When it comes to scaling a financial institution, bank executives need to balance the potential value with the corresponding risk that comes from getting bigger. At the same time, you have to ask whether the cost of doing more will be outweighed by revenue growth.
It’s not surprising that community banks struggle with how, when, and why to scale. Bigger banks may have an advantage with centralized operations offices and large budgets for staff. However, community banks offer a unique value proposition of localized expertise, hometown service, and relationship banking. Independently owned banks can also be more nimble in responding to customer demands, and more flexible with loan approval and terms. For example, local banks make 77 percent of agricultural loans and more than 50 percent of small business loans.
With these selling points on your side, growing a community bank may not be as hard as you think. Instead of doing everything yourself, look to your existing vendors as well as new partners. In the 21st century, your strategic suppliers can also be valuable scaling partners. In this article we’ll look at 4 high-impact best practices for growing your bank and how third-party vendors can help.
1. Evaluate and plan.
So you want to figure out how to scale a bank. First, you need to take stock of your current capabilities and capacity. How will your bank accommodate growth? Are the necessary resources, infrastructure, and personnel already in place? If not, how much will it cost to add them and will that eat up any extra revenue generated by expansion? The objective is to see your revenue increase while your operational costs stay the same or even decrease. Otherwise, you may do all the scaling in the world but you won’t actually make more money from it.
Strategic Planning for Growth
Once you’ve taken the time to reflect on and answer the questions above, you can start planning accordingly.
- Overarching Goal: What are you hoping to achieve? For example, some banks and credit unions want to expand their brand footprint, while others are looking for more leads in a specific product category.
- Growth Target: This should not be your pie-in-the-sky goal, but something that is actually attainable and sustainable. What that looks like will depend on the type of goal you set. For example, increasing awareness of your bank is an easily scalable objective because it can be accomplished through print and digital marketing tactics. You may need to increase your marketing budget, but you don’t necessarily need to invest in employees or equipment, especially if you partner with an experienced marketing vendor. On the other hand, growing your lending portfolio will require a simultaneous growth in deposits.
- Core Business Growth: It may be easier to start by setting a growth target for your core business instead of trying to launch a new product or division altogether. For example, agricultural lending is a specialty that often requires local expertise. If farm loans are part of your core business, you could look for ways to make your bank more competitive in this market. Are there any opportunities to cross-sell products related to agricultural lending, such as estate planning?
- New Areas of Growth: Are there new products or services you could offer? For example, your community bank could partner with a local mortgage or investment services company to offer those products to your customer base.
2. Cut existing costs through outsourcing.
Do you have an outsourcing partner? This is an important relationship to develop because your outsourcing partner is also your scaling partner.
For example, at PrintMail we help our financial institution customers with scaling because we have the physical equipment and IT infrastructure in place to handle all of your statement printing and mailing, mail marketing, and ePresentment needs, regardless of how many customers you have now and in the future.
Most financial institutions save money, time, and headaches by outsourcing. Then they can focus on their core banking competencies and on retaining and attracting customers. Because increased revenue isn’t helpful if it doesn’t come with increased profits, cutting costs and increasing efficiency through outsourcing can help make your FI more profitable.
For example, in 2018 PrintMail made a significant investment into Ricoh’s IP5000 High-Speed Continuous Roll-Fed Inkjet Printer with Hunkeler Pre and Post Finishing Equipment and in 2020 we’re adding a second one. Inkjet printers are much faster than toner printers, averaging 2,000 images/minute, and they can support same-day turn of critical communications (NSF, etc.).
Outsourcing some of your operations gives you more flexibility to respond to customer demands and industry trends.
For example, our eStatement service makes it easy and convenient for your customers to access their digital statement from your online banking experience with a single sign-on and integrated design.
Your outsourcing partner can also help you stay current with regulatory requirements. At PrintMail, we know how burdensome regulatory requirements can be on independent banks and credit unions. That’s why we stay up-to-date on changing regulations in the financial industry and offer cutting-edge compliance communications services.
3. Invest in your 24/7 online branch.
Today’s consumers desire an omnichannel banking experience. This means the ability to visit a physical branch, open a new account or apply for a loan online, and deposit checks through a mobile app.
When it comes to looking for banks or researching loan options, most people begin their search online. This is why it’s important to invest in your website with digital marketing tactics and search engine optimization (SEO). Make it easy for people to find you and take the next step to contact your bank, apply for a loan, or open an account. An additional bonus for scaling your bank is the ability to acquire new customers from outside your geographic region through account opening.
Finally, you can collect data on your website visitors and use those analytics to make more targeted offers.
4. Cross-sell your existing customers to increase your share of wallet.
There aren’t enough new customers in the banking market to scale your bank solely based on acquisitions. Instead, you also need to focus on increasing the share of wallet you have with your existing customers.
Since banks and credit unions offer the same basic products and services, you may think the most important competition point is price. However, promoting your personalized and friendly service can also be an effective strategy for increasing share of wallet.
When it comes to cross-selling, focus on three core categories:
- Saving
- Spending
- Investments
First, find out if you are the customer’s primary or secondary bank. If you are their primary bank, they probably already have at least two accounts with you, such as a checking and savings account or a checking account and a mortgage. What else do they need? For example, many people take a new job and forget to do anything with the retirement account from their previous job. This could be an opportunity to win a new Investments customer.
If you are someone’s secondary bank, find out what motivated them to open a savings or extra checking account with you. What are they not getting from their primary financial institution? What can you do to win more of their business?
Train tellers and personal banking representatives to discuss all of the products and services you offer with customers. They simply may not be aware that you offer investment services, for example.
Your business banking customers can also be a huge source of growth. Local financial institutions are often the biggest sources of loans to small businesses. They can also position themselves as partners to help entrepreneurs identify the right solutions for their business needs and goals. Reach out to your business account holders to see if you can do anything else for them, such as a credit card or equipment loan.
Contact PrintMail to learn how we can help you grow your bank!
PrintMail is the industry leader in print and electronic financial correspondence because we prove our value as a growth partner for our customers. We’ve helped a variety of banks through acquisitions and mergers, including the hurdle of achieving $10 billion in assets. Throughout it all, we’ve maintained our record of 98% on-time delivery with an error free rate of 99.999976%. How can we help you scale your bank? Let’s start a conversation!
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