If you’re a community credit union, please check out this piece specially written for CUs navigating the current turbulence of the financial sector.
Now’s not a great time to be a bank—or any other major financial institution, for that matter. Rising interest rates, Silicon Valley Bank’s abrupt closure (and ensuing bank run), and a constant stream of perilous headlines about economic downturn all have people spooked. It’s shades of 2008, and those who suffered through the Great Recession aren’t eager to do it all over again.
Regional banks especially face a precarious situation. They’re structured and managed far differently than national banks; however, to the public, a bank is a bank. As we teeter on a period of public mistrust for financial institutions, education needs to become a priority for regional banks. Earning business is about earning trust, and regional banks need both right now.
Inclement conditions pose a threat
Put yourself in the shoes of a hardworking member of your community. You’re financially literate enough to make a budget, pay your bills, and save a little here and there—But you don’t know much about banking outside the basics. Now, imagine you wake up to these headlines over the span of a few days:
- How Does a Bank Collapse in 48 Hours?
- A Financial Banana Republic
- Fed Raises Rates Amid Banking Turmoil
It’s easy to lose trust in a system you don’t fully understand, based on headlines and snippets that don’t tell a complete story. Bank failures, bailouts, mergers, government intervention, and the like don’t inspire consumer confidence. And, unfortunately, your community patrons aren’t able to distinguish your regional bank from the corporate megabanks that are making headlines. It’s up to you to help educate them.
Distance yourself from the whirlwind
Banking is an integral part of everyday life, from direct deposit to access to a mortgage. And while the days of squirreling money in a mattress are behind us, there are other implications that accompany lack of trust in banking institutions. If people need a bank, they’re going to be much more discerning about the one they choose. If people don’t trust your brand, they’ll look for one they do.
A regional bank that can inspire trust at a time when public sentiment toward FIs is waning will position itself to not only retain customers, but also gain them. To create this ethos, regional banks need to show how they’re different from their megabank counterparts. Often, that comes down to being transparent. How do you put your community first and provide financial security for those within it?
While JP Morgan, Wells Fargo, Bank of America, and other commercial banks strive to produce profit for shareholders, regional banks are beholden to their customers and members first. But do the people in your communities know this? Chances are, probably not. It’s up to you to not just tell them, but to show them.
Stay ahead of the storm
Alarmist headlines and news segments about the banking industry aren’t going away anytime soon, so it’s up to regional banks to stay ahead of the messaging. What’s coming down the pike that could scare people and how can you give your communities the knowledge they need to understand it when it hits?
Case in point, helping mortgage clients understand a rising rate environment and how it does and doesn’t affect them can create peace of mind not only about their financial situation, but also their decision to bank with you vs. another lender.
There’s also an educational component in how your regional branch is tied to the local community. What local organizations do you support? Who are your small business partners? What community ties are you proud of? Take time to entrench your position as not just another bank within the community, but rather the community’s bank. Let people know you’re on their side, putting their best interests first and safeguarding them from the turmoil affecting larger institutions.
Be the silver lining
There’s no changing the broader narrative around banking and financial services right now—and, in fact, it’s likely to get worse. That said, regional banks do have the power to influence the conversation in the communities where they’re present. The key is to think small.
People are afraid of what they don’t understand, and they feel like nameless, faceless numbers in a banking system they don’t have confidence in. By educating them, acknowledging them, and appreciating them, regional banks can prove to members that they’re big enough to weather the storm, yet small enough to see what matters.
If you’re a local or regional bank concerned about the gathering storm clouds, reach out to the team at JXM. We’ve helped financial institutions of all sizes build their brand, regardless of conditions.