Business 2018: Digital tools help local banks keep up with the big guys

The rise of online and mobile banking has revolutionized the way people manage their money, offering more convenient access to accounts, better security and a way for local banks to compete with national chains.

“This has leveled the playing field for local banks, the fact that we have access to this technology,” said Paul Benjamin, head of marketing for Greenfield Savings Bank. “Before, small banks couldn’t offer nationwide usage, now they can.”

Today, there are few things bank customers can’t do online — depositing checks, checking balances, paying bills, transferring money and opening accounts can all be done from a smartphone.

“It’s funny, a misperception by some consumers is that big banks have all the tech and little community banks don’t,” said Lynn Starr, executive vice president of Easthampton Savings Bank. “That’s not true. We have everything the big banks have.”

Daniel J. Forte serves as president and CEO of the Massachusetts Bankers’ Association, a trade group representing 150 banks across Massachusetts. He says that for decades, partnerships between smaller banks and software companies developing their online interfaces have been vital for helping smaller banks keep up.

“It’s been much more efficient to use these major providers,” Forte said. “I think community banks have been a very quick follower from the tech standpoint.”

While large banks invest in their own research and development, smaller banks partner with software companies like Fiserv and COCC (formerly known as the Connecticut Online Computer Center) to manage the online and mobile services.

“It’s all about the vendors we partner with,” Starr said. “Unlike Bank of America we can’t employ large tech staff that create own tech.”

Across the board, local banks interviewed by the Gazette are growing either through physical bank branch expansions or in the number of customers served.

Sheila King-Goodwin, senior vice president of retail for PeoplesBank, said many new customers are leaving much larger banks to join the Holyoke-based bank.

“They are coming because the value we provide with our products and services, that we provide with online and mobile, is absolutely on par with what those banks can provide,” she said.

PeoplesBank saw online users increase by over 50 percent in the past three years, and mobile app users increase by 135 percent. The bank serve about 74,000 customers through 17 branch locations in and around Hampden and Hampshire counties.

“You can definitely see a shift in customers performing their everyday transactions online,” King-Goodwin said.

Florence Bank has seen an increase in both the number of transactions occurring online and in customers opening accounts online. In the last six months, the bank saw more accounts open online than in the history of the bank, with 25 percent of those accounts opened by smartphone, according to a Nov. 28 interview with president and CEO of Florence Bank John Heaps.

“Having state-of-the-art electronic banking in the online and mobile environments, in addition to exceptional face-to-face service, allows Florence Bank to fully meet our customers’ needs and expectations,” Monica Curhan, senior vice president and marketing director for Florence Bank said in a statement. “Customers can do almost anything they do in a branch on their phone these days.”

Florence Bank serves almost 50,000 customers through 10 locations with roots in the Pioneer Valley dating back to 1873. Last August, the bank opened a drive-up ATM in West Springfield and more recently a new “smart” ATM location on the Pleasant Street rotary in Northampton.

“We’re growing technology-wise and not giving up the branch,” said Denise A. Coyne, executive vice president and chief operating officer of Greenfield Savings Bank. “A lot of people say that the branch is going away, but we don’t see that. Our transactions are steady and people like coming to the branch.”

More than half of Greenfield Savings Bank customers use online banking, with 30 percent of those customers accessing their accounts through a mobile device. The bank has nine locations in Franklin and Hampshire counties, and processed $1.2 million in mobile transactions alone last year.

PeoplesBank customers, at least, still prefer opening accounts in person, with 97 percent of accounts still opened through branch locations. A generational gap exists between customers banking primarily online and those who prefer visiting branch locations, so banks are taking efforts to preserve both options.

“One of the things we’ve noticed over the years is that different customers like to use different channels,” Starr said. “In the last five to 10 years it’s really started to evolve very quickly, so you have to be nimble and adaptable.”

Easthampton Savings Bank, established in 1869, has 10 branch offices in Hampden and Hampshire counties, and recently opened a new location on Sargeant Street in Holyoke. The bank oversees $1.2 billion in assets and over half of its checking account customers utilize online banking.

With the rise in online banking comes some natural concerns over security, exemplified by last year’s Equifax breach, and online identity theft.

“It’s important that we vet those new technologies to make sure they work well, are easy to use, and are safe and secure,” Curhan said in a statement. “Any service we provide goes through an extensive security review and thorough testing prior to launching to our customers.”

Mobile and online banking offer customers greater security with the ability to monitor their account activity in real time. Some mobile apps allow users turn their debit card on or off, or restrict allowable purchases by merchant or zip code.

“We’re monitoring all the time, and if something doesn’t look right we will call the customer to see if they did the transaction,” Coyne said. “We’ve invested a lot into that.”

Banks have been exploring different forms of biometric security features, like fingerprints and face recognition, too. PeoplesBank, Florence Bank, and Greenfield Savings Bank already use one form of biometric identification — a thumbprint as a password.

“Biometrics, that’s something we have to take the time to look at and apply thoughtfully,” said King-Goodwin of PeoplesBank. “There’s so many different directions you can go into right now with voice biometrics and facial recognition.”

Berkshire Bank oversees 113 locations serving 400,780 customers throughout New England, with 15 locations in the Pioneer Valley. With one of the region’s largest customer bases and a host of online services, security is a priority.

“People have to really be able to see their money and see their balances in the event they need to react,” said Ryan Shorette, vice president and regional manager for Berkshire Bank’s southern New England region.

Still, when customers have tricky financial questions, they like to meet financial professionals face-to-face. In the last eight years, Florence Bank saw a 25 percent decrease in visits to branch locations, according to Heaps. Instead customers are visiting bank locations for information about services like applying for mortgages, loans, managing trust funds and opening business accounts.

“If you’re looking for a mortgage or a home equity loan, you really need to have somebody guide you through that,” Shorette said of Berkshire Bank. “There’s so much involved with all the new regulations, that’s where physical branches come into play.”

While online use has boomed, it has not necessarily caused physical locations to close. According to Forte, there are 50 percent fewer banks in Massachusetts today than there were in 1990, however, the number of physical bank locations has increased by 11 percent.

“There are fewer banks today, but they’re stronger and more innovative,” Forte said. “Over the decades the technology has become more important to drive business and keep the costs down, but that doesn’t mean branches will become obsolete.”

Massachusetts is a friendly state for smaller banks, with a strong economy and a history of community-owned mutual banks that aren’t easily bought out. In the last decade, however, the number of overall branch locations has declined. In 2009, there were 2,228 bank locations in Massachusetts, and by the end of 2016 there were 2,182.

“We have seen a leveling off and a little bit of a drop,” Forte said. “I do think particularly with the large institutions you’re going to see more consolidation of branches.”

Outside of personnel expenses, real estate is one of the biggest expenses for banks, according to Forte. He thinks in the future customers will start to see more single kiosk style banks with virtual tellers, or branches sharing space with coffee shops or grocery stores.

“It has to be consumer centric,” Forte said. “If there are economies of scale that come out of it, great, but any product offered by any industry that is only self-serving for the company or industry itself is doomed to fail.”

Greenfield Savings Bank installed two virtual teller machines in downtown Amherst and Northampton last spring, and plan to implement more. The machines work like “smart” ATMs in that users can cash checks, make deposits, check balances and pay bills, but with the option to speak to a teller remotely for assistance.

“When we open up these branches, we have fewer staff, but that’s another staff member located in our call center,” said Carmen Bassett, senior vice president of Greenfield Savings.

Virtual tellers work from a call center in Turners Falls and can service multiple teller booths in different locations remotely, Bassett said.

Additionally, banks are expanding the services they offer, with financial management

“It’s not just banking anymore,” Forte said. “It’s really more financial services delivery. Some banks are getting into insurance sales, annuity sales and trust management.”