Banks adapt to changing consumer behavior

On the heels of the announcement Chemical Bank will close 16 more branches by year’s end, two local executives say relationship banking is more important than ever.

Joel Rahn, regional president at Chemical Bank, said the bank has seen growth in its West Michigan commercial loan portfolio over the past seven or eight years, with acquisitions of Byron State Bank and Bank of Holland, as the economy stabilized post-recession.

In 2016, the bank’s West Michigan commercial loan portfolio was at $2.1 billion, up from $2.01 billion in 2015.

Despite that growth, CEO David Ramaker announced on May 1 that Chemical Bank would close 16 branches to “increase efficiency and adapt to evolving customer needs.”

According to Rahn, those customer needs increasingly include the ability to bank from home and on the go rather than in-person.

“Banks are looking at, ‘How do we balance the customer needs, along with our own efficiencies, and try and be smart about where we have those physical offices?’

“At Chemical Bank, we made the decision to consolidate where we had branches nearby to other branches, in some cases. Every situation is a little different. In remote locations, we considered ATMs and other ways for our customers to interact with us.”

Rahn said customers still prefer face-to-face interactions for some types of transactions.

“At the core of it all, the marketplace is responding to our community bank business model,” he said. “The decision-makers are here in West Michigan, and business owners value that. They like to know the decision-makers and sit across from them and talk about their business.

“Business owners are feeling they’ve got a personal relationship with the bank.”

Bob Kaminski, CEO and president of Grand Rapids-based Mercantile Bank, agreed.

“While most banks talk about (being) about relationships, Mercantile has that as its core,” he said. “Getting to know a customer, a prospect, understanding their business and understanding their opportunities, so we can fulfill the role of a trusted advisor. We want them to look to us for strategic advice. … We want to get to the point where they’re looking to us to provide loans for financing, but more than that, as someone who can provide advice.”

Kaminski said Mercantile’s West Michigan commercial loan portfolio has seen year-over-year growth of $1.3 billion in 2016, up from $1.1 billion in 2015.

“It’s attributable to … the approach of our lending staff regarding relationship building,” he said.

Like Chemical, Mercantile customers also have shifted toward a mostly online approach to banking for day-to-day transactions, such as deposits, balance monitoring, transfers and bill pay.

“We were founded 20 years ago here in Grand Rapids, and our philosophy was one of limited bricks and mortar from the beginning,” Kaminski said.

“A lot of people say, ‘I don’t have the time to go into the bank; I’d rather do it in the comfort of my own home.’ We knew technology was going that way, and it’s played out, so we were happy with what we did way back when.”

Rahn said technology advances over the past decade have helped banks become more responsive and sophisticated.

“It’s easier to talk about 10 years ago because you can see a larger contrast,” he said. “(Since then, we’ve seen) things like smartphones … the ability to pay your bills online, to check your balance, to move money back and forth, to pay other people — people pay especially has become very useful for customers.

“We have our Chemical Bank smartphone app (that) we offer our customers. You can check your balances, get text alerts if your balance drops below a certain dollar amount. The customer can establish how they want to be contacted about their account.”

Chemical also brings banking services direct to the customer in some cases.

“We offer courier service to our commercial customers as another alternative to customers having to travel to our physical branch locations. Some customers want us there every day; some want us there once a week.”

Kaminski said despite the technology platform or channel for communication, in the end, it boils down to customer service and having a relationship-based, rather than transaction-based approach.

“If you’re looking to solely grow based on transactions, you’re saying we don’t have a lot of other things to offer, such as a strong staff or good product base,” he said. “If we call them transactions, they end up being short term in nature.

“It takes a lot of work and effort to bring those clients to the bank, and if they are there for a short time, it’s not a good return on investment. It’s very disruptive for any customer to have to change banks.”

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