This article was originally featured in the Great Lakes Banker Magazine, August 2023.

Community banks have long been in the business of personal relationships. They have thrived for generations through their strong connections with their community and customers. Bank tellers, loan officers, and branch leadership live, work, and play in the same towns as the families that trust the institution with their assets.

Even as banking changed over the years, these banks maintained strong connections with multigenerational customers through direct, community-based relationship management. This relationship building and maintenance is showcased through sponsoring local sports teams, being active in the Rotary Club or United Way, and underwriting the financing of new commercial projects.

But as the banking industry transforms digitally, people can now open accounts, apply for loans, and invest through banks beyond the city limits. As customers receive a steady flow of advertisements for digital banking services from all over the country, community banks must engage in their own digital transformation by employing new digital tools to attract, retain, and enhance relationships with their traditional and next-generation customers. What worked for their parents, may not work for young Millennials, Gen Z, and future generations. In some form, these customer relationships will be maintained and grown where they are banking—on their phones, tablets, and computers.

Digital transformation requires the technological, organizational, and ideological adoption of technology across all sectors of the bank to enhance the value delivered to their customers.

According to the Community Bank Assessment Index, local institutions are increasingly engaged in digital transformation, especially mobile banking, remote deposit capture, and electronic bill payment. Deloitte reports they are also updating back office operations, enhancing banking portals and mobile applications for an improved customer experience, incorporating credit decision software for lending efficiency, and, in some cases, replacing legacy core banking software.

But while community banks are joining the digital transformation movement by partnering with fintech and banking as a service companies to modernize every aspect of the business, the customer relationship is often overlooked when banks are considering legacy upgrades.

A successful digital transformation must create a cohesive customer journey that personalizes their relationship with the institution, enhances their banking convenience, provides proactive support, offers new insights, and enhances their data security.

Personalized Experiences

Through data analytics and artificial intelligence, digital transformation enables banks to gain insights into customer preferences and behavior. This allows for a holistic view of the customer’s needs digitally while enhancing it through the personalized touch of the bank staff.

Enhanced Convenience

Digital tools provide customers with on-demand access to banking services anytime, anywhere. For customers to benefit from a digital-first relationship, the professionals that support these households require a holistic view to supply the support through digital channels. The convenience of shared information and a central repository brings value if customers are maintaining one source of information across their professional ecosystem.

Faster and More Efficient Service

Outside the innovation of core banking and lending products there is a desire to improve customer interactions by engaging them in a single source of information. This information is managed and updated by the customers, their loved ones, and the professionals that support their day-to-day lives and long-term plans.

Bankers rely on the transaction of information sharing to enable and finalize transactions, from a new mortgage for an expanding family or a car loan for a newly minted 16-year-old child. Fast and efficient can be accomplished through creating a customer- centric vault of their most sensitive information. By centralizing this data, the bank is able to remove the time barrier and support its customers when they need the services and products without the heavy lift of hardcopy paper collection and scanning.

Enhanced Security

Longtime customers and their families need confidence that these new digital tools aren’t advertising their personal information across the internet and into the hands of criminals. Their generational relationship with the community bank could be in peril by a single data breach. Enhanced security measures such as two-factor and biometric authentication, data encryption, and physical security keys can be incorporated into banking platforms to prevent unauthorized account access or data breaches. Centralizing customer data on a third- party platform with state-of-the-art tokenization and aliasing protection will reduce costs and limit exposure to both external and internal risks, providing improved data security during a time of increased threat detection.

Consumers want the convenience, personalization, efficiency, and security of new digital tools, products and services, while maintaining the community- based feel and connections of their local bank. Community banks are starting to rise to the challenge, but more needs to be done.

Meeting customers where they need to be—in the community and on their digital devices—will keep these institutions the center of financial life for these customers.

About the Author

Annie Eser is the Director of Business Development at Trustworthy - The Family Operating System®, an online service that helps banks collaborate with their customers to secure and optimize their important information.

Annie has 20 years of fintech and start-up experience as a CEO, founder, and consultant specializing in all aspects of data security and core banking systems.