Lincoln-based consultant Sean Payant urged banks to grow their organizations by adding customers and not cutting expenses during his presentation at the Bank Holding Company Association’s Spring Seminar.
Payant, chief strategy officer and senior executive officer with the consulting firm Haberfeld, said the 76 banks that have been in the top five percent of return on equity for five straight years outspent their industry peers as a whole by 31 percent. “They don’t save their way to prosperity,” he said of how those banks earn high ROE. “It’s a revenue gain. Your job is to create more revenue.”
To Payant, banks must grow their number of primary financial institution customers. He noted that up to 68 percent of new consumer relationships begin by opening a retail or business checking account. Fifty-two percent of business account openings begin with a checking account. Payant said banks should especially look to attract younger customers, because they are more likely to lead to more long-term, non-interest income opportunities for FIs.
To Payant, community bank marketing work should prioritize digital and print advertising, which has been shown to provide banks with the best return on investment. Such marketing should take place every six to seven weeks and be targeted to within 5 miles of a branch, where 84 percent of new customers originate, he said.
Banks must also adopt a customer-first approach to growth, the consultant said, and if customers must enter a branch to open an account, they will lose opportunities. Payant’s comments align with a 2021 FICO study that revealed 62 percent of customers expected to be able to provide their identity digitally, but only 21 percent said they would move out of digital channels and still complete the opening. Half of customers said they would abandon the digital onboarding process if they had to answer more than 10 questions.
Payant suggested banks remove unnecessary hurdles to account openings, including requiring a physical proof of address and Social Security card. “We create too many barriers,” he said.