Banking on the Homefield Advantage

MARKET COMMENTARY Banking on the Homefield Advantage Community Banks and Credit Unions are First in Line When it Comes to Personalized Care What defines a community? Hometown Values Equal Recent studies reveal that 60 percent of Homefield Advantage Gen Zers believe that communities are Right now, nearly 30 percent of created around causes and interests.1 consumers have a relationship with Millennials have a similar view and desire a non-traditional financial services 60% to shape society through positive impacts, provider, such as PayPal,5 but when it something that 46 percent feel is more comes to selecting a banking partner, important than starting a family 2 local and nearby still wins the day. According to research conducted by PwC, Generation X on the other hand places 65 percent of consumers prefer a bank priorities closer to home. They believe or credit union that offers a physical in building community through loyal branch location.6 60% of Gen Zers believe that relationships, as 56 percent are caring communities are created for aging baby boomer parents3 or helping In fact, 75 percent of consumers opened around causes and interests their adult children get a financial foothold their existing bank account at a branch on the world.4 and over half would do so again. For 40 percent of individuals, location As consumers reshape their attitudes is the primary factor when taking out and thoughts about community and a checking account.7 the important role it plays in the lives of individuals, local banks and credit unions Consumers agree that local branches are emerging as hometown heroes, built continue to provide value in the digital on strong personal connections and age, particularly when it comes to more community involvement. complex experiences, such as taking out a mortgage or engaging in investment However, as change remains constant, services. 58 percent of consumers like to these same financial entities will need work with a local branch on these matters, to evolve to maintain their homefield though 27 percent of these individuals advantage and continue to meet the would prefer the meeting taking place needs of the clients they serve. in the comfort of their own home.8 FINASTRA Market Commentary 1 The Financial Brand puts the local branch personally valuable to city residents, the Banks and credit unions are in a new light, painting the brick and bank is engaging at a community level mortar structure as a financial institution’s and increasing the odds of being “seeking new ways to engage most important billboard for brand the firm of choice for consumers when with consumers on a personal identity. It serves to remind residents the need for financial products or level, often turning branches into of the institution’s standing in the area services does arise. and its involvement in the community community centers to do so. While large national providers seek to ” —in short, its hometown persona. instill a hometown feel, when it comes But how do consumers select the branch to fostering a sense of community, where they place their business and local banks and credit unions have the what are the factors driving loyalty? homefield advantage, because they According to The Financial Brand’s are already deeply ingrained within the research, it comes down to personal community. The branch manager’s son experience. To understand what may play soccer on the same team as a this means, we must dig deeper into small business owner’s child. They see consumer attitudes and perceptions. each other around town and interact at community events. In short, they’re McKinsey & Company revealed that neighbors, and it is far easier to trust your personal-consumption spending on financial well-being to a friend than a large experiences, such as traveling or institution. attending a spectator event, grew 1.5 times faster than overall personal- In addition, many community banks and consumption spending and almost credit unions transcend generational 4 times faster than expenditures on boundaries. A parent may bring a goods.9 Experiences etch emotional child in to open their very first savings connections into the consumer psyche account. That child grows up, marries and elicit a sense of inclusive belonging. and brings their own child in to open their first account. Before long, banking To put this into a business perspective, relationships may extend two or 80 percent of respondents to a recent three generations deep, creating an survey said they were more likely to interconnected web between the bank engage with a company that offered or credit union and the family. personalized experiences.10 As a result, banks and credit unions are seeking new Family connections turn to community ways to engage with consumers on a connections as local banks and credit personal level, often turning branches unions support the causes that are into community centers to do so. important to the welfare of the region. It isn’t uncommon for executives to serve CaptialOne Bank in New York City offers on charity boards, and institutions at this non-specific use seating areas where level commonly offer services and charity the public can stop and check email events that benefit the area. messages on a cell phone or sip a cup of coffee. By offering an experience that is FINASTRA Market Commentary 2 From a client’s perspective, small and knowledge of the region and trends at local offers personalized experiences that large, to offer more personal advice on Many community banks large and corporate just doesn’t provide, financial products and best steps for “and credit unions transcend giving community banks and credit unions money management. the homefield advantage. Maintaining it generational boundaries Open Communication: High fees are the ” over the ease and convenience offered number one reason that customers and by larger national or international members leave their financial institution, banks, however, requires a dedication to and 75 percent will not won’t give advance providing the personal experiences that notice because they doubt it will make customers and members cherish. a difference.13 Small banks and credit In one rural Connecticut town, a family unions are in a far better position to keep pharmacy served its customers for the lines of communication open than generations, going above and beyond larger banks and prevent detrimental by adding things like free prescription switching, because they are more in touch delivery, curbside assistance and helping with the community at large. elderly customers understand their For added insight, small banks and credit medications. When a large national chain unions can survey customers to assess moved into town, the local business their performance and gauge customers continued to treat its customers as satisfaction with the service they provide. individuals, maintaining loyalty over These types of communications come the convenience of the big chain. more naturally from community banks or Community banks and credit unions credit unions due to their friendly and local need to do the same, forging deep place within the region they serve. customer connections through Think small town: Consumers select personalized experiences: community banks or credit unions Small touches: Customers or members because they crave personalized care, are delighted when a bank teller greets so it pays to go above and beyond. them by name but imagine the impact on As members of the community, retention when a branch manager greets relationship managers are more in touch them at a restaurant or local event on with life events, affording them the a personal level. opportunity to rally around customers or members at important stages. Acting as a personal advisor: When it Offering congratulations at the birth of comes to creating the right account or a baby or checking up on a new home managing wealth, one in two consumers after a customer or member takes out a welcomes personal advice based on their mortgage enhances loyalty but also puts individual circumstances.11 Many are the institution in a position to learn new willing to share their data in exchange for areas where they can serve individual an assessment of their spending habits customers and members better. and advice on how to better manage their money.12 Community banks and credit unions can combine their FINASTRA Market Commentary 3 The Virtuous Cycle of “We finance hundreds of homes for first- We know our customers and Community Banking time homebuyers every year, many of “we have a relationship with Small banks or credit unions have a lot in them immigrants with limited resources,” them that is very special common with small businesses as well as said Steven Schnall, chairman and CEO ” consumers. Both are vital to the success of Quontic Bank in an interview with David Lacey of a community and both are dependent Independent Banker. “We also help low- President & CEO upon each other for success. income seniors tap equity in their homes so they can age in place.” Community Bank & Trust As community banks and credit unions invest in local business, they’re fueling As members of the community, the economy. Consider the case of a community banks and credit unions developer that secures financing from support their own. As these institutions a small local bank or credit union to build grow, they look to their customers a 500-unit apartment building. and members for support, drawing on engineers, architects, security firms and The small bank or credit union supports other solution providers from their own the development, population in the town client roster to deliver the services they grows, and in the end, more deposits and need. For example, if a small bank or accounts come back to the institution.

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