There was a full solar eclipse last week, did you get a chance to view it?  Depending on where you were in the country, or perhaps you were one of thousands that made a specific trip to get in the path of totality, last week’s eclipse was either extremely exhilarating or kind of a dud.  Here in Baton Rouge LA, we were supposed to get something like 85% of totality. I say supposedly since the cloud completely obfuscated any view of the sun and quite frankly, although it did get just a little darker around 1:45 local time, it was essentially a non-event.  I do feel a little badly for those that spend mega bucks traveling and paying usury hotel fees to be in the path of totality only to find out they also had cloud cover and could see nothing.  It is extremely frustrating to be specifically looking for vision only to find that vision blocked.

This got me thinking about how community banks must be looking to our future to strategically plan for our continued success.  How relatively easy or hard is it to predict what the next five, eight or twelve years might bring?  But if we can eliminate the overpowering brightness of what is working for us now, it might reveal that our future could take a different path. Let me use this illustration: one of the exhilarating elements of the solar eclipse is that the moon completely blocks the sun. Meaning for a few minutes, the rest of the sky is dark like night, and you can see stars and planets, which of course in full sun are obfuscated from view.  To compare this to how community banks need to examine their future, particularly in who their customers are, the overwhelming presence of baby boomers and Gen Xers who have nice deposit balances, make and pay loans and generally drive both deposit volumes and income make it difficult to see that we need to plan for their exit.  In the next five to twelve years, most FIs will see a dramatic shift from their current customer demographic to one dominated by young millennials and Gen Zs.

What we need to do is have something akin to how we look at ALM but applied to our customer demographics. In ALM, we apply calculations to determine what would occur if there were dramatic rate shifts up or down 100, 200 even 300 basis points.  The view of how our assets and liabilities mix affect interest rate risk helps us to make decisions about products and the associated rates.  What if you could do essentially the same thing about your customer mix?  Consider this exercise: Run a report of all your customer relationships who were born in 1964 or older and total up their deposits. Then run the same report on the total deposits for those born between 1989 and 2006 (customers aged between 18 and 35). Divide the total deposits of both groups by their respective number of accounts to achieve an average deposit amount per generation. With this information, you can run scenarios that would show over a period of time, how many younger customers you would need to add in that timeframe to keep total deposits constant.  If you put this into a spreadsheet, you can make some assumptions about how many customers might be lost in the Baby Boomer group that calculates a corresponding number of new young millennials and Gen Z customers needed to keep deposits constant.

Does the total number of new younger prospects seem to be an unusually high number?  If so, this is an indication that marketing and advocacy targeted toward these younger prospects will need to be ramped up, d not in five or eight years but now.  Getting started on this path and making strides in the near term to be more strategic in attracting younger customers will be critical to future success. Much like compounding interest, the investment you make early will pay off bigger in the long run.

Need some ideas for how you might go about changing your thinking on attracting younger prospective customers?  FNBB has published a white paper called The Next Generation of Banking. Download it here.  I encourage you to read the entire document and share it with members in your institution.  We are getting positive feedback from our customers that this document is directing them to think strategically about their focus on new younger customer acquisition.  I welcome your comments, questions or critique on the white paper.  If you feel your institution should be doing more to address this issue but you need some assistance to get you on the path, contact me at dpeterson@bankers-bank.com. We are offering innovation consulting that can be the beginning of an effort to strategically address the pressing issue of the transformation of who your customers will be.

The views expressed in this blog are for informational purposes. All information shared should be independently evaluated as to its applicability or efficacy.  FNBB does not endorse, recommend or promote any specific service or company that may be named or implied in any blog post.