Digital banking has given customers a clearer picture of how they are managing their finances. Some may soon expect that kind of transparency in the way banks lend their deposits.
Several studies have found that millennials are either apathetic or distrusting of the banking industry. But some say that one of the ways banks — specifically impact-based banks — can connect with young people is to do a better job in sharing the work they do in their communities.
"The new competitive advantage is not just going to be having great technology. It’s going to be great tech and why should I care about your business," said Megan Hryndza, co-founder and chief executive of Mighty.
Mighty is an early-stage marketing platform startup that aims to help consumers compare banks based on social-impact performance. The platform will rely on lending stats from quarterly bank call reports, bank customers and other sources to showcase the effects banks have had on their community. Mighty is currently testing its product with two banks.
By illustrating what sets one bank apart from its peers, Mighty hopes to inspire consumers to pick their banks the same way they might pick a coffee shop because it uses fair-trade beans or a retailer that only sells American-made apparel.
"We are excited by what we see as a long journey and long commitment to help increase appreciation for diversification in banking," Hryndza said.
Southern Bancorp in Arkadelphia, Ark., is one of the banks working with Mighty. The $1.2 billion-asset bank hopes the platform draws in deposit accounts — particularly from millennials — and potentially in new markets.
"We hope to attract customers who align with our mission," said Darrin Williams, chief executive of Southern. As a community development bank, Southern’s social work includes things like offering free tax-filing services and helping folks improve their savings habits and credit scores.
Picking a bank based on how it lends may seem like a niche proposition, compared to picking a bank because of the convenience of its branches, the usability of its mobile app or the rate it pays its depositors.
But it is perhaps not as far-fetched as it may seem.
According to a 2015 study by Cone Communications and Ebiquity Global CSR, 91% of global consumers expect companies to operate responsibly to address social and environmental issues in addition to making a profit.
And it’s particularly top of mind with young adults. "Millennials do value social good more than other generations," said Terry Golesworthy, president at The Customer Respect Group, a research and consulting firm.
Others have picked up on this trend, too. For instance, Amalgamated Bank in New York is in the midst of a nationwide digital push, betting that its longtime mission to serve unions and progressive politics will resonate with people outside of its geography.
Of course, the social impact has to come alongside fulfilling the table stakes.
"The majority of people want convenience," said Golesworthy. "They want good apps."
If a solid app is in place, Golesworthy sees an opportunity for a bank to win people over based on corporate responsibility efforts if the end-results are clear to the consumer. He cites Lemonade — an insurance startup that shares its unclaimed money with causes a customer selects — as a good model. "The recruitment is done by the cause," he said.
Likewise, Nicole Sturgill, principal executive advisor of retail banking at CEB, says social impact could serve as an input for doing business with a particular bank so long as that bank also meets all of the consumer's’ financial needs. As Sturgill sees it, Mighty could also help banks — that often highlight a customer in a commercial or YouTube video — strengthen the way they tell their stories by weaving in statistics.
Many U.S. banks have struggled to get the word out about their work, Hryndza said. She sees Mighty’s platform as a way to amplify their message.
"For banks that have been doing really important and impressive work for decades… It’s an opportunity to put them on a map to a population of the country that hasn’t heard of [them]," she said.
Larger banks, like Wells Fargo, have been updating the ways they digitally tell their stories. Umpqua Bank, for instance, is well-known for innovative approaches to getting its brand message out, including via a traveling art show and in running a podcast.
In fintech, some companies have baked in social missions. Aspiration donates part of its profits to charities and recently launched an online publication — Make Change — that explores where money and mission meet. Meanwhile, CommonBond launched with a social mission to fund education of needy students in a foreign country.
However, smaller banks need to improve the way they communicate their good deeds. Hryndza hopes Mighty will give mission-impact institutions a leg up.
In time, Hryndza sees Mighty as helping banks recast their image, and in turn, influencing the way someone chooses a bank. Instead of viewing a bank as a black box where money is stored, she says Mighty aims to reinforce how a personal relationship with a bank directly affects the community.
"When you bank, you are providing fuel to different markets," she said, adding this outcome is clear when someone invests in something but more nebulous when it comes to socking away deposits.
"Just like investors, I, as a depositor, am ready to know the markets I’m powering," Hryndza said.
To woo on social impact requires consumers to think about how their deposits affect other individuals or other communities, Southern’s Williams said.
"Do you know where your money sleeps at night?" he said.