resonates. There’s great power in knowing your audience. Financial institutions have long searched to find their best customers. Today, it’s possible to identify who is your best audience and how you should reach them. Set up for success in 2023 by unlocking the revenue-driving potential of your best audience — to make better decisions for your business. ▪

Every financial institution has unique objectives and should approach its goals based on its distinc- tive marketplace and position. To increase market share with next-generation competition, precise, data-driven objectives are a must. With clear, pre- cise and actionable outcomes, the bank’s marketing can target, reach and convert the best audiences to achieve goals. How to Find — and Deeply Know — Your Best Audience You know your customers — but do you know your customers? While it might sound simple, it’s extremely powerful to understand the demograph- ics, creditworthiness, income distribution and

Build a 360° View of Your Best Customers

Collect all existing customer data from across your organization. It’s easy for customer data to get siloed, but checking the nooks and crannies ensures that the bank has a complete picture of current customers. That customer data can then be analyzed against a reference group in your geographic marketplace for similarities and differences. Why? Every cus- tomer base has a tell — sometimes multiple tells. What is the key variable that stands out within the population and is unique to your business in its marketplace? Once you’ve identified what’s truly unique about your customers, you can find other people exhibiting those same signals. And you’ll know how to market to them with the right mes- sage, channel and measurement. When a bank knows its customers inside out, it can make better informed, data-led decisions. With a full view of exactly who your customers are, you have choices. Do you want your acquisition pros- pects to look like your current customers, or not? Or do you want to expand your cross-sell tactics to other key services of your organization? These pivotal business decisions are only possible when you have the full picture of your customers. For example, let’s say the goal is to expand market share by adding X number of households within your geographical marketplace. Gather all current customer data from within your organization. Analyze customer data against the population in your geo- graphical marketplace to uncover unique variables that only your customers have. Then, identify pros- pects within your location with the same variables.

Sample comparison of ‘existing’ versus ‘ideal’ bank customer bases Figure 1

Existing

Ideal

Education

Less than 1/3 have a college degree

Over-index on college degrees

Age

69% of them are over 45

More likely than the average consumer to be 35-44

Wealth

78% have a net worth below $500k

52% have a net worth $500k or above

85% own a home (the home was most likely built prior to 1969)

Homeownership

Over-index in owning newer homes

Spending

Over-index as Walmart shoppers

68% are live music concert attendees

More likely than the average consumer to not be looking to switch jobs

More likely that the average consumer to be a manager and be interested in switching jobs

Jobs

More than 50% are unlikely or very unlikely to travel internationally

More than 50% are likely or very likely to travel internationally

Travel

THE FINANCIAL BRAND © October 2022 SOURCE: Amsive

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By Total Expert

Happy customers come back for their future banking needs, and they refer friends and family to their financial institution — right? Time-honored banking wisdom as well as consumer surveys support this belief, in part. But consumers have shared one more thing when polled by Gallup: Banks and credit unions miss nearly 40% of opportunities in their relationship with customers when they focus only on satisfaction. How do banks overlook so many chances to strengthen relationships and bring in more business? Their mistake is to focus only on satisfaction, when they should be using the powerful combination of satisfaction plus engagement Perhaps they do so because increasing customer engagement is riddled with risks, and practical barriers hamper success in channels that offer high returns on investment. Each of these challenges is surmountable once leaders understand what they can do about them. When established bank customers say they’re satisfied, that doesn’t necessarily mean the relationship is robust and growing. To win a larger share of customers’ financial business, banks and credit unions must increase engagement. They can win at cross-selling if they focus on reviving sputtering relationship growth with existing customers.

Engaging Existing Customers Drives Banks’ Cross-Sell Success

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Incentive for Growth: Improved engagement increases customers' interest in buying additional products from their bank.

Don't Disappoint: While 51% of consumers want more help than they’re getting from their financial provider, 40% were “unhappy” about the generic advice they received from their provider.

When banking leaders self-categorized their institutions, the majority said they had just begun using contact data, banking data, segmentation and digital engagement. In that category, only 10% leverage data from multiple sources to segment customers. Some 52% send the same message to all customers and 70% still manually leverage data. No wonder 66% of consumers don’t value their engagement. Banks don’t have the tools that make valuable engagement possible. In case leaders read this and think the message is “buy engagement tech,” hang on. It is true that banks need the tools to overcome the chal- lenges of scaled and valuable engagement. But often it’s the tools that have doomed them from the beginning. Most banks have never done digital engagement before at the level consumers expect. They don’t know how technology should be used to solve their scale challenges. What expertise does the platform contain and provide for growing a bank? Is that built into the software itself? Leaders seek engagement to create better depositor onboarding, to grow relationships through cross-selling or lend again to past borrowers. But they’re buying blank canvases — platforms without already-developed industry- specific functionality. To avoid engagement’s biggest obstacle, lead- ers must not place bets on technology or on their bank’s know-how to develop technology to fully engage and satisfy customers. This approach mandates that they learn that through trial and error within customer engagement. If the goal is to reach that 83% opportunity with customers — avoiding that 66% failure rate — don’t wait for firsthand experience. You no longer need to take the risk. A much easier road to being fully engaged awaits you and the customers who clamor for a relationship upgrade. ▪

with outside vendors to improve and increase their engagement. Nearly half (48%) are adding new team roles to support new engagement tactics. Not All Engagement Is Equal The road to greater customer product usage might be paved in gold, but it’s not lined with roses. Consider the bigger picture. Consumers say “fully” engaging them bodes well for the bank, but what does that mean? Do they want more or better engagement? We are all consumers, so we intuitively know the answer — we all want better engagement and only more engagement when it is better. Consumer studies paint an even more vivid picture. Research from Personetics found that while more than half of consumers (51%) want more help than they’re getting from their financial provider , 40% of those who have received communication from their provider were “unhappy” about the generic advice they received. Translation: When banks attempt to climb to full engagement, they’re cannibalizing their customer satisfaction most of the time. The rela- tionship and opportunity costs are not small. Gallup research shows that only one in five con - sumers (19%) would go to their bank for their next product or service when they are neither satisfied nor fully engaged. The Risk of Doing Nothing If a bank currently has “satisfied, but not fully engaged” customers — 45% of whom would con - sider the bank for their next need — wouldn’t it be less risky to just do nothing? It seems better to stay at a 45% opportunity than risk unsatisfactory engagement and a fall to 19%. Unfortunately, risk confronts banks on both sides. On the one hand, consumers have as many as 30 relationships with banking providers, all of which will use digital engagement to serve their customers more and more. Other banks and credit unions — especially the largest financial institutions — now invest to do the same.

Engagement: A New Competitive Battleground

Most consumers hold two to three products at any one institution. Households typically use about ten products. Only the very best organizations sell more than four products to any one customer, not including “go with” services such as debit cards that accompany a checking account. To increase households’ product-service usage, banks and credit unions must identify what causes consumers to add to the relationship. According to a Gallup survey of some 9,000 consumers that use banking services, engagement is the missing link. When addressed, improved engagement increases customers’ interest in buying additional products from their banking provider. Gallup found that 45% of consumers who were satisfied with their banking relationship also said they would consider their institution for their next product or service. If that sounds good, it’s nearly 40% shy of the true relationship opportunity. About 83% of consumers polled said they would consider their institution for their next product or service when they are both “satisfied and fully engaged.” Financial institutions leaders now race to engage “fully” because it offers growth with current cus - tomers — the most efficient kind. With a possible 40% increase in customers’ usage on the table, engagement becomes much more than a marketing “nice-to-have.” Industry surveys clearly show financial institu - tions are investing to engage. About 80% are implementing new technologies, 73% are adding new processes and procedures and 51% are working

If other providers reach full and satisfied engage - ment, they win the cross-sell game. When a com- petitor gets consideration 83% of the time, it means others — those who are not considered more than 45% of the time — get less and less consideration. In that case, the competitor grows by siphoning off customers every year. And as competitors set a higher standard, consumer expectations will follow. For each of these reasons, bank leaders should consider that risking 19% may be a small price to pay when competitors will soon send the oppor- tunity rate closer to zero with every passing year. Banks must choose: Pursue an 83% cross-sell opportunity or succumb to an opportunity that can fall much further than 19%. If leaders choose growth, serving customers bet- ter and investing in the long-term franchise value of the organization, they can chart a path through the risks to fully engaged and satisfied customers. The key is to remove the barriers that prevent person- alization, decrease engagement value and hamper sales and marketing operations. Removing the Biggest Obstacle While leaders will face a series of improvements as they seek full engagement, they can remove the first and biggest challenge: They must ensure the project isn’t doomed from the beginning. When surveyed by Total Expert, bank leaders reported the reasons behind poor engagement satisfaction. Providing value to each customer seg- ment — not to mention each customer individually — presents a scale problem, and it’s one that can only be addressed by harnessing data and automa- tion. Most banks, however, don’t have technology made for that purpose.

The Broken System: Over half of financial marketers standardize messaging instead of personalizing the content to match the customer.

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THE FINANCIAL BRAND INSIGHTS WINTER 2022

The Four Myths of Marketing Analytics Platforms

Sifting through the dozens of options for business intelligence platforms, especially those that can inform marketing decisions, is daunting. Some financial institutions default to the major, trusted players — Salesforce, Oracle, IBM, global marketing agencies. Others grab off-the-shelf software-as-a-service tools like HubSpot and adapt it to their needs. Still more use features of their core processor, or banking industry-specific analytics platforms that promise to let you analyze your data in any way you like. Any way you slice it, choosing the right analytics platform is the easy part. Actually getting ROI and adoption after you sign is a long-term initiative — one that banks and credit unions must think ahead for as they’re shopping. There are a few things that financial institu - tions must keep in mind when making analytics

Keep in Mind: Don't stop asking questions when it comes to integrating new tech platforms. Check with other users to see how much staff time it requires.

By Dan Novalis Founder and CEO at Sternwheel

It's important to know what you're getting into before you invest in a marketing analytics solution — not an easy task given the marketing hype from providers. Here are several common surprises that financial marketers usually find out about only after they've signed on the dotted line.

tool investment decisions. It’s hard to see past the platforms’ marketing messages, but keep in mind these three common myths: MYTH 1 The Tools Are Easy to Use It’s in the best interest of any software platform to talk about itself as being easy to implement, adopt and utilize over time. The reality is that it often takes far more people-power to get the most out of these tools than expected — meaning you either have to hire more staff, or pay the tool’s service department

(if they have one) to utilize the tool for you. Even with technology, answering hard analytics questions is still going to require some time and learning. Over time, you can develop processes and you’ll likely be going back to the tool with the same questions. But there’ll be outsized needs at the start. When you’re doing your due diligence, ask other customers using the tool if they’re using all the features, what staff they have supporting it, and how much time they’re each spending in the tool per month. Can you support that with your current staff, and current skillset?

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Functionality > Flash: With any large investment, it’s imperative to avoid shiny object syndrome — specifically, purchasing a tool based on its promises, rather than its ability to solve a real-life problem that you actually have.

MYTH 3 Insights Enable Ultra-Targeted Campaigns With Little Effort Many analytics platforms have well-designed dash- boards where you can dive deep into any aspect of their findings. And these dashboards are often what’s shown off first in demos and sales pitches. They’re what convince your senior leaders to sign on the dotted line. It’s not that these dashboards aren’t useful — but you need to stop and think about how you’ll actually be able to use that data in your marketing campaigns. Is it possible to pull a list of customers that meet certain criteria, and import them into your marketing automation platforms? Or to pull a list of addresses for a direct mail campaign? Or an email list for a social media campaign? Further, how do you send performance data back from these external channels so the analytics tool knows who responded and actually became a cus- tomer, and therefore can remove the person from the list and report back to you the holistic campaign performance? Often, from platform company websites and demos, it’s unclear how the insights from the tool can actually be used in your campaigns. It’s another good area to dive into with existing customers of the tools before you buy. BONUS MYTH You Need All Your Data Unified to Get Good Insights This isn’t so much a myth, but more something many financial institutions overlook. If the end goal is running marketing campaigns, do you really need the 360-degree view on all of your customers? Often a bank or credit union may only have emails for 60% or 70% of customers. Many often don’t have birthdates, or the ability to know if a customer has their mortgage through you, or a way to see debit card utilization on the individual cus- tomer level. Is this a problem? It will definitely restrict what you can do, and hamper your goals to becoming a fully data-driven organization. These are long-term problems that you will want to work on solving, but it could take months or years to clean up that data.

Go The Extra Mile: It's not always about the look of the dashboard (which usually gets financial marketers hooked). It's also about whether the data provided is actually usable.

MYTH 2 They’ll Unify Your Data, Rapidly Getting that 360 degree view of your customers is harder than it sounds. Many platforms overlook the difficulty in gathering data from across your institution. It’s often a months- or even years-long initiative. There may be other tools available that can solve problems more quickly, while you work through the larger data unification project. Data from different departments needs to be “tied together” using a common identifier, such as an account number — which may be different in mortgage versus retail versus commercial. And householding is another layer on top of that — is there an ID that lets you know who lives together or shares financial responsibility for a business? Even if there is, a student account may require different analysis, and different marketing mes- sages than an adult’s account. You could tie accounts together via address, but what if there’s a small typo or difference (e.g. Avenue versus Street versus Road)? Beyond the data itself, there are myriad cultural issues you may run into. Your business lending department may not want to give up prospecting info, for fear of the marketing or IT teams restricting their access or meddling in their sales pipeline (and commissions!). The mortgage team may have their own CRM system — or worse, a lack thereof — and which may be difficult to integrate with your market - ing automation platform. And neither of these things is really related to the platform itself. The platform provider can likely guide you through fixing these issues (data or cultural) but most of that work will rest on your shoulders, and these problems can take months or more to solve, even at institutions that are moti- vated to become data-driven.

It doesn’t mean you can’t run some compelling marketing campaigns in the meantime. What are some insights you can gain from the data you do have? Can you access transactional deposit account data, and mine just that for insights? There’s a lot you can learn by looking at how spending habits change over time, where direct deposits are com- ing from, and where payments out of the bank are going (to competing credit card vendors, mortgage banks, etc.) The platforms you’re researching may have some features you can use while you’re unifying your overall dataset, or you may even be able to do some of this analysis on your own (via a spreadsheet or visualization tool). Choosing the Right Marketing Analytics Platform With any large investment, its imperative to avoid shiny object syndrome — specifically, purchasing a tool based on it’s promises, rather than its ability to solve a real-life problem that you actually have. Yes, the promises of these platforms are great, but if you don’t have the staff to use them, or the extra budget to pay the platform company to run it for you, are you getting anything out of the tool, or is it just collecting dust? Instead, start with a clear documentation of your end goals. Where does your bank want to be in five years? Does your executive team and board really support a transformation to becoming data and digitally driven? If so, you’ll need some technology for that. But make sure you pick something that also solves today’s problems, not a generic bucket of things you think you might run into down the line. ▪

Stellar Strategic Planning Advice From 10 Changemakers in Banking and Technology Free Report: Nymbus spoke with ten industry leaders about how they approach strategic planning and what banking executives should plan for in the coming year. This 27-page report details their thoughts and guidance on how financial institutions should approach their strategic plans for 2023.

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