Independent Banker - November 2017 - 40

The third difference emerges
from those first two points: Since
online-only bank customers are
not restricted to choosing local
banks, and they're comfortable on
the internet, the banks can use the
internet's power to more effectively
target their products to particular
market segments.
For example, the management of
MemoryBank decided to focus on
people born from the mid-1960s to
the mid-1980s. " The natural inclination
is to look at millennials, but the
" We surmised that the
big banks were opening
accounts online and
taking our depositors
right out from under our
nose. [Redneck Bank]
solved the problem,
and it's still a huge
contributor today. "
-WADE HUCKABAY,
ALL AMERICA BANK
beauty of digital is that it goes above
one generation, " Varga says. " Instead,
we focused on Generation X. We felt
they are soundly entrenched in the
digital approach, and they are in their
prime earning years. "
Marketing and regulatory
challenges
One advantage that brick-and-mortar
banks have over online-only brands
is that each physical branch is a giant,
permanent advertisement. A new
family moves into Happyville, Mom
drives by Happyville Bank, and next
thing you know, Happyville Bank has
a new customer. That doesn't happen
with an online bank.
" We realized early on that even
though you're on the internet, no
one knows you're there, " Huckabay
says. His bank tackled the marketing
challenge with an unforgettable name
(see sidebar on page 38).
MemoryBank took a disciplined
approach to its marketing.
" We looked at four different
markets and employed four different
models, " Varga says. " One market was
the US as a whole, which we reached
through search engine optimization.
Another was Richmond, Va., where
we employed display ads and social
media. In Kansas City, we did some
TV and outdoor advertising. And in
Madison, Wis., we did heavy PR. "
Varga says he's not revealing which
marketing worked best, but he admits
that the digital marketing techniques
were the most efficient and effective.
Online-only banks face the same
regulatory challenges as physical
banks. However, since they never
actually see their customers, those
regulations can be more difficult
to meet. " All banks are required to
know who you're doing business
with, and when you're not face-toface
with the customer, it's harder, "
Sargent explains.
Sargent says he's seen banks
employ various strategies to satisfy
regulators, including analysis based
The academic perspective
Subhajit Das and Aroop Gupta are visiting research fellows at the Clayton
Christensen Institute, a nonprofit, nonpartisan think tank in Redwood City,
Calif. They recently studied the application of the Theory of Disruptive
Innovation to elements of retail banking. About online-only brands, they
say, " For incumbent community banks to compete with new [fintech]
entrants in the space, they will need to create a completely separate entity
that is distinctly different from the parent. The new organization should be
focused on building a business model that reimagines the customer value
proposition. For a bank, this would mean offering unique products and
services that take advantage of the advantages and capabilities offered
by digital technologies. To be truly successful, however, the new organizations
must strive to create a completely different DNA, and its resources,
processes and priorities must be designed to literally compete with their
parent companies as well as any fintech entrants in the space. " -Ed Avis
40 ICBA IndependentBanker November 2017
on " out-of-wallet " questions that
would stump an imposter, such as
" What house did you live in seven
years ago? "
Community banks have proven
that they can succeed with onlineonly
bank brands. The future is
about keeping all those distant
customers happy. " We have a lot on
our plate with 1.7 million customers
now, " Sidhu says about BankMobile.
" It's not just about getting them into
the funnel, but about how to enhance
their experience and keep them as
customers for life. "
Ed Avis is a writer in Illinois.
Independent Banker - November 2017

Table of Contents for the Digital Edition of Independent Banker - November 2017
