Institutions within the customer owned banking sector are often viewed as followers rather than innovators. There’s a belief that smaller, community-focused providers are not having as significant an impact on consumers as their bigger, publicly-traded counterparts. But these kinds of assumptions couldn’t be further from the truth.
Customer-owned banks are ahead of the field in a number of important ways, especially in leading with purpose, the main theme at Australia’s Customer-Owned Banking Association convention. Read on as Sandstone’s Chief Customer Officer Jennifer Harris explores some universal challenges and advice from the 2023 event.
Customer-owned banks contribute $2.2 billion in wages, profits and taxes to the Australian economy. Their wages contribution is larger than that of aquaculture, fishing, forestry, gas supply services, shipping or petroleum & coal product manufacturing.
Their mutual business counterparts in the UK generate over £133.5 billion of income annually which can be distributed to members and into local economies, according to The UK Mutual Report 2019.
Community-owned banks were the first to market with critical banking capability. They pioneered the practice of serving key demographics, from police and nurses to bus drivers. And they were the first to really understand the value of serving and rewarding their community, a value which stands true to this day.
Community-owned financial institutions (FIs) exemplify the philosophy of leading with purpose, their overall purpose being to serve their communities to the best of their ability. They take their community-oriented values and make them the driving force of their organisations.
The AU mutual sector overall held 91.6 per cent in customer satisfaction as of June 2022.
A keynote speaker with purpose
Lisa MacCallum, founder and president of Inspired Companies, delivered the opening keynote for COBA 2023. According to Lisa, organisations that lead with a unified purpose hold a clear advantage: their purpose drives inspiration, resulting in inspired companies.
As the marketplace changes, we hear fewer and fewer CEO missives and corporate marketing messages, as other stakeholders gradually claim a greater share of voice. They might be the organisation’s customers, their employees or outside influencers. 
With this shift in power comes a shift in how FIs need to take their voice to market. Lisa lists three key factors as critical to an inspired company’s success:
- Have an inspired sense of purpose (stand for something)
- Have inspired action (be authentic – show, don’t tell)
- Target inspired profit (good money – be ethical)
Overall, this means FIs need to have a message that sells outside of their products and services. They need to think more broadly, holistically, and bring people, innovation and inspiration into everything they do.
Sometimes though, it is difficult to see the wood for the trees. Particularly when the financial services sector, like many sectors, has experienced so much change in such a short space of time.
And having an inspired purpose statement only goes so far. It needs to be an authentically held purpose and be able to withstand the pressures that come from within and externally to the organisation.
So what are some of the key challenges impacting a financial institution’s ability to lead with purpose? Here’s our top five based on conversations held across the industry.
1. Increased fraud and cyber security threats
Trust is at the forefront of the customer relationship and with recent data breaches front and centre, many customers are relying on their financial institution to keep their information safe. Openly communicating to your audience on what you are doing to protect their information needs to be authentic and evidence based.
2. Changing consumer expectations and banking behaviours
2 out of 3 US customers can’t do without their mobile banking apps.
Understanding the way consumers are interacting and choosing to engage with their financial institution is critical to servicing their needs. With mobile banking now the primary channel of choice, you need to be able to not only meet their expectations using these digital channels but anticipate their future needs.
Digital payments, online account opening, and self-serve capability are all key factors in providing a frictionless customer experience. You cannot claim to be customer-centric when you cannot meet these basic banking needs.
3. Increased regulatory framework and reporting requirements including operational resilience
Operational resilience, risk and compliance continue to be a focus for financial institutions. The flow-on effect of increased regulatory requirements is being felt through increased reporting, additional FTE and overheads.
So what does this mean for those with limited budgets? Investment and expenditure are tied up in compliance, while other areas of the business have reduced budgets pausing or completely blocking uplift in other banking capability.
4. Size matters – how does the smaller end of town achieve the same level of reporting as the larger entities?
When the same regulatory pressures for larger banks and FIs are being placed on smaller entities, the impact to the bottom line is disproportional. With limited FTE and more budgetary constraints, maintaining these standards means many within the community owned sector are having to face tough decisions on their future operations.
If the pathway involves M&A activity, the selection of the larger player needs to effect a cultural and purposeful fit for their customers. This alignment is key in ensuring a smooth transition for the brands and their customer base.
5. New technologies and the speed of change (i.e., generative AI)
The speed of change in technology is unlike anything we have seen before. With Gen AI in particular comes a new level of technological advancement many are saying will outstrip the invention of the world wide web. And it will have tremendous impacts on the financial services industry.
For FIs to remain at the forefront of the digital revolution requires an exponential investment in technology. However, the potential benefits are huge.
So how does a community owned bank keep up with the big guys? The answer lies in picking one or two solid use cases that will drive efficiency, productivity or customer experience and invest in them. Don’t try to be everything to everyone, and understand that technology – digital banking, mobile apps, AI - is there to support the human relationships. In the end they need to work together.
To succeed, FIs will need to be able to navigate their way through the minefield of pressures bearing down on the industry and come out the other side with their purpose and values intact. The objective for any organisation is to know and deeply understand your core values and use your strengths to drive the organisation’s purpose and inspire others - whether that be your staff, your customers, or the broader industry.
And this is why the community owned banking sector is one of the most trusted financial sectors - borne out by the highest customer satisfaction levels of the financial industry - and will continue to lead with purpose.
