The post-crisis opportunity for community banks in Florida
The ten largest community banks in Florida maintain nearly 500 branch locations and millions of customer accounts throughout the state. This presence is critical for supporting individuals and small businesses who lack access to the mainstream banking infrastructure. But in the post-COVID world, the branch model is evolving, and the best community banks are building strategies to better serve customers in this new reality.
Trend 1: Branch Closings
The branch closing trend in not new in the United States, 12% of bank branches have closed in the US over the past decade. COVID seems to be accelerating this trend. According to Novantas, a financial services research firm, both branch traffic and teller transactions fell more than 30% in April and the first three weeks of May compared with the same period last year. Many believe that these trends will have staying power and even accelerate over the next few years as social distancing persists. Some of the immediate impacts can be seen in China, who is a few months ahead of the United States in its recovery, where 800 branches have shuttered as the economy opened back up.
Trend 2: Mobile Banking Surge
April saw a 200% jump in new mobile banking registrations, and an 85% increase in mobile banking traffic. These numbers are so striking, that U.S. Bancorp, the country’s biggest regional bank, said the shift will likely present opportunities to accelerate branch consolidation. CEO Andy Cecere recently said in an industry conference he expects to close more than the 10% to 15% targeted by the bank in 2019. The bank counted about 3,000 branches at the time.
While this turmoil can cause banking leaders anguish, reflecting on the past, specifically the most successful ‘community bank’ in the history of the United States, is great inspiration for turning turmoil into opportunity.
Story Time…
In the early 1900s, after a shouting match with a local bank about its reluctance to make small loans to individual borrowers, a young fruit and vegetable merchant named Amadeo Peter Giannini founded his own bank called, The Bank of Italy. Giannini set out with a goal to provide banking services to folks otherwise unable to receive them.
Soon after opening his bank, in 1907 a devastating earthquake struck the Bay Area killing more than 3,000 people and setting the city into chaos.
Realizing that his bank was at risk for catching fire, Giannini filled a horse drawn carriage with gold and cash and escaped before his bank burned down. The next day, Giannini positioned a table in the famous Wharf Market of San Francisco with a sign BANK OF ITALY: OPEN FOR BUSINESS.
In the midst of crisis, The Bank of Italy filled a critical need.
During the aftermath of the earthquake, Giannini lent to almost everyone with legitimate need, taking little collateral aside from personal character.
Giannini continued lending to people in need throughout his life.
In 1921, he said “Be ready to help people when they need it most.” This idea drove Giannini to expand operations beyond San Francisco and deeper into middle America. This strategy made Giannini a pioneer in branch banking and allowed him to rapidly grow the business. But then the Great Depression struck, and in short order Giannini’s bank lost half of its deposits.
Despite the major loss, his strategy never wavered. “Get set to yank them out of a hole,” he said. “The glad hand is alright in sunshine, but it is the helping hand in the dark day that folks remember to the end of time.”
So, what does this mean for you, leaders in the Florida banking community?
It is not a stretch to think of COVID as the proverbial ‘earthquake,’ and many community banks are in the path of the divide. While the stock market continues to rise, many still worry about the demand side of the equation; and there are still major questions as to what will happen when the FED and Treasury Department cease to provide liquidity to the economy.
Community banks have been at the foundation of the recovery and need to continue to evolve to meet quickly shifting customer preferences. Both up market competitors and new entrants from Fintech are quickly taking advantage of the post-COVID shift to a digital first banking world. Like Giannini packing up and moving his shop to the crowded wharf area, it is time for community banks to double down on the digital transformation efforts to ensure they can still provide core banking services to populations who need it most.
This means building internal tools for workforces to better interact with customers digitally, formalizing customer understanding so it is the center of the digital and mobile banking experience, facilitating partnerships and interoperability with Fintech upstarts to take advantage of new channels and developing a strategy for the post-branch world.
Giannini was an innovator who blazed the trail for the branch model throughout the early part of the twentieth century. But it was not as simple as acquiring property, a safe, and hiring a team. He built management technologies and developed new and better ways to engage customers that scaled across multiple locations. Without these innovations, his strategy would have never worked. Despite challenges like the earthquake and the Great Depression he continued to innovate and managed to grow The Bank of Italy into a national powerhouse.
Maybe you have heard of it? It is now called Bank of America.
So, what should you take away from this story? Giannini used times of crisis as an opportunity to help the communities he served. While many bankers closed shop and ran for the hills, Giannini doubled down and focused on finding the best ways to get resources to people and businesses that needed them most.
Now is the time for the community bank leaders of Florida to take a similar initiative, and a post-branch future is the new frontier.
To learn more about Amadeo Peter Giannini and the founding of Bank of America, check out this profile from Jason Zweig at the WSJ.
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