Teller: Hello, how can I help you?

            Customer: I need to make a withdrawal from my savings account.

            Teller: What is your account number?

            Customer: Hmm, you know, I don’t use this account much; I’m not sure.

            Teller: Hold on.

And the transaction continues until you finally get your cash and leave the bank, without an ounce of personal banking or real customer service.

On the other hand…

            Teller: Hi Kate, how are you today?

            Customer: I’m fine; thanks.

            Teller: Hey, how was your recent trip to St. George?

            Customer: Oh, it was great. We enjoyed the wonderful weather and saw a few new sites down there and just had a great time together.

            Teller: That’s great; are the kids still doing well?

            Customer: Yes, they are. Ben is getting ready for baseball tryouts, Kimberly has a piano recital tomorrow night, and Joey just loves preschool.

The discussion and ensuing transaction continue, and Kate leaves feeling important, remembered, and looks forward to the next visit.

The latter scenario does exist at banks, even in today’s seemingly customer-service-challenged environment. And, not surprisingly, it is most often found in safe, reliable community banks like Western Community Bank.

In fact, last August, Kiplinger’s Personal Finance magazine highlighted community banks in the article, “Banks That Put You First”.  The report notes that for one customer, “The icing on the cake was the personal service: The bank’s account executives took the time to answer all of his questions. And they helped him refinance his mortgage…”

 The article also cites that “Community banks appeal to customers…because they have close ties to local residents and tend to offer more personal assistance than the big money-center banks. ‘Community banks are in the relationship-building business,’ says Karen Tyson, senior vice-president of the Independent Community Bankers of America. They tend to have fewer—and lower—fees than major banks. And they generally offer lower rates on loans and higher yields on savings.”

 There are many options to bank with great a community bank in Utah Valley. A number of these banks are within a short drive, and some are so good at delivering customer service that it’s worth taking a littler longer drive.

 So if you’re tired of being treated like “just another customer” instead of a person, or you want the peace of mind that comes from keeping your money working for the local economy, visit a local community bank like Western Community Bank. Chances are you’ll feel the difference the moment you walk in the door.

As a bank customer, I’m aware of the feeling that it’s a chore because going to the bank is usually an item on a to-do list.  (Personal side note: my wife is constantly amazed that I don’t carry any cash, even though most of my waking hours are spent in a bank.  So when we need cash, visiting the bank on the weekend or taking a trip to the ATM becomes a to-do item.)   

But there’s more to the studies.  Several indicate that consumers actually consider banking in the same light as going to the dentist!  That’s remarkable.  Do you share this opinion?  Why or why not?  Is going to the bank like getting a routine cleaning, more like a root canal, or like something more enjoyable?

As one with marketing responsibilities for the bank and concerned about improving the experience for every customer, I’m curious to know why this perception exists, and what can be done to improve if not abolish it.  Consequently, I’ve been doing a lot of reading lately.  In fact, in the last three months I’ve read almost as many books and articles and papers as I did during my last year of college.

Most of the reading I’ve done is business related—marketing, branding, leadership, efficiency enhancement, and the like.  And one common theme is emerging: the ability to actively engage customers, staff, management, peers, and prospective clients in meaningful positive ways is a key driver (if not the key driver) to improving the customer experience, the performance of staff members, and peer perception.

So I pose these questions (very transparently seeking to engage those willing or wanting to voice an opinion or participate in the conversation): In what way do you want your bank to actively engage with you?  What kind of interaction do you value?  What are your expectations? Is banking really just a chore?

There’s a lot of discussion about change in the banking industry right now.  Business plans have been turned on their ears.  Once solid and seemingly safe ways to make loans are now being questioned.  It’s getting more difficult for financial institutions to provide distinguishing products and services.  It’s even getting hard to tell what a bank is or is not anymore.

What an incredible opportunity this presents for all of us!  This shifting is creating an environment where it has never been a better time for consumers to make their voices heard, and for bankers (at least the smart and successful ones) to be taking the time to seriously consider every customer comment, complaint, note of praise, or suggestion.

I’m going to let you in on a little secret…this is not a totally new concept to community-based financial institutions.  I’m not talking about the big guys claiming to be community banks, I’m talking about the true community-centered banks that take the time to look a customer in the eye, who may have had to eat some crow now and then, and who have tried to adjust to their customers’ needs and wants in order to stay alive in a highly-regulated and viciously-competitive marketplace.  For these smaller institutions, listening and adapting to your needs is something they try very hard to do.

Now, in the interest of full disclosure, not every small bank or credit union fits this description, but generally they try.  They at least try harder and are more capable of faster change than the giant institutions that care more about making money off of your money than they do about earning your trust, providing you honest services at a reasonable rate, and investing in your future as a partner–whether you have $5 or $5,000,000.

So here’s a chance for you to make your voice heard.  Whether you’re a customer of Western Community Bank or not, comment on this post.  If you’re reading this on our blog, comment below.  If you’re an email subscriber, visit http://smartbankingtips.com/ and leave us your thoughts.  Help us transform banking to be better for you.  Help us strengthen our communities.  Help us better understand your needs so we can better serve you. 

Our ears are open.  We’re a little nervous.  But we want to hear from you.  The platform is now yours…

Here’s where I see some of the greatest opportunities for individuals, families, and businesses: 

• Improved lending standards. Though they will remain tighter than what we’ve seen in the last few years, lending standards will be different in good ways. It seems that everyone is internalizing the benefits of the sound, fair, and more responsible versions of standards from the last 15 years. These fresh standards will be better because the economy is forcing all of us to be more responsible and accountable. Sound standards are good for the economy and everyone participating.
• Customer service matters, but doesn’t replace technology. This one is a paradox. I argued in part one that technology matters but doesn’t replace customer service. In fact, both are true. In 2010 we’ll see an increase in the adoption of technologies designed specifically to assist the customer–technologies that do what people can’t. So while it’s critically important for banks to give you the attention you deserve, when your bank chooses to become IT savvy and makes sound business IT investment decisions, they’re going a long way to invest in your  financial success and future needs.
• New regulations will require more accountability from everyone. The Federal Reserve has stated: “Our goal is to ensure that consumers receive the information they need“.  Combined with other things I have read in trade publications, regulators are working to require the banking industry and the consumers who use the products to be more responsible for their actions.  Or in the words of  economist Merton Finkler, “In a highly leveraged economy, fiscal and monetary policies are not enough. We have to make changes in lending behavior.  Excessive debt accumulation, whether it be by the government, banks, corporations or consumers, poses greater systemic risks.”  In our ever-shrinking world, the actions of individuals matter more than ever.
• Banking really is no longer a service, but a commodity (like just about everything else). From Wikipedia: “A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it…Commoditization occurs as a goods or services market loses differentiation across its supply base…As such, goods that formerly carried premium margins for market participants have become commodities…” It hurts me to say this, but that’s a pretty good definition of banking, no matter where you choose to put your money.  The winners in 2010 and beyond (and the banks you should be looking to do business with) will no longer be determined by their products or services, but rather by how well they deliver on their promises and by their willingness to give back to the people and communities they serve.  This is especially true for the smaller “Main Street” banks that are more in touch with the local economies and communites they serve.

What are your thoughts?  What changes do you want to see?  What would you adjust?

I’m a firm believer that challenges are opportunities dressed in work clothes.  By deduction, this means that we have a surplus of opportunity in our current economic environment.  But before we can regroup and march forward we have to assess the past. 

Here is some of what we learned in 2009:

• Washington and Wall Street are more out of touch with Main Street than ever. There are over 8,000 community banks in the U.S that understand the needs of the local economies, communities, and individuals they serve. These generally operate in an honest, ethical, and sound manner. Very few of these smaller banks receive any of the luxuries afforded the much larger institutions, yet are being examined as though they are the cause of the problem. And even with bail-out money and more public scrutiny, the banking behemoths receiving the greatest consideration have yet to demonstrate any meaningful remorse or corrective action.
• “Too-big-to-fail” is a misnomer. The megabanks that received the biggest bailouts failed by most people’s definitions. Too-big-to-fail in this case really means too-deep-into-the-politicians-pockets-to-have-to-suffer-the-consequences-of-poor-decisions-and-mismanagement-in-a-free-market-system.
• Technology matters, but doesn’t replace customer service. Enhancements in processing services, online tools, and mobile banking are important–so long as they ultimately provide the customer with a better experience, or allow bank staff to better serve their clientele in meaningful ways. But these services, no matter how good, don’t take the place of exceptional and personal customer service.
• Lending standards were too liberal. Lending standards that required no verification of income and provided consumers the opportunity to borrow beyond their means to repay were not only dangerous and irresponsible; they were an effective way to hurt banks and consumers that were trying to do things the right way with integrity and ethics.

Certainly this is a shortened (and probably oversimplified) list, but the ideas here will have an interesting ripple effect into 2010.  I anticipate this year will demonstrate that…

• Tightened lending standards will remain, but will be different in good ways.
• Customer service matters, but doesn’t replace technology.
• New regulations will require more accountability from everyone.
• Banking really is no longer a service, but a commodity that is driven and enhanced by customer service (like just about everything else).

More on these ideas in the next post…

1) Check your FDIC insurance coverage limits.

a) Understand what the FDIC insures … and what it does not.
The FDIC insures all deposits at insured banks, including checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs) up to the FDIC’s insurance limit.  The FDIC does not insure stocks, bonds, mutual fund shares, life insurance policies, annuities, or municipal securities, even if the small business purchased these products from an insured bank.* 

b) Use the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to calculate the exact amount of insurance coverage that your small business has at each insured bank.  EDIE is located on the FDIC’s Web site at www.fdic.gov/edie/.

c) Understand how the FDIC defines account ownership categories to maximize insurance coverage.
The FDIC considers “single accounts” of sole proprietorships as personal accounts (not as business accounts) when calculating insurance coverage.  Single accounts are deposits owned by one person.  If more than one person is a signatory to an account and they have equal authority to withdraw funds, the FDIC may include these funds in the “joint category” thus allowing the sole proprietorship additional FDIC insurance.*

d) Remember:  the increases in deposit insurance will expire.
Increases in deposit insurance coverage for non-transaction accounts expire on December 31, 2013 and for transaction accounts on June 30, 2010.   Depositors should continue to monitor not only deposit insurance limits, but also what is and is not covered by the FDIC. 

e) Ask your bank if it provides extra insurance coverage through CDARS.
If a small business has deposits at a bank that exceed the FDIC’s insured coverage limit, CDARS (Certificate of Deposit Account Registry Service) can provide protection.  It enables banks to offer up to $50 million in federal deposit insurance by spreading the deposits among several banks (thus spreading the risk) and allowing customers to keep all of their deposits in one bank.  More than 2,000 banks offer this service.  Also, consider splitting deposits among additional FDIC-insured banks.

f) Make sure “sweep accounts” are “swept” into FDIC-insured accounts.
“Sweep accounts,” set up to earn interest on small business deposit accounts, should be swept into FDIC-insured accounts.  If your bank doesn’t offer a sweep option, make sure it collateralizes the swept deposits with U.S. government securities.

g) What if your bank merges with another bank?
If two insured banks merge, the FDIC provides separate insurance coverage for deposits at both institutions for a limited time.  This grace period allows small business owners time to restructure their accounts to maintain full FDIC insurance coverage on all their deposits.  The length of the grace period varies by the type of deposit account.*

2) Review the viability of your business plan.

a) Make sure your business plan has three scenarios: best case, most likely, and worst case.  Be prepared to execute each one.
b) Review your business plan with trusted financial advisors including your banker, your accountant and your lawyer.  Ask for their input and revise the plan as appropriate.
c) If your plan calls for expanding your business, reassess the business/market needs for this expansion.  Previous assessments may not be valid given today’s economic uncertainty.

3) Keep your banker in the loop.

a) Provide updates on how your business is weathering today’s economic storm.
b) Make sure you share all of the news–the good, the bad and the ugly. Bankers do not like surprises.
c) Ask for feedback on your revised business plan scenarios.

4) Conserve cash.

a) Withdraw cash from your business only when absolutely necessary.  Think twice about taking money out of your business to support a lavish lifestyle.  Bankers are unlikely to replace these funds (via a loan).
b) Review how your business collects, disburses, and invests cash.  Ask your banker to review your cash management systems to boost available cash flow.  Your goal should be to accelerate your receivables, maximize your investment income and pay bills on time.

5) Keep your suppliers informed of your financial situation. 

Trade credit is an important source of funds for most businesses.  It is important to maintain good relations with suppliers since they provide you with the products and services you need to run your business as well as the credit to finance them.  If you think your business might experience a cash flow problem, ask suppliers if they would consider extending their trade credit terms to you.  Every dollar of trade credit extended is one less dollar that you will need to ask your banker for.

*Source: FDIC

Robert C. Seiwert is a Senior Vice President of the American Bankers Association.  Prior to joining the ABA, Mr. Seiwert was a banker for over 30 years, serving as President and CEO of a high-performing community bank and Director of Commercial Marketing for one of the nation’s largest financial institutions. 

The following tips can help you manage your account wisely to avoid overdraft situations.

• Keep an eye on your account balance prior to writing a check or using your debit card. Prevention is your best medicine.
  • Review your transactions on an ongoing basis.
  • Use services, such as online banking, your bank may provide to help you keep up-to-date with your balance.
  • Remember to record and deduct checks, automatic recurring payments and debit card transactions and to add any deposits that have not yet been posted to your account.
  • Do not use your debit card like you use your credit card. Your debit card is like an electronic check and the funds are automatically deducted from your account.
• Ask your bank about all of its overdraft services. Community banks generally offer three types of overdraft services: overdraft lines of credit, transfers or sweeps from a savings account or another checking account, and overdraft coverage.
  • Overdraft lines of credit charge interest but provide a safety net. They may also have a transaction and/or annual fee. If needed, disbursements can be repaid over a period of time.
  • Transfer or sweep arrangements allow customers to cover overdrafts using their own funds for a small transaction fee.
  • Many times a bank will choose to pay an overdraft for a fee to avoid consumers having the inconvenience of returned transactions – embarrassment, fees and hassles from merchants.
  • Talk to your community banker about the best choice(s) for you.

During these challenging economic times, consumers are making tough financial choices–more so than they have ever had to do in the past. We want to be sure that consumers manage their accounts wisely. Most community banks provide some form of overdraft services, and do so in a way that best meets the needs of their customers. Remember that community bankers are there to help you.

Moreover, in their search for financial safety and security over the past year, consumers have actively redistributed their financial resources. Encouraging this trend and seeking to help stabilize the economy, the FDIC has extended its increase in insurance limits to $250,000 to the end of 2013.

This news should come as no surprise to anyone.

Much of the opposition to the economic stimulus plan centered on concerns that the stimulus money would be saved, and therefore not provide the hoped for stimulus.  The BEA report illustrates the fulfillment of the basic concepts that people are going to hold on to their money when, 1) money is getting harder to come by, 2) people are afraid to spend in an unstable economy, and 3) the smart spenders know that if they hold out long enough they can get a better deal than if they spend the moment they have a little money.

Note this simple definition from Wikipedia: “Saving is the conservation of money…Saving also includes reducing expenditures, such as recurring costs.  In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher.”  It’s not rocket science–in a down economy, people save.

So, at the risk of sounding like a punk kid, I respectfully say to the Bureau of Economic Analysis and all politicians who thought the stimulus should have had a different effect: “Duh!”

With nearly 24 percent of our local businesses planning to hire in the next quarter, BusinessWeek has named Utah Valley as the second ‘Best Place To Start Over‘ in the country.

Citing Information Technology as one of the booming industries in Utah Valley, BusinessWeek also makes mention of our relatively low average home price and slightly lower (comparative) unemployment rate. In particular, BusinessWeek states that even though our local Utah Valley economy has weakened in recent months, that a strong technology market, and local opportunities with BYU and UVU continue to buoy us up in hard times.

No doubt our local flair for innovation and entrepreneurship have helped to make Utah Valley one of the best places in The United States to start over.

If you have a business or are considering starting a business, check out the great resources and networking tools available on the Utah Valley Business Blog site.

Jeanette Bennett, BusinessQ: How would you describe the current banking environment in Utah Valley?

Ed Sanches, Western Community Bank:  The challenges we are facing are unprecedented.  But this has brought out more commitment from bankers.  There is the old joke about “bankers’ hours,” but the lights are on late in managers’ offices.  This is directly related to the commitment bankers now have, not only to their clients, but also to the community they are serving.  Bankers are pulling together.

Bennett:  The perception exists that it is difficult to borrow money right now.  Is that true?

Sanches:  No bank right now or finance institution want to bring on new loans that are going to be trouble for them.  No bank really ever has.  What caused the recession wasn’t commercial banks like ours. In reality, it was the mortgage and investment industry that said everyone deserves a home, no money down.  Consumers got in their mind that all banks should offer that.  Some banks did get sucked into that and now they are feeling the ramifications.  For the majority of Utah Valley banks, it is business as usual for qualified borrowers.

Bennett:  What are some examples of good news in our community?

Sanches:  Short- and long-term rates are at all-time lows.  For those who are qualified, short-term rates are very low.  Mortgage rates are very low…Banks in Utah County are, for the most part, strong, well-capitalized and actively looking for new clients.  It really is refreshing.  There are less people coming in to borrow money, but those who are coming in have the capability to repay what they are asking for…We are in business to lend money.