Three Top Challenges Facing Financial Institutions (as told to us by those who know)

Posted by Jeff Harper, President, BSG Financial Group on Nov 7, 2016 8:00:00 AM


Like many financial institution executives this time of year, we at BSG Financial Group have recently participated in numerous industry trade shows and conferences.

In a two-month period beginning in August, we exhibited at or participated in a plethora of conferences, including those sponsored by the Financial Managers Society (FMS), Association for Financial Technology (AFT), Virginia Association of Community Banks, the Bank CEO Network Conference, Jack Henry Banking... to name a few.

Attending these events is very important to us, as they connect us with customers and potential customers alike. More importantly, they give us an opportunity to learn first-hand the most pressing challenges for financial institutions, while validating and ensuring that we offer the programs and services to effectively address these concerns.

Listed below are three of the top challenges that financial institutions face—as told to us by financial executives at these recent conferencesas well as our responses/solutions:

More Income

Despite some negative news stories about "evil" banks and exorbitant profits, financial institutions are searching for ways to achieve greater profitability in a high-risk environment. Institutions are desperate for tangible, short-term solutions that can really impact the bottom line.

BSG Financial Group has offered overdraft protection services for over a decade. However, we have never seen such a renewed interest in overdraft privilege as we did during this trade show season. And while the potential profits that can be earned from such a program are enticing, we also learned that institutions want an overdraft solution that helps them reliably manage compliance and risk.

With a CFPB decision looming, institutions want to make sure they are offering short-term liquidity options in the most compliant way possible way, and that they are prepared for whatever decision is handed down. 

  • What we told each and every institution we met: With the right overdraft provider partner, your institution can potentially double your current overdraft fee income while remaining completely compliant.

Exceeding Account Holder Expectations

Getting consumers through your doors is only half the battle. Keeping them engaged for the long term is something else.

What we found in our conversations with financial executives is that institutions are placing a priority on ways to engage and retain consumers. They understand that most consumers view the relationship with their financial institution as only transactional. In fact, Forrester Research has said, “Focusing on customer loyalty is no longer just a smart strategy. In an age of empowered customers, it is an imperative.” 

  • Our suggestion: Add VALUE to the relationship by differentiating your institution and its product offerings. For instance, take an innovative approach to your checking account line up.

Offer a Fee-Based Checking Account that is enhanced with valuable products and services, such as Identity Protection/Fraud, Theft and Recovery; Cell Phone Protection; Travel and Entertainment Discounts; and others—all for a low monthly fee. Tailor the account with enhancements to fit your institution’s culture and pricing philosophy.

A value-add program such as this differentiates your institution in the marketplace and can provide an additional $40–$50 in fee revenue per checking account per year, while retaining your most profitable customers.

Increasing Pressure from Non-Bank, Digital Entities 

The institution executives we spoke to know that consumers and small businesses are flocking to online loan providers for their simplicity and speed, often paying higher rates for the convenience. In fact, according to TransUnion, the majority of unsecured consumer loans in 2015 were provided with an online platform, while small business lending online captured over 20% of loan volume. 

With some recent bad publicity for companies like LendingClub and Prosper, there is a real opportunity for financial institutions to earn back much of this business.

  • Our advice? Meet the demand with the right digital lending partner that can help automate and streamline the entire loan process, thereby making these short-term lines of credit profitable. 

These are only three of the challenges that financial institutions face today; certainly there are more. To learn about other ways to meet these challenges and improve your institution's performance,

Download our Guide: 
The S.T.E.P. Method™ for Improved Institution Performance

STEP Method for Improved Performance

Topics: Fee Income, Budgeting, Strategy, Profitability