By Dan Linehan
The bank is hardly alone in its need to adapt to digital disruption, but WSFS Financial Corp. is standing out for its novel way of paying for the transition.
The Wilmington-based bank has found an elegant solution to funding its technology upgrades that relies on its merger with Philadelphia-based Beneficial Bank, which closed on March 1.
The combined bank will close a quarter of its branches, saving about $65 million over five years. Instead of putting all of these savings toward the bottom line, as most such deals would, it devotes half of them to its technology transformation.
The decision to invest in technology rather than accrue more profit may have contributed to the initial negative reaction of investors. In the week after announcing the acquisition in August, WSFS’s stock was down 8 percent.
But in the long term, this funding mechanism is likely to help the bank compete against the major players, said Russell Gunther, an analyst at D.A. Davidson who has covered mid-Atlantic banks for 13 years.
“I think, over time, this is going to prove to be a very well-received transaction,” he said.
Lisa Brubaker, executive vice president and chief technology officer at WSFS, talked to Delaware Business Times about the deal and its place in the future of banking.
Old rules, new expectations
The elements of convenience that have changed other industries — like fast and cheap delivery, one-click purchasing and easy returns — have changed expectations in banking, too, Brubaker says.
But bankers work under regulations retailers and tech companies don’t. For example, she said the need to ask for extra information from customers “translates into a less elegant experience online.”
“There’s a broad range of information that we need to gather from customers to make sure we know who we’re doing business with,” Brubaker said.
And, in a time when international thieves and even rogue countries are getting into the digital theft racket, banks also have more to lose. Detecting fraud, a decision often made based on where purchases are made or what’s purchased, isn’t easy with globe-trotting customers.
“We’re protective, but we also have to be dynamic enough to be able to react to the customer,” she said.
These are the challenges faced by every bank. At WSFS, whose motto is “We Stand for Service,” the real struggle is to cultivate relationships through digital offerings that it strives to build during face-to-face interactions.
To do that, the bank has to collect information about its customers until it can infer what they want before they ask.
The need to collect information about customers complicates the decisions around participating in popular third-party banking products, like Venmo and Zelle.
“You never want to delegate the customer experience,” she says, but it’s more acceptable in utilitarian
transactions like person-to-person payments.
WSFS is more likely to build its own products when the data it collects gives them important insights about customers. Armed with more information, the bank could become something like a personal finance advisor, giving customers opportunities to reach their goals faster through investing.
The most significant consumer digital metric for WSFS is adoption and engagement rates. For example, they’ll collect data about a service and use it to tweak the details, like where and when on the app it should appear.
Even amid this digital decision-making, the bank is looking at how customers use its physical locations.
What will branches be for?
As its purely transactional exchanges — deposits, withdrawals, and the like — move online, what is the role for the bank’s physical locations?
First, while one study found four in five customers use digital channels with a bank, there are two caveats. First, of course, that fifth customer needs a place to go. Moreover, the bank’s data suggests even its customers who prefer the website for some tasks don’t use it exclusively. When they have a nuanced task or a thorny problem, customers often want to look someone in the eye.
“We see the branches leveraging our associates around advices and problem resolution,” Brubaker said.
The decision about whether to do business in person or online always resides with the customer, she said.
“We won’t force people to use digital options and that’s why we think branches are and will always be important,” Brubaker said.
Aside from predicting branches will be around for a long time, making pronouncements about the future is difficult. The only certainty is the need to be ready.
WSFS is giving itself five years to complete its delivery transformation plan. A successful transformation puts it on par with its larger competitors; rolling out ambitious, ground-breaking products may be beyond the reach of a mid-range bank.
“Your best-case outcome is to be able to provide a product for both commercial and consumer customers that is competitive with what the big boys are offering,” said Gunther, the analyst.
That may mean offering services like online video chat with agents and end-to-end digital consumer loans.
In some ways, the goal isn’t a product, but a state of readiness. That means being able to adopt the next major innovation or adapt to the next cyber-attack.
Gunther says the acquisition of Beneficial will serve these goals.
“WSFS is being forward-thinking in this regard; they were able to pencil out what they needed to provide a best-in-class delivery system and an experience for both the commercial and digital client.”