To avoid an SVB-like collapse, stabilize their balance sheets and maintain depositor confidence, regional banks need to triple their investments in digital apps. This is the unwavering argument of Kazakhstan’s former deputy prime minister, former World Bank president representing Kazakhstan and financial services consultant Yerbor Olymbayev, who guided Kazakhstan through the 2008 financial crisis and led a major Kazakh bank from near bankruptcy to a $1.2 billion profit.
The need to prioritize CX
As neobanks have shown, for the modern banking customer, digital experience matters. As the era of physical branches comes to an end, local banks must pivot to meet this demand – and prioritize CX above all else.
Olimbayev’s comments came after reports that the number of vulnerable U.S. banks rose to 52 in the final three months of 2023, the biggest increase since the collapse of Silicon Valley Bank. At the same time, the FDIC revealed that delinquencies on credit cards and commercial real estate loans are at their highest levels in nearly a decade.
Last year’s regional banking crisis — the collapse of Silicon Valley Bank, Signature Bank and First Republic Bank, lenders with combined assets of $440 billion — was caused by shaky operating and risk management strategies in a challenging, high-interest rate environment.
Olimbayev told the RBI: “As Jay Powell cuts interest rates and eases the economic pressures on businesses, there is a risk that regional banks will go back to their old ways and make shaky loans with minimal risk management strategies in place. I don’t mean to scare you, but we’ve seen failures like SVB’s as a result of doing this.”
Incumbent banks need to “take a lead from neobanks’ books”
“These banks need to adopt new strategies to stabilise their balance sheets and maintain depositor confidence. To do this, they must triple their investment in digital apps and become completely customer-centric.”
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Recent reports suggest that consumers are increasingly looking to their banks for a “super app” – a tool to manage payments, money, and other daily activities all in one place. Olinibaev argues that local banks must follow this trend in consumer psychology – and to do so, they must follow the lead of neobanks.
Olymbayev continued: “It’s time for regional banks to follow the lead of neobanks, the newcomers in the field. These financial institutions have prioritized CX above all else, cultivating customer trust and loyalty. In fact, the big banks are starting to follow their lead. Under pressure from Revolut, Wise and others, HSBC has expanded its services with its app Zing, demonstrating the importance of digital experience in modern banking. JP Morgan Chase is doing the same with the launch of its media network, Chase Media Solutions.”
“Unfortunately, we live in an era where branches no longer exist. In-person banking is losing influence among consumers. Community banks must evolve. They must triple their spending on digital apps to avoid mass exodus and potential bankruptcies.”
