Small Community Banks Struggle to Offer the Right Technology to Clients. I love technology. I love banking too. Where do technology and banking meet? Simply put, banking without technology cannot exist – both internally, running banking operations and externally, offering banking products to clients. Everything from making a deposit into your checking account at the teller line to making a deposit using your mobile phone is done using technology.

When I first started consulting for small community banks and credit unions, I used to advise to them to offer the most current banking technology products to their customers so they could compete with larger banks. And to clarify, small community banks and credit unions for purposes of this blog post, are smaller than $250 million in assets. However, as I started visiting small community banks and credit unions—especially outside of major metro areas—I learned that their customers don’t necessarily want or need state of the art technology. Even well-established products and services may not be needed. For example, one of our clients has a branch in a Minneapolis suburb and another branch in northern Minnesota. One day, we were talking about making sure they offer all customers e-statements in order to increase efficiencies. The employees from the suburban office (including myself) thought it would be an easy sell when the branch manager up north said, “Wait, my customers don’t want e-statements. Some of them don’t even have online banking. In fact, they look forward to coming to our offices to pick up their statements. There is no way I will be able to put them on e-statements.”

There was another incident where I was encouraging a client to sell remote deposit capture to their treasury management business customers when they stopped me and said, “We only have one customer who may want to use this product so we don’t think it’s worth it for us to invest in it.” So after several incidents like these ones, I changed my perspective on technology and what small community banks and credit unions should offer their customers. Now I advise them to offer the technology products that their customers want and/or need based on where they are geographically.

Having said that, I still strongly believe that small community banks and credit unions should strive to keep up with technology in two areas: 1) internally: so their employees have the best and most efficient way to do their work and serve their customers while keeping their customer data secure; and 2) externally: offering products that most larger institutions and local competitors offer so they stay competitive. My hope is that small community banks and credit unions don’t use the excuse that their customers don’t want or need the technology to stay behind the times.

For the small community banks and credit unions that have branches in metropolitan as well as in rural areas, they struggle with the balance of offering the most up to date products, which cost money to implement and keep safe. But they have no choice. Due to their geographical locations, they must offer all the choices to their varied customers in order to stay competitive. They have to take the risks and added expenses of implementing new technologies or the risk of losing customers (or not growing) by not having it. Once again small community banks and credit unions struggle making the right decisions to stay alive and succeed.

My advice is to take calculated risks based on what your customers are asking you. Ask them what products and services they want. Do not rely on your staff to “know” what the customer wants. Inform customers about new products and services to gauge their openness to using them. Know your customer base, do your research (meaning, know what the cost of implementing the new products is, who wants it, which customers are asking for the new products, charge accordingly, do a risk analysis on the new products so you know how to mitigate the new risks, implement a well thought out marketing plan, train your staff to sell the product), and go for it.

Looking for ideas to expand your Treasury Management reach to new business customers? Look into the TMClarity Framework, our comprehensive and transformative training and Treasury Management business management system that leads to greater sales success, higher margins, and increased customer retention in a competitive marketplace.

Do you really know your vendors? I would like to continue my posts on the topic of vendor management and how vital vendors are to the success of every organization. Through the years I have worked with many vendors of all kinds and I’ve had the opportunity to form long-lasting relationships with many of them. As a best practice and one of the strategies I used when starting a De Novo community bank back in 2005 was to obtain bids from at least two to three vendors who offered the same services so we could choose the right one. This strategy served us well and we were able to choose, almost 100% of the time, the right vendor for the product or service the institution needed.

In addition to doing due diligence with each vendor to ensure they are the right fit, to know they will exist long-term, and that they will keep your data safe, it is also important to form a good relationship with your vendors. As the CFO and COO, I worked with all the vendors, including reading and signing every contract, learning about their services, and protecting the institution at every level. I took that responsibility seriously and considered getting to know the vendors at a personal level of great importance. I worked with the sales person initially but I also got to know other key people in the company. This proved to be a great strategy for when sales reps left the company or my lead relationship manager was promoted to other positions. For example, with the financial auditors, I formed a long-term relationship with the relationship manager/partner, the lead auditor, and some of the staff auditors who visited each year to do the audit work. I did the same with the compliance auditors at a different firm, the IT auditors, and even with the State regulators.

It is also very important (and a great vendor management strategy) to diversify your vendor base. For example, I made relationships with various local accounting firms who provide services to community banks and credit unions, choosing separate firms to conduct compliance audits, IT external audits, financial audits, loan reviews, and tax return preparation. This strategy works great when it’s time to rotate firms so they don’t get too familiar with your institution. It is also a best practice for checks and balances within your community bank or credit union.

Get to know your vendors at the personal level and form long-term relationships because it will pay off.