Customer service

PNC is revving up its branch expansion plans even as customer traffic at branches industry-wide continues to decline, so the lender is prizing hospitality at its physical locations to make customers feel welcome and entice them to stay.

To that end, Pittsburgh-based PNC is pulling many new branch hires from the hospitality industry and finding that experience beneficial, said Jeff Martinez, an executive vice president and the super-regional’s head of branch banking. He pointed to a highly valued branch manager who had previously managed a location of the Brazilian steakhouse Fogo de Chao.

“There’s definitely a need for some industry knowledge, but it’s a mindset,” Martinez said during a recent interview. “We want people that are client advocates, that can drive the hospitable environment that we’re looking for, but also have the intellect, the curiosity to help” with banking specifics.

PNC in November said it has increased its physical expansion plans across the country, allocating an additional $500 million to open and renovate more bank branches, to bring its total investment in its retail presence to $1.5 billion. The bank plans to open about 200 new branches in 12 U.S. cities and renovate 1,400 existing branches by 2029.

“It’s a doubling down in [metropolitan statistical areas] that we’re in; it is not necessarily going to new and unknown areas,” Martinez said. 

Along the way, the bank is taking what it’s learned in a market such as Miami, where it’s seen encouraging growth with households and small businesses, to inform its trajectory in Dallas or Houston, for example, he said. 

PNC strives to get these markets to at least a 7% branch market share, and generate profitability from branches in four years or less, Martinez said. “If you really nurture a new build and get it right pre-opening and the first three years, you kind of understand the legacy trajectory that’ll build for five to 10 years to come,” he said. 

Where other banks may be new to a market such as the Southeast, PNC is focused on growing its established presence in the region, he said. “We’re not picking a new fight,” Martinez said. “We’re finishing the fights that we’ve already picked years ago.”

Editor’s note: This interview has been edited for clarity and brevity.

BANKING DIVE: How does PNC identify the right locations for new or additional branches?

JEFF MARTINEZ: One aspect is, how do you build on an existing franchise that has incorporated growth in communities? In Atlanta, we stopped de novoing around 2012, 2014, so that’s 10 years in a major city that’s grown. The relevance that we’ve seen in existing locations, we want to make sure we keep that relevance as communities have grown a mile out.

We have a lot of data that says clients have visited PNC, even though today they reside 30 minutes, 45 minutes out from that area of convenience. Then we work to understand: What other untapped parts of the community that we are getting some from, do we believe we can get more? Also, we may be their secondary bank today, but believe we can be their primary bank tomorrow, if we are eight minutes out, instead of 30. 

We also look to make sure we are in underserved communities and affluent communities. These areas we’ve identified, we plan on being there forever. So we want to make sure there’s some social mobility, that there’s an aspect in which we’re there for the mass market client as well. We’ll look at sites based on availability, but also the size and scope of the community.

PNC has closed dozens of locations this year, after shuttering more than 200 in 2023. How does the bank square these expansion plans with the pruning of its branch network? 

We think we’ve done good work over the last five to seven years that has allowed us to reinvest in the network. People will try to decouple what is creating an efficient and effective network with growth. In my opinion, they go hand-in-hand. It’s a reinvestment, not a separate part.

There was a little bit of a clean-up. There were some redundancies that came from past acquisitions. Some of the biggest consolidations we’ve done were in the in-store space. That was a shift in strategy. We had about 130 branches inside a supermarket, and we knew, based on data, where customers choose to bank, where they want privacy, the in-store layout – it wasn’t what would carry us the next 10 years, although it served a purpose in the last 10. 

How do these new branches look, feel and operate differently than older ones?

We’ve done a lot of work to understand what our clients want. The big theme is centered around hospitality. Even the ergonomics of the branch provide a warm welcome, such as the furniture. That initial feeling and the way we design our branches is to feel welcome immediately. 

Privacy is at the center. The types of conversations our clients want to have with us – especially through big milestones in their lives, such as retirement, marriage, home ownership –  require additional partners, added privacy, and we’re able to facilitate that in all of our branches. But we also have places where we can have informal conversations. 

Having bankers being bankers, tellers being tellers, allows us to be really good at the interaction clients are looking for, not just a transaction. It’s an interaction, advice-centric location that feels hospitable, it feels warm. We want a place where people want to go, don’t want to rush out, and that environment is welcoming enough where they may stay for a cup of coffee and conversation, or walking through their entire investment portfolio.

There is no shortcut to really thought-out, curated and individual advice. We drive technology and resources to amplify that; we never do that in reverse. Empathy will continue to be lacking in the industry if you use just technology and not people.

What about branch size or location within a community? 

Our model averages between 3,000 and 4,000 square feet. We want to be able to say, OK, we would have liked a 3,500 square foot location, but this perfect location’s 3,000 and we have the exact model that’ll still bring the functionality. What you may lose is, say, one office. A lot of it will be determined by the communities that we’re in, how we align with available properties. 

It’s being where our clients want to be. Understanding client habits, we’re looking at destinations with anchor grocers, other businesses that allow us to be part of everyday life for clients. Aligning with multiple others creates an easy atmosphere that allows our clients to do banking, do some shopping, and we’re convenient for them in town.

You want to make sure there’s visibility to the brand. In Atlanta today, where we have 60, 65 branches and prepare to add another 25, as we add one more, the two and three existing branches around it see a positive halo effect in brand recognition, in convenience. It creates this added momentum, not only in those 25 de novos, because communities see we’re investing and that’ll drive affinity to existing branches. 

What comes next? 

As we delineate between a regional bank and a national bank, it’s filling in some of these areas we’re underserved, or underpenetrated. We’ll look at that probably two years down the road, as we start to materialize the success of this expansion and understand what’s next.

We know we lack scale in some of the areas we’ve dipped our toe in. What you’re seeing from us is an intentionality we haven’t had historically, where we were happy doing onesie, twosies broadly. Now, we’re going into market to reach optimal branch share, to drive winning market share, and we won’t move to the next priority until that’s right.

Midwest super-regional Fifth Third Bank said in November it would be “doubling down” on the Southeast, to the tune of around 200 new branches in the next four years.

The guiding light of its expansion? A patent-pending geospatial heat-mapping tool that has a more than 80% success rate in identifying the right location for the next branch before real estate brokers and bank executives even get their boots on the ground, according to James Anthos, the bank’s director of distribution strategy and retail analytics.

The heat model, which follows the use of the bank’s proprietary metropolitan statistical area-identifying Market Strength Index, uses data to identify an MSA’s hot spots. The heat map creates a grid of the whole country, broken up into 1/8-mile hexagons, and overlays data such as existing retailers, the presence of competitors, local income, and available cell phone data to identify where potential customers are spending time.

“We've got thousands of data points, and we crunch trillions of calculations to come up with these geographic codings that tell us where we should be focusing on to build a branch. That creates what's called focus areas, and those focus areas are where we send our brokers,” Anthos told Banking Dive.

Anthos’ team follows the brokers, and with the symbiosis of tech and brainpower, locking down new site locations happens quick. Within six months of deciding to enter one market, Fifth Third had more than 75% of its targeted sites under contract, and the rest were under initial negotiation, Anthos said.

“You want to be where people are naturally going. If a customer goes to Kroger or Harris Teeter every day, you want to be next to the Kroger or Harris Teeter. You don't want to be next to a site where they only go once a month,” he said.

As population has soared in states like Florida and South Carolina in recent years, banks have been vying for market share in the Southeast.

PNC said in November it would be digging deeper in the region, and Bank of America said last summer it was eyeing nine new markets, with three — Louisville, Kentucky; Birmingham, Alabama; and Huntsville, Alabama — in the Southeast. Indiana-based First Financial, too, deepened its presence in the market through an acquisition announced in November 2023. 

Fifth Third CEO Tim Spence has set his bank apart from those with new eyes on the Southeast, because it entered the region more than a decade ago.

“I know a lot of people are investing in the Southeast, but it bears reminding that we’ve been in nearly every one of the markets down there for more than 15 years, and we’re not running small [loan-production offices],” he said in January 2024. “We have more than 200 client-facing people in those markets across commercial banking and wealth management alone, and then, like, another 1,700 that sit in more than 300 branches. And the brand is seeded in those markets.”

 As Fifth Third enters new markets, it holds the goal of 8% location share, meaning if there are 100 bank branches in a given city, eight of them are Fifth Third’s, Anthos said. As new markets open up in Columbia and Charleston, South Carolina, and Huntsville and Birmingham, Alabama, opening goals aren’t one-and-done, he said.

“Pretty much what you'll see is us continuing to fill that in. Fifth Third is about density,” he said. “In those new markets, [we’ll] continue to add until we reach that density.”

By the end of 2028, the bank expects to rank No. 5 in locational share for banks throughout the Southeast, Chief Operating Officer Jamie Leonard said at the BancAnalysts Association of Boston Conference in November.

“When you bring it all together, the 200-plus new de novos, the seasoning of the current network and increasing density driving share gains, the resulting growth in deposits from the future investments in our branch network will reach $15 billion to $20 billion of additional deposits over the next seven years,” Leonard said.

Banks may be eager to take advantage of opportunities posed by artificial intelligence, but they have work to do in persuading their customers to get onboard.

As they weave AI into their operations, seeking to make customer-facing and in-house functions more efficient, banks “really need to amp up their transparency and the education that they're providing customers,” said Ila Ghosh, senior director of financial services intelligence at J.D. Power.  

Less than 30% of consumers trust AI chatbots for financial information and advice, and less than half believe AI will improve their personal finances, according to a J.D. Power report released in September.

Personalized alerts and recommendations hold some appeal to customers, “but many are wary of allowing AI to control the actions and the application of personal security measures,” J.D. Power said. The firm surveyed about 2,000 U.S. financial services customers on their AI use and opinions in April.

Roughly 54% of bank customers said they’ve used some form of genAI, and that’s more likely among big-bank customers than regional ones, J.D. Power said. Banking is predicted to be heavily affected by generative AI, and with the promise of efficiency gains, the industry has scrambled to explore uses to bolster efficiency and productivity. 

Although a hot topic, AI remains somewhat of an enigma, at least to consumers, Ghosh noted. Only about one-third of customers have a solid grasp on how AI works, and many can’t tell when AI is being used, she said.

“The onus is on financial institutions to communicate to their customers a clear understanding of how AI works and its benefits,” J.D. Power said in the survey findings.

Ghosh was struck by consumers’ strong reservations around AI’s role in managing personal finances, despite its current integration into the financial services world through chatbots and fraud detection. 

Bank customers expressed apprehension around data privacy and security, increased risk of fraud and loss of human support when AI is involved. These customer concerns aren’t unfounded when AI is evolving rapidly, Ghosh said.

There’s also unease about potential bias and fairness issues related to AI, particularly regarding lending decisions, said David Donovan, executive vice president of financial services for the Americas at consulting firm Publicis Sapient. 

Room for optimism

Banks have started to leverage AI in substantial ways, including by offering customers tailored financial advice and quick assistance through chatbots and virtual assistants, Donovan said. As for banks’ own operations, AI is automating tasks such as fraud detection, payment processing and loan approvals, he said. 

As interest in generative AI has increased, banks are pursuing its use to help software engineers develop code, or make virtual assistants smarter and more efficient. Publicis Sapient’s recent study polled 1,000 senior banking executives and discovered about one-third of banks’ customer experience investments are going toward AI, machine learning and genAI.

Customer perception of AI, however, “is a bit of a mixed bag at the moment,” Donovan said in an email.

Most consumers believe banks are using AI to prioritize their own interests over those of customers, Ghosh said.

Of customer-facing ways banks are tapping AI, consumers expressed the most interest in alerts that might offer them a tangible benefit: Close to two-thirds of bank customers are interested in trying AI-powered account alerts that would help them avoid service charges and fees. 

Consumers were less enthusiastic, however, about using automated phone voice assistants to handle customer service issues (44%), or taking personalized product recommendations generated by AI (42%). 

On the customer service front, customers are worried it’ll be harder to reach a human when they need to address complex issues. 

“People want to talk to people. Machines can’t do everything,” Ghosh said. 

In light of that, it’s not surprising that consumers want their banks to employ a significant level of human oversight when AI is used, she said.

Customers also want to be informed when AI is involved in their interactions with banks. 

“Not every interaction may require disclosures, especially when it’s enhancing security or providing a seamless experience, but I think the customer perception is that they want to know if a bank is using AI,” Ghosh said.

Enhanced transparency  

There’s a clear need for banks to be more transparent about their AI use and provide disclosures, particularly as AI becomes more ubiquitous in banking, analysts said. De-mystifying the technology, by explaining how their AI systems work and what their data protection practices are via demonstrations on their websites, can benefit their relationships with customers, Ghosh said. 

“Customers deserve to know exactly how their data is being used, how these AI-powered decisions are being made, and what safeguards are in place,” Donovan said. 

Banks should emphasize AI’s security benefits, whether that’s enhancing fraud detection or real-time transaction monitoring, and offer clear explanations on how AI processes data, he said. 

Banks also need to give customers visibility into how AI decisions are made, Donovan said. 

“This could include customer-facing dashboards showing the logic behind loan approvals or investment recommendations,” he said. “Banks should be leveraging every channel – like emails, pop-up notifications and dedicated web portals – to educate and inform their customers.”

Lenders should also ensure their customer service representatives are educated on the bank’s AI use, Ghosh said.

There could be a need for targeted AI education to reach demographics with a wary attitude toward AI, she said. College graduates and customers who are men or under 40 use AI to a greater degree and have a more optimistic outlook on the technology than do women or older consumers, J.D. Power found.

Building customer confidence in AI's ability to handle complex financial matters is a “critical challenge” for banks, Ghosh said. But “anything that can help customers understand how the bank is using AI, why they’re using AI and really how it’s going to benefit the customer” can aid in efforts to alleviate customer fears and build trust, she added.

Banks may be enticed by short-term gains that AI can offer efficiency and personalization, but lenders have to take a long-term view, Donovan said.

“Banks have to double down on demonstrating the ethical, unbiased use of AI,” he said. 

Partnering with independent third-party auditors to validate banks’ AI practices as beneficial could be a smart move, Donovan added. 

“And proactively communicating their stance on fairness and transparency is key,” he said. “Customers want to feel in control, so giving them the ability to opt in or out of AI-driven services is crucial.”

After Hurricane Helene ravaged the mountainous areas of western North Carolina and eastern Tennessee in September, bringing catastrophic flooding and wiping out power and water for many areas, the first step for Truist was connecting with employees by phone to confirm their safety and offer assistance. 

Within five days, Truist had confirmed all of its workers were accounted for, said Aaron Slate, Truist’s Asheville market president, who’s lived in the city for more than two decades.

From there, “it was kind of just, where do you start?” Slate said. 

Western North Carolina has grappled with widespread destruction from Helene, which killed at least 227 people, and recovery is projected to be costly and time-intensive. Following the storm, banks that serve the area have endeavored to provide their employees and customers with basic supplies, financial help or a shower.

The initial challenge for Charlotte, North Carolina-based Truist – which has about 13,000 employees within Helene’s path – was helping staffers who requested assistance to secure temporary housing or transportation support, Slate said.

Western North Carolina, as well as areas of eastern Tennessee and western South Carolina, lacked power for days. 

When credit cards couldn’t be used, the bank sought to make sure its ATMs were fully stocked and functional. “Cash suddenly became very, very important for this area,” Slate said. 

Truist had opened about 80% of its drive-thru locations and branches in western North Carolina roughly two weeks after the storm. Some sustained damage from the flooding; in those cases, Truist is offering banking services through a mobile branch, Slate said. 

In addition to truckloads of crucial supplies, Truist’s west Asheville branch has added mobile shower and laundry units open to anyone since the area largely remains without water. “We’re meeting needs exactly where they’re at right now,” Slate said.

The need for cash has diminished as power has been restored for many, but business clients have been eager to ensure the availability of funds or secure deferrals on loan payments, bank leaders said.

Truist aims to be sensitive to clients’ needs and is approaching things like outstanding loans on a case-by-case basis, Slate said. 

“Each client that I’ve spoken with, if they’ve had a need, we’ve been able to figure out a way either to be able to help them directly, or connect them with the right resources,” Slate said. He noted a number of resources that have popped up in the wake of Helene, including a recovery fund from Mountain Bizworks, a community development financial institution. 

As well as Truist, other banks such as Raleigh, North Carolina-based First Citizens are also “taking a patient approach,” a spokesperson said.

“Our bankers on the ground are helping customers discuss debt relief options, including disaster relief extensions for loans, consumer and business disaster relief loans, credit card payment deferrals and lease payment deferrals,” the spokesperson said in an email. 

Nearly all of that bank’s branches and ATMs in affected areas have reopened, and First Citizens has committed $3.5 million in donations and financial support to Helene revitalization efforts, the spokesperson said.

Charlotte-based Bank of America, too, is offering financial assistance to clients and has pledged $1 million to support those affected by the storm.

Helene “was devastating to experience as a resident and a bank teammate who has worked with our clients and the community for more than nine years,” said David Dowd, the bank’s Asheville president, in a statement. The bank is committed to supporting the community, he added.

‘Well-tested’ approach

For First Horizon, all of the lender’s banking centers are open except one in Boone, which experienced flooding damage. There, the Memphis, Tennessee-based bank has set up a mobile banking center, in addition to ATMs in Boone and Asheville, said Laura Bunn, First Horizon’s mid-Atlantic regional president. 

First Horizon hopes to reopen the closed branch in two to three months, Bunn said.

“Unfortunately, with our footprint in the southeast, we're pretty experienced with hurricane season, and hurricane preparedness and recovery efforts,” said Bunn, who’s personally accustomed to the effects of hurricanes, having grown up in eastern North Carolina. “We've got a well-tested plan and approach to providing support to affected associates and to our clients and communities.”

In the Asheville area, water remains “a dire need,” not just for drinking, but to flush toilets, she said. Bunn’s team is meeting each day to review employee needs as they change, and the bank is facilitating access to water so people don’t have to use bottled drinking water to flush their toilets.

To support employees, First Horizon has delivered meals, fuel, water, ice and other essential supplies, and is providing mobile shower units and weekly laundry services for staffers still without water, Bunn said.

In keeping in touch with clients to assess their current needs and find out if they need relief from banking service fees or charges, the bank has already begun to process deferrals on loans, Bunn said.

The biggest challenge for First Horizon has been reaching all of its clients, and for its business clients to account for all of their associates, Bunn noted, given the hard-to-reach locations some mountain residents live in and the ongoing lack of power in some areas. 

“This was a really different storm in a different spot,” she said.

Dispersed operations a benefit

Asheville-based HomeTrust’s experience during Helene has underscored something it had adjusted to amid the COVID-19 pandemic, said Megan Pelletier, the bank’s chief operations and people officer. 

Having staffers dispersed geographically, in places like Charlotte or Georgia, “was to our benefit in the wake of Helene,” because it meant there was no service disruption for the bank’s customers through the storm and its aftermath — particularly essential for HomeTrust’s customers not in the Asheville area, she said. 

“It’s a lesson we learned during Covid, around flexibility, and it served us well during this event,” she added.

HomeTrust, whose footprint covers North and South Carolina, Tennessee, Virginia and Georgia, has about 300 employees in parts of western North Carolina devastated by Helene, Pelletier said.

Although the bank has had to augment its hours based on the availability of employees and what they’re grappling with, “for the most part, we’ve had our doors open since last Monday,” she said. 

Two HomeTrust branches remain closed, due to impacts to facilities, and employees from those branches have been deployed to other nearby locations, she said. The bank has also sought to work with customers to defer loan payments as necessary.

“What I’ve seen is a really humanistic approach to work and business over the last two weeks,” she said.

One of the bank’s leaders in Asheville, who didn’t lose power or water has been making home-cooked meals each day, to provide a hot lunch for bank employees who can make it to the office. Another HomeTrust employee who left town offered his car to a colleague in need.

Similarly, Slate and Pelletier each praised the way the area banking community has come together, in spite of competition. Pelletier lauded the North Carolina Bankers Association for its efforts, including setting up a relief fund for bank employees in affected areas, and noted fellow Southeastern lender SouthState Bank sent HomeTrust a slew of donated supplies for employees.

“People are really just stepping up to support one another in ways that you typically don’t see in business every day,” she said. 

Like First Horizon, HomeTrust has established an employee relief fund. In addition to physical needs, providing mental health assistance is crucial, too, Pelletier said.

“What has occurred in western North Carolina is — it’s going to take a long time, both physically, for the community to recover, but also mentally,” she said. “Ensuring that we really are providing those resources to our employees, and making them accessible in their time of need, has been paramount.”

Milton, too

Truist and First Horizon have each pledged money to help communities heavily affected by Helene. But the banks braced for another storm as Hurricane Milton tore across Florida, where the two lenders also have a number of branches.

Truist has committed $1 million to help that state in the storm’s wake. “What the bank has provided to us up here in western North Carolina, the bank is ready to do down in Florida,” Slate said.

After Milton clears out, “as soon as it is safe to do so and our teams assess damages, our humanitarian aid team will activate to determine and deploy needed supplies to impacted communities,” a Truist spokesperson said in a Thursday email. “We will work diligently to ensure we provide the critical banking services our communities rely on by getting our branch network operational and determining the deployment of mobile banks and generators.”

A First Horizon spokesperson said the lender has a “battle-tested plan” to respond to Milton and noted Florida is more accustomed to crisis management and hurricane preparedness. The bank planned to first ensure its employees are safe, then provide as much continuous banking support to clients as possible and aid in community recovery. 

The bank strives to be among the first to reopen its doors, “at least a drive-thru, following a disaster. That’s something we really think is important if we can achieve it,” the First Horizon spokesperson said. 

First Horizon had closed branches in Tampa, Sarasota/Bradenton, Fort Myers, Naples, Orlando, Palm Beach/Broward and north Florida ahead of Milton’s arrival, according to the bank’s website.

Count Five Star Bank among the lenders seeking to swoop in after the collapse of First Republic and other banks that catered to Silicon Valley businesses — except the Sacramento-area bank’s CEO makes a notable distinction.

“We’re not from the East Coast,” said James Beckwith, who’s been at the helm of the Rancho Cordova, California-based bank since 2003. 

“We’re a Northern California bank, we understand that market,” he said. “We’ve been involved in the Bay Area for a long time, growing up there. We all understand that there’s various parts of the area that are distinct.”

The “great turmoil” of spring 2023, with the failures of Signature, First Republic and Silicon Valley Bank, presented a prime opportunity for $3.7 billion-asset Five Star to go after talent and banking relationships in the San Francisco Bay Area, Beckwith said.

“Geographically, it's not that far removed from us,” he said. “But historically, it was a market in which there was no way to enter it, and so we never really thought much about it.”

When SVB and others failed, East Coast banks moved in quickly: Raleigh, North Carolina-based First Citizens purchased Silicon Valley Bank’s assets, New York Community Bank bought a large portion of Signature’s, and New York City-based JPMorgan Chase acquired the majority of First Republic’s. 

Now, as former First Republic customers express frustration over JPMorgan’s service, Five Star Bank is betting its California roots will appeal to those clients.

The lender is opening a 3,700-square-foot office space in San Francisco’s financial district in September, Beckwith said.

“We’re just walking over what we’ve done historically, and developed historically, and bringing it into the Bay Area,” he said. 

Additionally, Five Star has hired 21 people since June 2023, and aims to double that number over the next two years, Beckwith said. Hires have come from First Republic, Signature and California Bank of Commerce, he said. 

“We think those opportunities still exist,” Beckwith said of further hiring, “as we continue to build and show ourselves in the marketplace as a successful organization and one that's very employee-centric.” 

The bank has about 200 employees and eight offices.

Five Star’s recent investments — brick-and-mortar and talent — have been fueled by a public offering the bank closed in April, raising $81.5 million.

Beyond talent acquisition, Beckwith suggested the bank may consider purchasing another lender, as the operating environment has strained community banks.

“We’ve always been an organic growth shop,” he said, “but there may be opportunities for us to look at other organizations to see if they’re like-minded and would want to join us.” 

The commercial bank’s customers are generally small to medium-sized companies generating between $1 million and $200 million in revenue, Beckwith said. Given the sizable market and the prevalence of Silicon Valley entrepreneurs, “over the next five years, we think we can grow the franchise by up to 1 billion dollars just in the Bay Area.” 

The bank doesn’t offer wealth management services and doesn’t plan to, Beckwith said, noting that’s a “very competitive space.”

Providence, Rhode Island-based Citizens Bank, for example, has snagged former First Republic bankers to help it build out its wealth-management presence and scale its business banking footprint on the West Coast. 

Five Star’s business model is most closely aligned with that of First Republic, with a high-service, technology-focused approach, Beckwith said. “That's the expectation of a lot of these customers of the old FRB, who were really well-serviced and well cared for,” he said. That, in turn, fostered a strong sense of loyalty among those customers, he added.

The high-touch service approach is crucial to those commercial customers, Beckwith said.

“It’s having a relationship with somebody they can pick up the phone and call; somebody that’s going to return the call immediately; somebody that’s going to be on their business premises to visit them, to check in on them, how they’re doing,” Beckwith said, noting that Five Star doesn’t have 1-800 numbers.

“We think there's a great niche for us to provide that community bank service,” he said.

Creve Coeur, Missouri-based First Bank is sharpening its focus on serving family-owned and privately held businesses across its footprint, including by expanding into Texas this year. 

The lender, family-owned itself, has about $6.5 billion in assets and 80 branches. First Bank operates in Missouri, Illinois and California, with mortgage production offices in the Kansas City area. 

First Bank, which has about 850 employees, is leaning on its “Goldilocks size,” which affords it enough scale for sufficient resources and technology needs, and the ability to cultivate close connections among small and midsize clients, bankers and leadership, asserted Mike Dierberg, the bank’s board chairman. First Bank’s privately held status plays into that, since family-owned clients see that benefit in the bank, Dierberg and CEO Mikel Williamson said during a recent interview.

Prior to the Great Recession, First Bank was “kind of your typical diversified community bank,” said Dierberg, who represents the fourth generation of family ownership of the bank. Since then, the bank has sought to zero in on serving family-owned and other privately held businesses.

That’s a segment the lender sees as a growth driver, as the number of U.S. small businesses has soared, noted Williamson, who took the CEO role at the bank in November 2023.

“A lot of your bigger banks are really focusing on the mass market — being on every corner, being all things to all people, larger branches, and more of a generalized product offering,” Williamson said. “There are some banks out there doing what we do, and they're doing an OK job, but they're not doing a great job and they're not in our markets. It's a place where relationship still matters, and that requires investment and development over time.”

Although First Bank serves consumers, it’s not an area where the bank expects to take market share. The largest banks have “a ubiquitous brand” that allows them to succeed with the mass market consumer, “in ways that’s a little more challenging for a bank like ourselves,” Dierberg said.

In relationship banking, however, personal ties remain important to small and midsize businesses and affluent clients. “That is something we can really succeed and thrive in, because of the size of the company,” Dierberg said. 

Smaller banks with trusted client relationships stand to gain in the current competitive environment, according to Nikhil Lele, global and Americas consumer banking leader at consulting firm EY, because consumers are more interested in a small bank expanding its reach to offer more products or services than a large bank, provided the small bank creates fluid digital interactions and service experiences are positive. 

About 60% of First Bank’s business comes from California, Dierberg said. That’s primarily family-owned and privately held business banking, as well as commercial. 

The bank declined to identify how much of its overall business mix the privately held and family-owned business banking segment represents, or what the bank aims to grow it to in the next two years, but Williamson said the lender aims “to grow significantly” in that segment. 

To fuel this effort, the bank is betting on its new four-story, 87,000-square-foot headquarters in the St. Louis suburb, which executives said is designed to appeal to both employees and clients. The $40 million building, which opened in May, better accounts for hybrid work and features more outdoor space, executives said.

“We've got this atmosphere [where] we can really entertain here on a big scale, or we can bring it right down to the selected experts that our customers might need for specific problem solving,” Williamson said. 

As part of its focus on privately held businesses, First Bank offers webinars and seminars with information geared toward family-owned business clients. With client relationships in mind, retention is “a high priority” for First Bank, Williamson said, and the bank is hiring in its wealth, family-owned and privately held businesses and commercial banking segments.

“Being able to bring that expertise to the table in a banker who’s well trained, understands their business as well as understands the financial system — when you marry those two things up, it creates a win-win for the company and the bank,” Williamson said.

With banking battle lines increasingly fought around primacy, Citizens is doubling down on its efforts to offer more value to customers to stoke greater engagement. 

That’s according to Chris Powell, the Providence, Rhode Island-based lender’s head of deposits and customer engagement. The super-regional rolled out improvements to its onboarding experience for customers in November and added digital features, including a savings tracker and checking account benefits calculator. 

The latter tool enables the bank to convey to customers just how much they’re getting from banking with Citizens versus competitors, which can bolster client retention, Powell said. The feature reflects how the $219.7 billion-asset bank is trying to zoom out and think more broadly about the value it’s offering customers.

“At the end of the day, [banks are] all striving to make more simple, more straightforward experiences for our customers, such that the transactional nature of banking is no longer where you win or lose relationships,” Powell said in a recent interview. “It’s going to be the advice and the engagement, and what real value can we demonstrate?” 

Powell declined to quantify how much the bank is spending on such upgrades, but said it’s an area of “sustained” investment. The majority of the bank’s discretionary pool of capital goes toward such digital enhancements and features, he noted. The bank’s non-interest expenses, which included salaries, equipment and software, rose 13% last year, to $5.5 billion, according to its most recent annual filing. 

From Powell’s perspective, it’s been an interesting few years in retail banking: Consumers had built up account balances amid the COVID-19 pandemic, and as interest rates rose rapidly, they shifted funds from checking and savings to higher-yield products such as CDs, fueling competition for customers. As rates have started to moderate, there’s still an “intense” level of competition for deposits that Powell doesn’t expect to ebb.

“There’s never really a utopia in the deposits business,” Powell said. When rates are high, banks are worried about how much they’re paying for those deposits; when rates are low, banks are worried about how to attract customers, he noted. 

Many consumers have different types of accounts at more than one lender and, more than ever, banks are vying to be a customer’s primary bank. 

“The focus is going to be on who’s going to get the most customer relationships, who’s going to get the right level of engagement with those relationships, and then who ultimately is going to be able to deepen and broaden the relationships over time,” Powell said. “I don’t see that changing. If anything, I see the competition for folks trying to do that really well only intensifying.”

That’s what has Citizens considering how it can take what’s become “commoditized” products or experiences and wrap them in a simpler or value-added experience for customers, Powell said.

Offering insights, guidance and advice to customers seeking it is one element of that. 

“Being positioned where Citizens is the person delivering the advice that helps them along their journey, I think, is a key focal point for us,” Powell said.

Making the account opening experience smoother and less complex – think, setting up an iPhone – is another crucial element, he said. 

Historically, the bank has “bumped into things” by asking too many questions during the onboarding process, so Citizens has tried to “strip away the majority of that,” Powell said. 

With a more streamlined process, the bank is focused on easily integrating direct deposit and bill pay switching, and getting a debit card ready to spend, so customers don’t have to go back and do more later, he said. The bank works with direct deposit account switching fintech Pinwheel to facilitate that feature.

Getting customers’ direct deposits, handling their primary transactions and engaging with them digitally “is really the stepping stone,” Powell said. Establishing those basic relationships with customers is key to getting them to turn to the bank for retirement offerings or other financial needs, he added. 

To that end, Powell embraces the intent behind the Consumer Financial Protection Bureau’s open banking rule. Removing the friction of a bank switch puts the onus on banks to deliver value, he said. 

“We shouldn't be thrilled because it was hard for the customer to leave; we should be thrilled because a customer wanted to stay, because they were getting a ton of value out of the relationship,” he said.

The bank is also exploring how it can offer more value through its artificial intelligence-powered assistant. Such tools have increasingly become a bank customer expectation – Citizens has its own AI-powered virtual assistant, CiZi – and the bank sees further opportunity in those assistants not only answering questions but also handling tasks the customer needs help with right there in the chat, rather than directing them elsewhere, Powell said. 

If a customer is asking about freezing a debit card, for example, “let them freeze it right through the chat interaction, instead of telling them where to go to do the job,” he said. 

Starting to create those integrated experiences will bring “powerful unlocks for us and for the industry more broadly,” Powell said.

Following the collapse of a banking-as-a-service company that’s left thousands of customers unable to access some $160 million, Unit has launched a tool that allows banks to connect directly with the end customers of their ill-fated fintech partners – ensuring those customers never lose access to their funds.

Unit’s Business Continuity Tool, which the company quietly rolled out, was developed to prevent any disruption in service for end customers, co-founder and CEO Itai Damti said. 

The tool’s release comes at an interesting time. Four months ago, BaaS firm Synapse filed for bankruptcy, leaving the end users of some of Synapse’s fintech partners without access to their life savings and prompting lawmakers to ask for answers on their behalf.

Unit had started working on the tool about two months before that. It’s the type of tool, Damti said, that banks have always needed.

“Whether or not the Synapse incident happened, a lot of programs have wound down over the years, and banks wanted to allow people to keep accessing the funds,” he said. “This is the first time that banks have the ability to continue the relationship with the end customers if the fintech company is winding down.”

Plenty of fintechs have failed over the years. In those cases, the banks behind the fintechs had one option, Damti said: offboard the end-users and follow a checklist for how to do it properly.

“In many cases, they even rely on a company that reached the end of its life, so it might not have the right amount of resources, it might not have the ability to build tech – so we just decided to make this an automatic process,” he said.

Unit has seven partner banks that power a number of fintechs; and its technology touches about 1.5 million individual users. In the event that one of those fintechs fails, the bank can go to Unit’s dashboard and activate an emergency mode for that fintech. At that moment, Unit emails the fintech’s end users, informing them that their account was impacted and giving them access to their bank account, now through Unit’s white-labeled dashboard.

“At this point, [end customers] can do everything from funding their account to withdrawing funds to some outside bank account that they might own. They can see all of their cards, physical and virtual. They can see the recent transactions. They can download statements. They can see their balances. They have almost fully functional banking experience that doesn't rely on [the fintech’s] ability to keep serving them,” Damti said.

“Statements, ACH in and out, wire in and out, checks,” he added. “They can keep getting paid interest according to the original terms, they keep paying the same fees for ACH and the wires and checks as the bank originally agreed to.”

The tool gives users the same access to the bank that the fintech had, allowing banks to retain these customers long after the fintech has fizzled away.

“You can retain the deposits. You can retain the fees. You can talk to the end customers directly. You can basically treat them as your core end customer,” Damti said. “Effectively, once a bank activates the emergency mode, all these end users are turning into their direct end users, or their kind of channel end users. But it's the same system, right? It's the same core that everything flows from."

Unit’s partner banks are in the process of studying and getting trained on how to implement the tool, Damti said.

A former Bank of America employee has developed an app tailored to women after recognizing gender disparities in investing regardless of education or financial literacy levels.

Feli Oikonomopoulou, founder and CEO of WealthMeUp, served as legal counsel and vice president at Bank of America in London for four years before moving to the U.S. to study at the Yale School of Management last year.

While working in the financial industry for more than eight years in the U.K., Luxembourg, France, Greece, Singapore and the U.S., Oikonomopoulou encountered gender inequality as an international issue when she noticed her female colleagues were less likely to invest than men. In diving into the issue, she said she realized financial services firms don’t do much to cater to women when they structure their products.

WealthMeUp, a free tool aimed at revolutionizing how women approach investing, is designed with a woman’s lifestyle and spending habits in mind, Oikonomopoulou told Banking Dive. The beta version of the app, launched in June, is for everyone to use but is built specifically for women, she said.

“The company is about financial literacy and investing, and our vision is to revolutionize the way that women engage with their investments and simply turn purchases into investment opportunities,” she said.

Women drive 80% of consumer spending but have often been underrepresented in the investment space, she said. A recent study from the World Economic Forum highlights that if women invested more, it could initiate an additional $3 trillion in global investment capital.

Oikonomopoulou, originally from Greece, said she left the country because of the financial crisis. Her experience in Greece made her realize that when an imbalance happens, those without knowledge of financial management are disproportionately affected.

WealthMeUp, developed while Oikonomopoulou was completing her MBA at Yale, has a core team of three members, including the founder — plus a team of advisers, interns and external contractors. The interns are from Cornell, Columbia and New York University.

The app focuses on financial education for Gen Z and millennial women and has most users from these schools or the area. This has paved the way for Oikonomopoulou to discuss introducing the product to the schools.

Investing in literacy

The app aims to present users with steps to make it easier for them to gain knowledge and invest.

The first is the financial education tool — currently being launched — to clear up misconceptions around investing, Oikonomopoulou said. There are 140 short courses that each take roughly five minutes to complete, covering seven financial topics designed to help women learn the basics of stocks, bonds, mutual funds and other investment options. After the user engages with a tool, she is rewarded with points, which can be redeemed through products or services offered at no cost through the app’s partnering firms.

“Therefore, you associate financial learning to begin with a positive habit and with something that rewards you with something that you need,” she said.

The next step: guide the user through investment options available on the platform with the help of financial coaches and financial advisers who work with the firm. That feature is in the pilot stage.

Oikonomopoulou also plans to implement a revenue-sharing model in which the firm partners with a bank or a credit card company that offers cash back on a user’s spending and redirects that to her investment account. 

“Turning your spending habits into investment opportunities in a very safe way, given the cashback that you receive on your spending, is essentially free money that you were not expecting to come,” she said.

While building the app, Oikonomopoulou sought feedback from men and women to assess their preferences regarding investing. While women expressed a preference for goal-oriented self-development, men preferred monetary value, which could be less than $1, she noted.

Structure and rewards

Financial services apps like Acorns have a similar model of investing spare change, but WealthMeUp's mission is female-focused. The company partners with female-led companies for cash back rewards, using those rewards to invest rather than accumulate spare change, Oikonomopoulou said.

Oikonomopoulou views Ellevest, a robo-adviser investment platform and financial literacy program, as the biggest competitor in the female investor and female-focused financial services space, but she doesn't see it as a direct rival. She instead considers Ellevest a partner in working toward the shared vision of promoting female investing and putting more money into the hands of women.

WealthMeUp also works with the fitness franchise Orangetheory and financial coaching service FemFinancial. While explaining how the rewards system works, Oikonomopoulou said that when app users accumulate 3,000 points, they can redeem those for two one-hour sessions at Orangetheory or some merchandise.

Oikonomopoulou said she thinks the next phase of the fintech revolution is here, and that women can play a fundamental role in it because this stage involves “financial products to be more personalized and more integrated into our very personal needs and habits.” 

Roughly a year after the launch of Roger, Citizens Bank of Edmond’s neobank for military recruits, the bank is set to launch a large-scale marketing effort led by Director Marcus Castilla, a former pharmaceutical executive and retired Army lieutenant colonel who is also the husband of CEO Jill Castilla. 

“We have a very aggressive sales and marketing plan,” Marcus Castilla told Banking Dive. “When we're looking at the target audience, it's those communities that support our newly enlisting soldiers,” including officers and noncommissioned officers. 

Roger, named after a military term that suggests a message has been received, rolled out in August 2023 amid a push to reach newly enlisted service members seeking access to bank accounts to fulfill direct deposit information requirements. 

The ecosystem of financial institutions serving military members consists of a few incumbents, such as Navy Federal Credit Union and USAA. Marcus Castilla, a 25-year military veteran who joined the bank in May, said Roger aims to take any friction out of sign-up by setting up incoming service members with a digital bank account in minutes. The marketing campaign will include social media outreach, advocacy from senior leadership and fostering relationships with military leaders.

The military “can't endorse any banks specifically, or financial institutions, so that is always a challenge,” he said. “Just providing that awareness, though, then starts that ball rolling to then provide understanding, establish connections.”

A key selling point is quick turnaround for account setup and the bank’s ability to accept multiple forms of identification, including tribal cards, military identification and green cards.

Marcus Castilla wouldn’t comment on customer numbers, but said the volume of accounts opened has consistently grown by at least 50% every month and the number of accounts opened weekly has doubled. The digital banking platform offers checking accounts with 2% annual percentage yield and savings accounts with 5% APY. It’s also partnering with other military-oriented community banks and credit unions to broaden its reach and provide recruits, a bank spokesperson said.

Digital community bank

A differentiator for Roger is its human approach to customer service, Marcus Castilla said. While the interface is digital-only, Roger provides service from human customer service agents. Roger is also open to customer feedback on product offerings as it looks to expand and modify its suite of products. For example, the bank decided to offer a 2% APY checking account three months after receiving comments from customers, Marcus Castilla said.

The objective of Roger is not to go head to head with incumbent institutions but to provide another option for banking services for new recruits, Marcus Castilla said. The company plans to grow the ensemble of products by partnering with other institutions.

“With Roger, we can make changes very quickly to the needs of the modern soldier, with modern banking for those service members, where it might be difficult for other institutions to do that,” he said. “Jill is in active conversations with other financial institutions who want to join in with Roger to help grow it.”

Ron Shevlin, chief research officer at Cornerstone Advisors, said niches present big opportunities for neobanks, provided the offerings can meet the needs of a particular market segment.

“What makes or breaks a niche strategy is identifying truly unique needs,” he said. “The military is a niche and there are clearly a lot of unique needs of people who are full-time military members … [Jill Castilla] recognized that new service members had certain challenges in getting banked by … the existing military focused financial institutions.”

The challenge for Roger will be on the execution side, he said.

Patrick McKenna, co-founder of Facet Wealth, said the power of a platform like Roger is its ability to help new military recruits start building a framework for managing their financial lives — a foundation that will help them through different life stages, including the eventual transition to civilian life. McKenna spent 11 years in the military.

If Roger can successfully crack customer acquisition among military members, it has a significant runway to grow through word-of-mouth recommendations.

“The military is the ultimate affinity group — military people listen to other military people,” McKenna said. Finding advocates “that have a voice that young military members are listening to seems like an opportunity, but also the challenge,” he added.