2019 Strategic planning recap podcast

Show notes:

• 1:25 We’ll be revisiting this blog post, originally written in late 2018: 5 topics banks should discuss during 2019 strategic planning.
• 2:45 Strategic planning basics – Most CEOs of community financial institutions have a good sense of how market conditions and technology will affect their strategy. They are always thinking about how they can improve their position in the market, and how they can partner with someone who may help them differentiate themselves or become more efficient.
• 3:35 “Throwback Thursday” day – Everything changes over time. Fashion, technology, economics. What seemed relevant at one time may not be anymore, and time can change the way things look which is why we’re revisiting our recommendations for strategy planning in 2019.
• 7:30 Topic #1: Deposit flight – For 2019, we predicted that institutions would be repricing deposits at a higher rate, following along with rising Fed rates at the time. We also predicted that we would see deposits move into the most competitive vehicles. This may have been true during the first half of the year, but things didn’t quite stay that way — making it challenging for institutions to settle on a competitive deposit strategy.
• 8:45 The year of fluctuation – In the summer of 2019, Ally and Marcus were pushing high savings rates and then the Fed cut rates. The market responded by lowering rates, but not by much. Even today, megabanks like PNC and Marcus have rates around 1.8-2%.
• 10:20 The importance of customer service – Economic shifts like this are a variable that community financial institutions don’t have control over. One way to lessen this sensitivity is by offering great customer service. Consumers don’t make decisions based on rate alone. After all, thousands of account holders have free checking with a local institution that offers no rate at all. They stay because of the customer service.
• 11:35 Offering the best of both worlds – There are products that offer a great rate and are offset by non-interest income or expense savings. Offering these along with better customer service benefits community financial institutions while giving them a leg up over megabanks.
• 12:10 Topic #2: Increased cost of funds – Cost of funds is always a big concern for financial institutions. For those with a high loan to deposit ratio, the concern is how to fund those loans affordably, without going to the federal government or offering 2% CDs. In cases like this, the cost of funds can double or triple. Loan demand offsets it, but the situation isn’t sustainable or profitable.
• 14:30 Cost of deposits – What is the cost of deposits and how does it differ from cost of funds? It’s a holistic view of the true cost of a deposit tool, looking at cost of funds (interest expense), non-interest expense (like sending a paper statement), and non-interest income (debit card swipes).
• 18:15 The proof is in the pudding – Kasasa clients have consistently promoted higher rates than CDs and the cost of funds has been on par to the CD, while the cost of deposits has been lower, even near zero or below zero. That means the institution is making money on those deposits before they even lend them out. This has been a reliable strategy during times of economic uncertainty.
• 20:35 Topic #3: Modern marketing – We predicted that multi-channel marketing would play a big part in account growth for 2019. This was true, as our partners recognized the importance of marketing not just on radio and billboards but in the digital space as well.
• 23:00 Commercial break – We give a shout out to the Kasasa Exchange. Congratulations for already being here!
• 24:25 Meet your audience where they are – The most important aspect to multi-channel marketing is knowing your audience and reaching them everywhere they are. Research where to invest your marketing dollars to make sure you’re putting it in front of the right people and the right places. This will be just as important for 2020.
• 26:45 Multi-channel marketing in other industries – After visiting a retail store online or searching about an item of clothing, you’ll see digital ads pop up about it everywhere you go. It should be no different for banking services.
• 29:20 Topic #4: Customer retention – This is always a concern for financial institutions, no matter the year. Great products will get consumers in the door and even engage them, and great customer service will keep them there.
• 32:10 The pain of switching – Changing financial institutions doesn’t feel easy for most consumers. What causes them to take that drastic step?
• 33:10 Case study example – A small institution in the rural Oklahoma area had to amp up their product offering to compete with a nearby regional bank. Consumers in the area already knew they offered better service and switched when the better product came along too.
• 35:55 A case of the fees – Getting hit with ATM fees can also be a powerful switching motivator.
• 37:00 Topic #5: Fintech and innovation – In 2019, billions of dollars were being invested by companies developing new innovations. That’s still true in 2020. Are you poised to deal with that before it’s too late?
• 39:00 Data, data, data – Community financial institutions need to harness and clean their data as much as possible and ask themselves if they are prepared from an internal standpoint to take advantage of the new opportunities offered by fintechs.
• 40:30 Lay the foundation – This isn’t about building rocket ships, it’s about planting trees. It’s incorporating platforms that are foundational to everyday business processes. Jim Collins’ Good to Great talks about how successful organizations think about their data.
• 44:20 Underrated/overrated for 2020 – The trend over past few decades has been of market share shifting away from community financial institutions to larger regional and megabanks. In 2020, ask yourself if there are products you can tweak or launch to drive growth and stay relevant in the market.