Pub. 12 2021 Issue 2

www.wvbankers.org 8 West Virginia Banker Banks: The Path to Service Quality and Managing Costs for the Future By Bryan T. Di Lella, ICI Consulting T hroughout the pandemic, households have accumulated significant savings. Banks, awash in deposits and with interest rates still at low levels, have increased lending while working through the many challenges of the past year, including maintaining services to existing customers. Despite the pandemic’s operational obstacles, most financial institutions have managed to attract new customers, further aiding the growth in asset size for institutions nationwide. The Paycheck Protection Program (PPP) has also contributed substantially to this growth. While the economy gradually adjusts from heavy government stimulus and returns to growth levels seen before the pandemic, banks adapt to new ways of serving their customers. Beyond the logistical challenges of in-person meetings and modifications to branch operations to maintain service quality to customers, banks have mostly resorted to bolstering the use of digital channels to continue to operate and thrive throughout the pandemic. The rapid adoption of digital banking has exacerbated the need for banks to have responsive and innovative digital and mobile offerings. Among a rising set of customers – those who may not have interacted with their financial institution in this manner before – the pandemic accelerated the use of such channels. For banks tuned into their user base, it is evident that effective digital channels must be a part of current and future strategy, a contemporary path to service quality for those banks, and they are prepared to invest in it. Notably, service quality is primarily the result of the management and philosophy of the bank. As with most any business, customers want to see that their bank cares, values the customer relationship and understands needs, regardless of where and when the interaction occurs. If banks embrace this intense customer focus, they will forge new paths to service quality. One ICI consulting client kept its branches open and boldly stated, “We never had to ask our customers to make an appointment to visit a branch.” In part, service will only be as good as the sof tware tools banks use to implement digital banking. Therefore, a comprehensive survey of the institution’s requirements and a rigorous evaluation of current of ferings is demanding the attention of bank executives to be competitive in the market, responsive to existing customers and in a position to attract new ones. Banks must look forward to when the economy stabilizes, employment returns to normal levels, and people embrace everyday routines. To secure a long-term and stable customer base, banks will need to grow by catering to a younger demographic while still providing superior service to their clients. Attracting and servicing future generations will require innovative new products and services delivered through digital channels. Banks must also anticipate the likely challenges ahead and prepare for a time when growth levels; when this happens, one of the most dependable actions will be to control costs. With few exceptions, data processing expenses are among the top three expenditures – along with salary and benefits, premises and fixed assets – that a financial institution incurs on an ongoing basis. Data processing expenses, including an institution’s spending on core processing & ancillary systems, are easily addressable cost reduction targets. The ancillary systems are vital applications surrounding and interacting with the core system. They include essential services, such as ATM/EFT, credit card, online banking, mobile banking, loan origination and servicing, payments, wire transfer, cash management, document management, BSA/AML, IT security, check processing, among others. These ancillary systems are as critical as the core system because they support the institution’s key business functions and serve as touchpoints for customers. Banks must look forward to when the economy stabilizes, employment returns to normal levels, and people embrace everyday routines. To secure a long-term and stable customer base, banks will need to grow by catering to a younger demographic while still providing superior service to their clients.