The Customer Owned Banking Association 2024 annual conference presented a rare opportunity for smaller-tier banks and mutuals to step back from bottom-line preoccupations, to focus on social responsibilities and how they’re shaping organisations.
Human-centric thinking
How to do more with less? Reducing the cost to serve. Be sustainable as a business while continuing to meet regulatory obligations. These are the top-of-mind concerns we hear about from decision makers every day.
The overwhelming theme at COBA 2024 however, was much more “human”, according to attendees Jennifer Harris, Sandstone Technology Chief Customer Officer, and Michelle Yu, Chief Product Officer. While there were numerous sessions based around the promise of new banking technology, mobile banking, AI etc., it was generally in the context of societal needs and how tech can serve people in the community.
In his keynote address, COBA CEO Michael Lawrence spoke of the cost-of-living crisis and how smaller financial institutions (FIs), being embedded in their communities, are needed now more than ever before. The ability to service their communities up close, allows them to offer high interest rates on savings or lower interest rates on loans. They also feed directly back into the community through supporting local causes and creating more meaningful engagements.
These FIs understand that customers are sensitive on interest rates because they know them, Jennifer reiterates. They know how important it is to be advocates for their communities and put profit back into the community through a variety of programs.
This values-led approach is going to be even more crucial as baby boomers age out and wealth transfers to younger demographics. With digital natives calling the shots, smaller-tier banks and mutuals will need to earn their loyalty through smart, digitally-driven interactions and functionality, especially in mobile banking. These customers will also demand to be understood by someone who lives in their community, and who shares their values - something the smaller players do so well.
As Jennifer Harris says, "The community-owned banks are like a rock people can rely on in difficult times. They offer a human touchpoint, which is especially important with increasing bank closures at the bigger end of town."
Greener banking
Being part of the communities they serve must also involve understanding a community’s environmental concerns. On this note, a major thread through the conference was the progress of customer-owned banks in green finance, e.g., green loans and funding renewable energy.
Sandstone is already on the case. As Michelle says, “we’re working with a number of clients at the moment that are developing their own green loans.”
Getting these products right is dependent on being able to analyse the carbon footprint of the household applying for the loan, including the levels of renewable energy they’re using. If it’s a personal loan for an appliance, the FI needs to be able to determine the energy rating of that appliance. From there they can develop an offering for the customer that has significant benefit, like a discounted interest rate on the loan.
In the future, that might mean a community-owned bank could offer bundles to customers: buy a heat pump and solar panels and be eligible for a bundled personal loan; or the customer can add the borrowing to their home loan for a discounted bundle rate.
For now it’s a work in progress, as there are substantial roadblocks, according to Michelle. A lack of qualified assessors is a major one. Currently a small group of FIs are lobbying the federal government to drive certification but that may take time.
The other green priority community-owned banks are exploring currently is how to give customers the ability to do more in-app or using online banking. That might include making changes to linked bank accounts or their billing account. Historically the customer has had to fill in paper forms to make these changes happen. But once those processes are transitioned over to digital banking channels, the bank can then encourage their customers down that path and reduce paper usage.
As FIs automate processes, they’re saving human hours in the organisation Michelle says, which has a direct impact on their carbon footprint, contributing positively to an organisation’s ESG position.
The connectivity thread
Another theme running through the conference was connectivity, whether in the sense of creating feedback loops in workplace culture, ensuring future-fit leadership - or even in a general understanding of human behaviour and resilience.
This is especially important when leaders and managers need to have difficult conversations with staff members – that’s when they need to be able to make others feel heard, allowing the necessary time and space for feedback.
There are also difficult conversations with customers to be considered. In some situations, customers will hesitate to explain the financial hardship they’re going through, because they don’t want to feel judged. Banks need to make sure their staff have the ability – whether in the call centre, or in the branch, to ease those difficult conversations. Even better: if the FI offers digital channels to start that communication, the risk of feeling judged is further reduced.
As Jennifer points out, AI is going to be a valuable tool for helping banks be more proactive in these scenarios. Using AI predictive models, FIs will be able to predict when a customer might be facing hardship down the track based on intelligence gathered across all customers, and start initiating conversations earlier.
The tyranny of distance
“Everyone’s still trying to re-adjust on the back of the pandemic,” Jennifer says. Financial institutions, including smaller-tier banks and mutuals, are increasingly challenged in building trust with customers, but also in building a strong culture within their organisations.
This is especially hard where staff are located hundreds of kilometres apart. Many community-owned banks have had to hire talent well outside their geographical footprint, and remote working is often the norm, at least for part of the working week.
In typical customer-owned bank fashion, FIs have banded together and formed working groups to share their experiences and ideas across people and culture to help tackle these challenges. Technically some banks may be competing in the same space, Jennifer says, but they’re also in it together.
“They understand that if they all get stronger, they all succeed,” she says. “They all want to see everybody still around next year.”
The scourge of financial abuse
Issues of financial abuse and domestic violence are now on the agenda for all financial institutions in Australia, with CBA the first bank to release a solution for tracking financial abuse.
What some customer-owned banks have discovered is their staff are recognising signs of financial abuse, but aren’t doing anything about it. Why? There may not be policies or processes in place to facilitate action; and/or terms and conditions of products don’t grant rights to take any action.
To address financial abuse, FIs need to review policies, as well as product terms and conditions to ensure staff are empowered. Staff must not only be trained to recognise the signs, but also to understand that most perpetrators learn to fly under the radar. If they can be identified and called out by the bank, it’s likely they would stop the behaviour.
The human interaction + technology equation
Technology alone won’t be able to solve these social ills. Using AI to scan transactions and trawl through descriptions will enable banks to pick up specific abuse words and trigger alerts. But abusers are used to working around the system, being creative in how they exert pressure and avoid detection.
Being able to pick up where financial abuse is happening and clamp down on the behaviour will rely on a combination of human interaction and technology.
“We need humans to be able to put themselves in the shoes of perpetrators and see how they might be working around the technology,” Jennifer says.
Bank staff also need to be able to put themselves in the shoes of the victims, to invent solutions. For instance, some banks have put in specific features within the Help areas of their websites or digital banking. These might include Quick Close functionality: if the victim senses their abuser entering a room, they can instantly close the page.
Or the bank may offer a contact page through which bank staff can pretend to be somebody else (say a teacher at the customer’s kids’ school) when they’re communicating with the victim, and communicate under that guise, without alerting the abuser.
In the end, digital will always be central, but it needs to enhance and support the human element.
“Generally, there’s a feeling that with digital taking over in the pandemic, we lost some of that crucial ‘human touch’", Jennifer believes. “And it’s important we get that back.”
To find out more about how Sandstone Technology could help your bank or mutual develop features and functionality to meet community needs, contact our team now.
