So You’re Starting a Direct Online Bank
Three Questions to Answer
In the banking industry, it’s easy to find success stories of online brands who helped drive significant deposits for their parents. Some of the ideas are Incredible, some helped a company Rise, still others steer into specific (“funner“) verticals.
Deposits are still (always) a prime need for community banks, and many currently are evaluating – or launching – this idea of a direct, online, beautiful brand to save a lagging balance sheet. More specifically, bankers may dream of tapping into a market outside their own. This allows the bank to preserve its low cost of funds (and high apathy?) among a current, local, customer base.
Can this work? Sure. Will it work?
That’s a different story. Before you lead your c-suite into full-scale development of an online brand (Space Bank, with rates out of this world, is just sitting there), there’s a couple relevant CMO, CDO, and COO-level questions to ask yourself before the plunge.
- If we build it, will they come? Spoiler: No. What, you ask? I thought digital marketing was easy, efficient. Cheap, even. it seems intuitive to banks that once you invest in the brand and a site, that the next steps are easy. Your signpost, plus a rate, and a high trust in Google and Facebook will deliver hundreds of viewers ready to gulp up your products. This is never true. You may get some looks. Or even some return visits. But very few conversions, for a new brand that didn’t exist and wasn’t even in the decision tree for your online cruiser target. That moves you to the next question:
- What will it take to get people here? Digital advertising, but not the typical boosted-post or pay-per-click spend you’re used to. Nope, it’s going to take a full-on, multichannel, ecommerce approach, competing for specific product hunters. Before we discuss numbers, plan on 6 months of dev for just a few conversions. Plan on 1 year of spend. Plan to not break even in terms of cost per acquisition for 2 years. Still in?
- How long is this e-commerce game, anyway? I don’t blame you for still being in. It’s less about a manageable CPA than it is a new slice of core deposit customers and balances on the sheet. But it’s tough for any company, let alone a bank, to stomach a large sticker price without an immediate investment, especially from one year to the next. But that’s exactly what a start-up ecommerce platform requires. Additionally, market spend is only one variable, but you’ll also need to be cognizant of operations and vendor cost, plus cost of funds. You’ll need to prepare for a trickle before a flood. For many banks, it’s difficult to postpone an immediate ROI on dollars spent.
But it can be done.
Assuming you’ve got a reasonable expectation on money, talent and time, and you’ve used these three points as a gut check, then perhaps you’re ready to discuss the branding strategy. The product selection. The audience development. The support level. And even the expectations you’ll need internally to develop a CX and operational strategy. That’s another conversation. Start it at Strategic CX.
Originally published in June 2024 at Strategic CX.