In the past decade the banks deemed “too big to fail” have only gotten bigger and more homogeneously conservative. Instead of innovating their way out of the industry’s problems, they’ve dug in their heels and persisted in a saddening, radical sameness. Perhaps the most visible manifestation of this trend are the 461 new branches built in NYC in the past decade. Why are the big banks doubling-down on retail branches when every industrial trend-line shows that in-branch transactions and branch profits are tumbling?
A long, fervently accelerating current of innovations are injecting exciting change into the financial sector at large, but the so-called big four banks (Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo) are not embracing this new direction. Instead, they are buttressing their “safe” lines of business with plodding inertia. Branches all behave the same, because sameness is safe.
Enter the Challengers
Unlike in the UK, where High Street’s big four are being confronted from within the established banking system by specially designated “Challenger Banks,” the most ardent opposition stateside is coming from the financial fringes. The newly burgeoning sectors of Fin-Tech and Alt-Finance are producing a swiftly multiplying ensemble of competitors.
The likes of Square, PayPal (along with recently acquired subsidiary Venmo), Apple Pay, Lending Club, Kabbage, SoFi, et. al., are rebuffing the big banks from all sides. Counter to their earlier progenitors such as Bitcoin, which controversially lurked just outside the edges of the conventional; these new, polished players are now making a loud splash into the mainstream. Super-Bowl 50 saw no fewer than three, very vocal spots touting the “New Money” (as PayPal brashly claimed over an instrumental version of Selena Gomez’s thumping hit Confident) challenge to the established banking edifice.
Even stodgy, GenX challenger Quicken made a rather assertive statement; rhetorically asking “What if we did for mortgages what the Internet did for buying music, plane tickets, and shoes?” in the ad for its new Rocket Mortgage mobile app.
Summing up the sector’s new attitude, Paypal’s VP of Marketing, Greg Fisher remarked: “building our brand [will rely on] making sure that people understand who we are and what we’re doing to help transform money.” Big banks might not have the latitude for such radical rhetoric, but the notion of incorporating innovation directly into the conversation of branding is certainly an actionable lesson.
The core of the banking establishment has coalesced into a stolid status-quo, and brazen, radical competitors are barking at the edges. There is another set of financial players, however, that’s closer to the center from which bank branding might draw more practical insight for how to position itself for the future.
Lessons from the Niche Establishment
Large private commercial institutions that cater to a niche audience have to pursue innovation at a faster pace to hold their own against the more staid competition from the center, as well as appeal to a slightly savvier audience. An instructive example of one such contender is New York’s Signature Bank. With just 27 branches “tucked away in office buildings,” Signature’s diligent attention to courting business customers, paired with soft innovations in management and employee autonomy, has led Crain’s to herald it “New York’s most successful bank.”
United Services Automobile Association has taken this directive one step further by parlaying a customer-first outlook into tangible innovations in banking technologies. For example, USAA was the very first to unveil mobile depositing in 2009 (an innovation the recently shaken establishment scrambled to meet) and has recently continued this inventive streak by unveiling robust, varied biometric verification for iPhone users.
This steadfast commitment to its customers is consistently credited for USAA’s nearly perfect consumer satisfaction ratings. In one of many laudatory columns, the Harvard Business Review identified the source of the bank’s success: “USAA has proven itself to be a technology leader — not because the company is obsessed with technology, but because it is obsessed with customers.” Making USAA’s example an even more poignant counterpoint compared to the big four banks is how the upstart achieves its innovation without conventional branches.
In a rapidly evolving financial landscape with wildly fluctuating customer attitudes and expectations, only one thing is clear: banks can no longer brand around simply puffing out their chests. They need substantive innovation to justify their market position. Successful branding in the finance sector will highlight hard innovations and consumer-centricity. Big banks might take solace in the fact that they are too big to fail, but unless they reorient themselves toward consumers and double-down on technological progress, their branding will remain hopelessly hidebound. As a result, they might prove too big to succeed.