How Mobile Is Changing Community Banks

Community banks will have to learn how to deliver their personal touch and local advice through digital channels, experts say.

Some community banks are quickly leveling the playing field with larger ones in the mobile channel, introducing services like mobile remote deposit capture and mobile P2P almost immediately after (or sometimes even before) the bigger banks get around to it. But mobile is also changing the traditional value proposition of a community bank where you walk through the branch door and everyone knows you. Instead of going to the branch, people are using their mobile devices for simple transactions, potentially making it more difficult for community banks to deliver the personal touch that is at the heart of their value to the customer.

Those community banks that have been early adopters of the latest mobile banking technologies have seen positive results. Take Conestoga Bank, based in Chester Springs, Pa., a community bank that rolled out mobile remote deposit capture (RDC) in March 2011, with help from mobile imaging solutions provider Mitek and J&B software, a division of the software company 3i Infotech. The bank ($621 million in assets) was the first regional or community bank in the Philadelphia area to introduce mobile RDC, and since then has seen a 10 percent increase in new account openings. "We had very fast adoption with customers and businesses. And we have attracted a lot of new customers as well," says Lori Adamski, Conestoga's COO.

Adamski says that transaction volume at Conestoga's branches had been going down for a while, but she doesn't think that fewer branch visits undermines the value of a community bank. Fewer branch transactions allows the branch to be more consultative. "The value of a community bank is in delivering local advice," Adamski says. Instead Conestoga is taking a we've-got-all-your-bases-covered approach with its customers: "We offer the current technology that they want, whether its through telephone, branch, online, or mobile. And we still maintain a personal touch."

The key is whether or not community banks find a way to deliver their personal touch through new channels. "Community banks will have to figure out how to push that value proposition of theirs out there [in online and mobile]," says Coy Joyner, vice president of Product Management at ACI Worldwide, a banking technologies provider. "They [customers] won't go into the branch." Joyner suggests that online chat, video conferencing or FaceTime on the iPad to deliver the local advice that Adamski mentioned through mobile and online.

Mobile could also make it easier for community banks to hold on to customers, says Dave Wegman, senior vice president and general manager at Fiserv, a technology solutions provider. "People used to change banks often because of relocating or life-changing events. Financial institutions realize that if they're offering convenience, once you get the customers, you should never lose the customer because they can bank anywhere with you," Wegman comments. He added that community banks who adopt mobile technologies early will be more attractive to younger customers to begin with. And, as he says, once they attract the customer they should be able to keep that customer no matter what.

Bart Narter, senior vice president of the Banking Group at Celent, a consulting firm, agrees that mobile will help community banks keep customers who move or travel often. "If they [customers] don't value a massive branch network, because they have mobile deposit capture, it gives smaller financial institutions a leg up," he remarks. "Mobile erodes that advantage of when you're traveling you can find a branch or ATM anywhere."

Narter also says that as long as mobile functionality remains more limited than, say, online functionality, community banks will have a certain advantage over bigger banks in terms of speed of deployment of new mobile solutions. Smaller banks working with a third-party technology provider can deploy mobile RDC or mobile P2P quicker than their larger counterparts because they don't have to deal with the bureaucracy or make the in-house technology infrastructure upgrades that bigger banks have to deal with.

But there's a hitch for smaller banks. Narter notes that in the online channel, which has more functionality than mobile, the bigger banks tend to offer a better customer experience. If the functionality of mobile increases to the point that online banking has reached, many smaller banks won't be able to make the investments to compete in mobile. "It will be harder for smaller banks [to compete] as mobile becomes more sophisticated," Narter predicts.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio