?Community banks need to invest in digital, analytics to meet customers' needs

?Face-to-face interactions will always be essential, but customers expect new channels

?Cost of investing in analytics is "unbelievably inexpensive"

Seacoast Banking Corp. of Florida has dedicated considerable resources to developing digital channels and harnessing customer data. A "digital transformation" has allowed the $4.77 billion bank to organically grow its customer base in a fairly cost-effective manner, while layering on a series of acquisitions.

S&P Global Market Intelligence recently spoke with Jeff Lee, chief marketing officer at Seacoast, about that effort. Lee came to Seacoast four years ago with a background in digital and analytics, and he has used that experience to change the way the bank interacts with customers.

The following is a version of the conversation that was edited for clarity and length.

S&P Global Market Intelligence: How did Seacoast decide to invest in digital channels and analytics?

Jeff Lee: Up until 10 years ago, convenience was defined by being on every corner of the neighborhood. Things have really started to change, and convenience has been completely redefined. Our aim was to serve all of our customers' needs and not be marginalized because the customers' expectations were being changed dramatically. The choice was, do you use the tools that are available to you, do you use the data that you already have, or do you let yourself become really isolated and only able to meet one thing — just chasing commercial real estate loans for example.

When I joined, I was struck by the opportunity. When you're a bank this size, you have an enormous data set that is very clean and all in one place. We have one core provider, whereas regional and larger banks have multiple core systems and platforms. It makes it hard to harness all that information in a way that is good for customers. I found that just wasn't the case for a bank of this size.

Did you build software in-house or look to third parties to analyze what you have? Is it a one-time cost or is there ongoing spend?

Once we confirmed that we had good clean data and understood what it meant, the next step for us was using the software, not building but buying. We bought software from IBM and then made an investment in analytics. The investment in analytics was making sure you have the right people. The software is not that expensive, but you have to have the right folks who understand the business and know what to do with it. The ongoing costs on an annual basis are unbelievably inexpensive. We've recruited people out of credit card companies and large banks, and they are actually empowered to move a lot faster and use their craft in the environment where the data is accessible.

With the focus on digital, your deposits per branch have risen to $75 million from $50 million four years ago. Similarly sized peers are about $59 million per branch. You are able to capture more business with less physical infrastructure.

We've focused on making customers understand how convenient digital tools are. As an industry, we talk a lot about how important millennials are, but I was surprised with the adoption we saw among customers age 50-plus. We didn't push them. We introduced and educated them, and had fun with it. Our mobile penetration among customers 50-plus is already 17%. If you go back four years ago, it was zero. Our business from a customer standpoint is on demand. Customers expect it to be on demand just like everything else, but the banks don't really think that way. In today's world, we're arguing that you've got to be that way.

Beyond catering to customers, tech can make you more efficient. We just conducted a mobile banking survey and found the vast majority of all branch transactions were deposits. Those transactions are expensive at a teller but very cheap through digital channels. How else beyond ease of use have you been able to drive business?

A good example is our focus on interchange income. Our debit card program brings in just under $10 million, and we've been able to grow that by using data. We can look at customers that have activated cards but have never used them. We run campaigns reminding customers of the convenience of debit, often incenting them with a coupon or something of that nature to capture more share of wallet. A lot of what we do is take that data and help our sales associates be better informed when talking with the customer.

What would you say to community bankers who believe their focus on high-touch service and customer relationships is more important than utilizing technology? Why would they need to consider investing in digital and analytics?

There are moments every year where that face-to-face interaction is everything. There's a complex problem, and the customer needs advice. That's the best aspect of community banking. But we also know that most of the activity is routine. Look at the behaviors in your own life. Who would have thought that every airport would have interactive kiosks and it actually would be a better experience than standing in line? Who would have thought with Amazon Prime, I can order pretty much anything I want without going to the store. I don't think banks are going to be immune. I wouldn't say this is an either/or decision. Our mindset is let's take the best of both and serve that customer the way they want to be served, whether it's routine on demand or a complex problem that we're working together to solve.

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