Customers of Simmons First National Corp. who try to open a new checking account through the bank’s website encounter an unusual experience — they’re encouraged to use their mobile phone instead of their desktop computers.
Through the bank’s mobile phone app, opening an account takes less than five minutes and requires just three basic pieces of information: email address and phone and Social Security numbers. Customers can complete the process in the time it takes to get dressed, find the car keys and leave the house.
“We think the best experience we can give you is through a mobile device,” said Alex Carriles, chief digital officer at Simmons, one of the state’s largest banks. “It allows you to do a lot of other things you wouldn’t be able to do on your desktop.” Simmons’ approach highlights the digital transformation in the banking industry that has accelerated during the pandemic as customers shifted from traditional in-person banking as a preference to the rapid convenience of online and mobile services.
“A lot of banks have said they forever changed the way they serve their customers and they’re not going back,” said Charles Potts, chief innovation officer for the Independent Community Bankers of America, a national trade group that represents about 5,000 small-and midsized banks across the nation.
The two-year pandemic has been a catalyst for the digital explosion, fueling shifts in customers’ behavior. Covid-forced branch closures motivated many customers to try online and mobile banking services for the first time.
“A lot of people were not ready to move digitally, with some of them stuck in their ways,” said Matt Olney, banking industry analyst with Stephens Inc. of Little Rock. “With covid, and branches being closed and a lot of consumers didn’t want to leave their houses, it kind of forced them to figure out how to do online banking.” Consumer acceptance strengthened and has turbocharged the evolution of digital-banking.
“Bankers throughout this process took the strategic plan they developed in 2019 … and basically threw it in the trash and said we’ve got to do in months what we had planned to do in years,” Potts added. “To a large extent, that was by necessity — the customers demanded it. The digital evolution has accelerated at an unseen pace in my 40 years of doing this.”
Arkansas’ banks have jumped along for the ride.
Lenders, large and small, are relying more and more on mobile banking to sell their services and attract customers, with many using what Potts calls a “mobile-first strategy.” Across the board, regardless of asset size, financial institutions in Arkansas report digital transactions have increased substantially over the past two years.
Chris Gosnell, chief executive officer of Farmers Bank & Trust, a $2.5 billion asset bank in Magnolia, said the pandemic was a “slap in the face” that influenced the banking industry to move quicker in deploying mobile and digital service. “It kicked us forward about five years,” Gosnell said. “We were planning to ease into it and all of a sudden, you have to do it right now.” Arkansas State Bank Commissioner Susannah Marshall notes bankers were moving to improve their digital experience before the pandemic but also cites covid-forced branch shutdowns as a key factor in speeding up those initiatives.
“A lot of banks were already starting to move to a digital banking presence before the pandemic and we definitely saw customers more willing to adopt and use digital service offerings during the pandemic, and that’s continued since then,” Marshall said. “Our banks have done a great job of responding to what customers want today.” Banks today are racing at warp speed to implement more robust mobile-banking options, including a full-range of products and services from opening new accounts, applying for a loan, real-time-payment options, and registering for trust and investment or cryptocurrency support — services that previously required customers to go to a local branch for help.
Global research firm Kearney reports that more than 40% of consumers increased their use of mobile banking apps or websites during the pandemic, and 85% of those said they will continue to rely on digital channels going forward. Likewise, the American Bankers Association found that digital account opening activity more than doubled from pre-pandemic levels.
Arkansas’ lenders also are reporting rapid digital growth.
Simmons Bank says that digital transactions escalated by 40% from March 2021 to the end of March this year, with about 71% of customer transactions conducted through digital channels. Similarly, mobile deposit dollars are up 31% at Simmons over the same time period.
Arvest Bank of Benton-ville, the state’s largest privately held institution with assets of $26.6 billion, says customers who do their banking exclusively using digital channels leaped from 17% to 29% from December 2019 to the end of May this year. Branch-only usage dropped from 27% to 18% over the same period. Overall penetration of digital services to all consumer households increased from 63% to 69%.
First Bank & Trust of Jacksonville, with just under $1 billion in assets, said digital transactions more than doubled from 2020-21. FB&T installed 18 interactive teller machines, allowing customers to interact with tellers through two-way video, at all of its locations just before the pandemic hit to expand its digital efforts. “Obviously, our customers were taking advantage of the investment that we had made in newer technology,” said Larry Wilson, the bank’s chairman and chief executive officer.
Digital transactions at Stone Bank, a more than $600-million asset bank chartered in Stone County, are up by 15% over the past two years, according to Chief Executive Officer Marnie Oldner.
At Farmers Bank of Magnolia, the number of mobile-bank customers has soared over the past five years, skyrocketing by 263%, Gosnell said. Online account openings have registered a 34% jump over the same period.
Similar forces are at play for credit unions, which also are seeing surges in digital usage. Online transactions increased from 15% annually before covid and are now running up to 45% at Arkansas Federal Credit Union (AFCU), the largest in the state with $1.9 billion in assets.
Those increases have led to more investment in digital products and services. “We’ve added a lot of functionality,” said Nicole Matsoukas, AFCU’s chief information officer, who said the credit union has upped its digital-technology investment by 45% from last year.
Friendlier consumer behavior is accompanied by higher expectations — customers demand digital services and an experience on par with those delivered by the world’s best technology companies: Amazon, Apple and Google, bankers and industry officials say.
“The experience becomes really critical,” Carriles said. “The reality is you have one shot at this. If the experience isn’t great, you’re going to lose that customer.”
Those results are leading financial institutions to invest more in digital improvements, drawing funds from branch-network growth. “In terms of incremental dollars banks are going to spend, it’s 100% going to go toward digital transformation, moving the spend away from branches to digital transformation,” said Olney of Stephens.
Banks in the state are investing more to meet the demands of digital customers.
In 2018, Simmons committed $100 million to technology advancements — including mobile banking and infrastructure improvements — to position the bank for future growth and to keep pace with the evolving digital landscape.
Farmers Bank has increased its annual investment in digital-banking technology by 15%.
Digital’s warm reception from consumers is putting pressure on branch networks and industry officials cite online and mobile expansions as primary factors leading to a reduction in branches across the nation.
“Banks have accelerated plans to consolidate their branch footprints as the covid-19 pandemic encouraged consumer adoption of mobile and digital channels,” S&P Global Market Intelligence reported earlier this year.
Nationwide, there has been a net loss of 2,126 branch banks in 2020 and a record number of 2,927 net branch reductions in 2021, representing a 38% year-over-year increase, S&P found. Arkansas lost a net 22 local branches over the same period, according to the study by the global financial services data firm.
However, bankers note that prognosticators have been predicting the death of branch banking for more than 50 years since the introduction of ATMs.
Community banks, with a commitment to local areas and small businesses, say they are not turning away from branch investments.
“Branches are still pretty much relevant,” said Oldner of Stone Bank. “We want to offer customers the convenience of the mobile app but we still want our bankers to meet the customer. I’m not changing our strategy at this point. Customers want to know they have the human touch there whenever they want it.” Gosnell, the Farmers Bank CEO, says a local presence is vital for smaller banks. “This is still very much a relationship business,” he added. “The challenge is how you keep that relationship going digitally.” The banking industry is at a critical inflection point in evaluating where best to invest in growth, according to Potts.
“This is another great opportunity for our community bankers to rethink and reimagine the next evolution of their service and delivery strategy by blending the best of both the physical and digital approaches.”