Earlier this year, Walmart filed a trademark for “Hazel” – its proposed new fintech brand. Little is known about Hazel’s complete capabilities, but it appears the solution is tailored toward consumers who are looking for quality, digital and affordable financial services. This move underscores the emergence of large brands – particularly retailers – entering into the financial services space.
The burden is heavy upon financial institutions, particularly community institutions. Not only is there increased pressure and competition among banks, but retailers such as Walmart present new challenges. Today’s community bank is forced to arm itself against these larger entities and keep its customers loyal, often with less resources.
A Real Threat or Fool’s Gold?
Retail giants such as Walmart have almost universal brand recognition. Add to this, Walmart’s target socioeconomic demographic favors those who also tend to bank with community institutions.
However, what Walmart, and other retail and tech giants are doing is not new. Many years ago, Sears & Roebuck attempted to enter the wealth management space to no avail. However, unlike Sears from yesteryear, today’s players have just as much, if not more, access to the consumer via smartphones, online shopping, etc. Yet, the bank still has one advantage over the retailers – access to customer data.
The Bank’s Advantage
Banks have credibility, access to customer insights and a reputation of quality service. While Walmart has scale, banks can build better experiences. Bank leaders are able to form relationships with individuals and provide more tailored and personalized service that is not attainable on Walmart’s large scale.
Take robo-advising for example. There is speculation that Hazel will include an offering that enables access to wealth management services. This is traditionally a weakness for community banks as the threshold for wealth management services usually far surpasses the deposits a customer may have in the institution. Also, it is costly to hire and staff a full-service wealth management program within the bank. However, banks can deploy their own robo-advising product that leverages the insights they already know about the customer and create unique, personalized experiences with a low dollar amount required for entry. This can be executed without the need to hire and staff an additional department or manage the portfolios of interested customers.
Services such as robo-advising empower the bank to remain as competitive, and strategically advantaged, as it can now deliver a digital-first resource customers are looking for while also leveraging the data it has to create a far superior customer experience.
The bank should be a “one-stop shop” for customers. Implementing products such as a robo-advising in into existing digital banking eliminates the need to log into a separate platform or link it with any deposit accounts. This direct integration contributes to the convenience today’s customer expects.
In The End, The Bank Wins
Though Walmart appears to pose a threat to traditional financial institutions, particularly community FIs, many of the company’s perceived advantages are disadvantages. Walmart lacks trust when it comes to financial services. The retailer is known as a destination for those looking for a pair of jeans or a grocery run, but not when it comes to their finances. The retailer is also not known for having positive customer experience and, many times, a trip to Walmart leaves much to be desired.
Community banks are the exact opposite. They are trusted community institutions that actively seek to create positive interactions with customers. Sure, Walmart can scale faster, but banks can build better overall experiences centered around supporting the financial well-being of its customers. Bigger does not always mean better. With the right solutions, banks can stand up to giants like Walmart and win.
Chris Doner is founder and CEO of Access Softek, a digital banking platform provider.