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James Robert Lay:
Greetings and hello. I am James Robert Lay and welcome to episode 203 of the Banking on Digital Growth podcast. Today's episode is part of the Inside Digital Growth series, where I, James Robert Lay, your digital anthropologist, commit to continue to coach and guide you and your financial brand or FinTech along your digital growth journey as you commit to guide people beyond financial stress, towards a bigger, better, and brighter future. In today's episode of Inside Digital Growth, we are going to dive into the podcast inbox where we've been getting some really good questions from listeners around the world. And my team, they've done a fantastic job of grouping these questions together to provide you with clarity around a specific area of focus. But before we get too far, if you have a question that you'd like to gain clarity around, text your question to 415-579-3002, that is 415-579-3002. And my team will make sure that we get it, you get an answer in an upcoming podcast.

James Robert Lay:
So let's jump into today's four questions framed around a focus on niche banking. Now, I view niche banking as an emerging trend that will continue to grow an adoption as a competitive strategic advantage for leading financial brands in FinTechs over the next three to five years. Niche banking is in fact one of my favorite topics to talk, to facilitate conversations around in strategic training workshops for financial brands in FinTech, their marketing teams, their sales teams, their leadership teams, who are members in the Banking on Digital Growth Program. Niche banking has also been a topic on the podcast. We've had some really good conversations with others. And in fact, I'll be speaking about niche banking, niche growth opportunities to hundreds of credit union leaders attending the CU Leadership conference in July.

James Robert Lay:
So the first question on niche banking is framed around a dear listener who wrote in and stated, "As credit unions and community banks seek to spin off new niche banking products or brands, what should we be thinking about at our organization?" They continue, "How should we go about finding and validating a viable market segment?" And they wrap up asking, "Should we start by looking for niche needs in our own customer base, or should we be using market research to look outside?" This is a fantastic question to get today's thinking started with, and I want to break this down first. There is a tremendous opportunity, really specifically for credit unions and community banks, even FinTechs. But I would say for credit union as a community banks seeking to spin off niche banking products or brand, simply by identifying common people's pain problems that cause common people pain. Let me say that again. The opportunity is for financial brands and FinTechs to stop, to pause, and to identify common people problems that cause common people pain.

James Robert Lay:
And you can do this yourself through research framed around an acronym that we teach, where we encourage financial brands and FinTech to go all in on common people problems that cause common people pain. And when you go all in, ALL is an acronym where number one, A, asks real good questions that go beyond the obvious. And there's some skill that comes from practicing asking really good questions. I've always said one of the competitive advantages in a digital world is to get really good asking really good questions. Number two, the L, the first L in ALL, the acronym, is to listen to what people are saying, but more importantly, listen to what they are not saying. And then that brings us to point number three, the second L in ALL, A-L-L, learn through observing people's behaviors, because people often will say one thing, his is why I think focus groups are a waste of time.

James Robert Lay:
And I'm really big on observational research to tap more into the thick data, to get into a person's why, but in a one to one environment, that way group think doesn't take over and influence the other eight, nine, or 10 participants in a focus group. When it comes to where niche banking opportunities might be found, I like to defer to the wisdom from Wayne Gretzky, because he shared once, it is important to skate to where the puck is going, not to where it has been. And this is in reference to do we look inside for niche opportunities or do we look outside for niche opportunities? Research can begin internally, looking for common patterns, common patterns framed around common people problems causing common people pain. You can look internally within current customer sets, or a member base if you're a credit union.

James Robert Lay:
But the big question to consider is where will future growth come from, where will future growth be found? And if you're looking internally, is it there? I don't know. It's an important question to consider and think about. And furthermore, when you're looking internally or externally, are you even fishing in the right pond to begin with and could the pond that you're fishing in, could that pond eventually be over fished? Another concern when looking at and considering a current customer base or member base is scale. So instead of fishing in a pond, the current pond that you've been fishing in, should you consider possibly fishing in a larger lake, or perhaps even going and finding a blue ocean where there is a sea full of opportunity?

James Robert Lay:
However, it is important to keep in mind, when it comes to niche, when it comes to niche banking, you are fishing for certain kinds of fish, and really be careful to not cast a too wide of a net, trying to catch everything as this would sink your boat. It's just within an ocean or a sea of opportunity. There are even more of the same types of fish that are available to be caught than in a local lake or a local pond, which is where my thinking is framed around. There's a vast amount of opportunity for community organizations, community institutions, to consider larger lakes, or even blue oceans of opportunities, looking outside the traditional community. And that's because community has been redefined. Community goes beyond zip code, it goes beyond counties, goes beyond cities and states even, borders. Communities can now be found digitally, and established digitally, around common purpose, around like minds, values, aspiration. The FinTech has done a tremendous job of this when it comes to their purpose, their positioning framed around the environment.

James Robert Lay:
And if you haven't checked out aspiration... And I wrote about aspiration in Banking on Digital Growth, I highly recommend you go to aspiration.com and consider how their niche, their niche banking opportunity, has a large enough lake, or maybe a blue ocean of opportunity, but it's not for everyone. They're not trying to catch all the fish in the sea. Let's move on to question number two as another listener writes in and notes, "I would imagine starting a niche bank or banking solution is more than just about basic products with a new label slapped on it." They ask, "Why must my leadership team truly understand the market and then offer unique products that specifically meet those needs?" Great question. First off, I agree, 100%. Simply slapping a new brand label on a niche banking solution.

James Robert Lay:
If you remain in the status quo, operationally speaking, within a financial brand, an incumbent, when you slap a new brand label on a niche banking solution, it's the same exact exercise as putting lipstick on a pig. Not only, and we're going to come back to the point of community institutions, not only must a credit in our community bank truly understand the market they're looking to create value for, they must, many times, and I would say 99% of the time here, they must transform their thinking internally to not let their historical perspective, their historic culture, their historic processes, their legacy mindset, get in the way, be an impediment for future growth for this niche banking brand or product. I have seen this happen, I've experienced this firsthand where a community organization, very successful, very successful organization, wanted to journey down a path of niche. And they launched a niche banking product outside of their corporate brand, but it was the legacy mindset of the corporate brand that was an impediment to the growth of the niche banking brand.

James Robert Lay:
And there's no one to blame for this. It was a lack of clarity. It was a lack of understanding for what it really would take to launch a niche banking brand. And there was also unrealistic expectations of the value that this niche banking brand would create within a very limited period of time. Well, the good news is is through some training, through some education, through some resetting of expectations, this niche banking brand continues not only to survive, but is beginning to thrive because it's just a different operational mindset than the historic model that incumbent financial brands have been used to operating around. Furthermore, there's some good news that through a focus on a niche market, you have the ability, as a financial brand or as a FinTech, to go really deep when the vast majority of other brands have historically gone very wide when it comes to market positioning.

James Robert Lay:
Because when a brand commits to go deep, this is when they truly begin to transform themselves to think beyond the here and now, think beyond their internal perspective, to take an external perspective by understanding the common people problems that cause common people pain within a specific niche market. And from there, the brand can begin to craft and create cures, solutions, prescriptions, that ease the pain of the people within those niche markets. Furthermore, it's not just crafting prescriptive products and positioning and messaging, but really, success growth comes from truly knowing a market's common pain points, because that makes it far easier to produce content and to promote content that helps first sell seconds, that builds trust, that makes deposits in the trust funds of consumers' minds within the niche market to ultimately build a community of like minds. Because once again, community has been redefined beyond the physical, tangible world to where community now resides in the hearts and minds of people.

James Robert Lay:
Let's move on to question number three. The listener simply ask, and I like this question, "What sort of technologies do we need when starting a niche bank or niche banking product?" I don't want to go too far down a rabbit hole of technology for the sake of time, because we could really spend a couple of hours having a very healthy dialogue and discussion. But when it comes to technologies, I think mindset trumps technology here, and here's why. Financial brands that get the closest to the people in the niche markets that they are looking to create value for, those financial brands that get closest to the people through a collaborative, and that's the keyword, through a collaborative, creative process will be the ones that win, because it really should be the people within a niche market that provide perspective into the technologies, a financial brand or FinTech, can provide to solve the common pain points of common people.

James Robert Lay:
And these technologies, of course, will vary from whether it is a B2B niche, a B2C niche, or even a B2B2C niche. And I think there's some really fascinating opportunities there when it comes to B2B2C through the lens of open banking and open finance. Furthermore, opportunities exist here and really begin to grow exponentially when it comes to technology. But I think it's important that we simplify the technology perspective because there's an abundance of technology available to bring together, to solve common people problems causing common people pains. But let's come back to, really, the three common people problems that we have identified, reflecting back now on 20 years of research and conducting now, at this point, probably close to 1500 digital secret shopping studies, where we look at the positioning of financial brands, of FinTechs through the lens and through the eyes of real consumers, talking through feelings and emotions. And very simply defined, the three common people problems that transcend all niche audiences, that transcend all niche communities is people want to feel three things.

James Robert Lay:
They want to feel healthy, they want to feel wealthy. And wealth does not mean being a bazillionaire. They just don't want to have to worry about money and finances and the stress that comes from that. And they want to feel happy. And the problem, when you look at, really, solution, crafting solutions, crafting cures, the problem with all three of these points, whether it be health, wealth, or wellbeing, health, wealth, happiness, the problem is financial stress, for consumers, for people, as well as for business owners. Financial stress is the number one factor, it is the number one problem standing in the way of realizing these three hopes, these three dreams. I want to feel healthy. I want to feel wealthy. I want to feel happy. Health, wealth, wellbeing. And when we start simplifying complex problems down into what are we really solving at the end of the day, we want to make people feel healthier, we want to make people feel wealthier, we want to make people feel happier.

James Robert Lay:
I truly believe financial brands and FinTechs have the ability to do that because there are multiple studies available that show the connection and correlation between a person's physical wellbeing and their financial wellbeing. It shows the connection and correlation between a person's mental wellbeing, their happiness, and their financial wellbeing. Transform a person's wallet and you can truly transform their life. And that's why one of the greatest technology opportunities I see here is to provide coaching. It is to provide guidance, it is to provide insight beyond just offering commoditized, mobile banking and bill pay and remote deposit capture and we're going to pay you two days earlier. I mean, it's all table stakes now. The greatest opportunity is to use technology for coaching, coaching that can be further enhanced through financial data to provide insight, to provide guidance that truly transforms people's actions, their behaviors, their habits that are deeply rooted within their belief systems and structures, their personal relationships that they have with their money.

James Robert Lay:
Until we start working and solving that problem there, the future becomes the predictable past. Because people's financial problems, struggles, challenges for many times are rooted deep within belief systems and structures that they might not even be aware of. And the way that we bring awareness to that, it is through coaching, it is through guidance, it is through insight and using technology as a tool to facilitate these activities. Okay., Last question for today's show is about talent as one listener ask, "What about talent?" Many niche banks such as those who are serving doctors or dentists or musicians, they have at least a few people from that particular field within the C-suite. So the question that this dear listener asks, "Would you say there needs to be some internal personal connection or someone in the community that identifies with these market segments as an expert?"

James Robert Lay:
The short answer is absolutely. Niche banks, niche financial brands must attract talent from the niche markets they're looking to tap into as this empowers them to build a brand around knowledge, to build a brand around expertise. And once again, not just another commoditized financial product, packaged up for a niche market, made pretty putting lipstick on a pig. So attracting talent from a niche market provides, really, a perspective that is rooted deeply in what we call banking on expertise. Banking on expertise will be my third book, and I'm putting it out there, due out 2025. Banking on expertise provides an opportunity to position around the production and the promotion of thought leadership, of thought leadership content, think podcasts, videos, articles, white papers, eBooks, even books for that matter. And I'm so encouraged by this because just the other day, I was facilitating a workshop for a smaller asset institution, community based, that is now making a nationwide play into a very niche market, going B2B2C.

James Robert Lay:
So it's value creation on both sides. It's value creation for businesses within this niche market, it is value creation for consumers that buy from businesses within this niche market. And one of their leaders mentioned in this conversation, "We've talked about being a thought leader, but we really don't know how to do that." And I said, "The fact that you're saying this really gets me excited because not many traditional or incumbent financial brands, yet alone community financial brands, are thinking about this, yet alone deploying thought leadership thinking." They are not banking on expertise, yet within the proverbial four walls of their organization, there is a vast amount of knowledge, there is a vast amount of expertise that is waiting to be shared, that must be shared because it is through the sharing of knowledge, it is through the sharing of expertise, particularly within a niche vertical, this is how a niche brand brings to bear in the marketplace, knowledge, expertise, providing a path for them to level up beyond commoditized positioning and promotion of the same great rates, amazing service and lookalike laundry list of product features every other financial brand promotes.

James Robert Lay:
This is why I am so passionate about niche markets. And if you look ahead to the future, what does that future look like? Whenever I was working on my presentation for July, then I'll share some of these insights deeper with hundreds of credit union leaders at the CU Leadership conference out in Vegas, one of the things that I was thinking about was bringing the future into the present moment. I see a future where a community financial brand has the potential to have a portfolio of niche, niche banking brands. Think of this as like a boutique play. These are like more of boutique brands, so we can learn a lot. And I do this, I like to look outside of the industry to learn a lot of what's going on, how can we bring this thinking back inside the industry to transform our thinking? Because when you look outside the industry, that is how you begin to see things differently. And when you see things differently, you begin to think differently.

James Robert Lay:
But just because you think differently doesn't mean you're going to do different, you must feel different. And that's why some of this stuff takes time, because it's the feelings, it's the emotions, it's the desire to transform it, it is the desire to do something different. That must be far greater than a desire to remain the same, to stay stuck in the status quo, to stay trapped in the cave of complacency. And if we look out towards the future, community institutions have the potential to have a portfolio of niche banking brands, boutique-y brands that are creating value through thought leadership, through coaching, through guidance. Because it is through that coaching, it is through that guidance, it is through that thought leadership, that is how they rise above the commoditization of lookalike features. That is how they differentiate in a sea of sameness.

James Robert Lay:
This has been a lot of fun. And as always, I appreciate the questions that we do get from you, the dear listener. They really help to keep me on my toes. They challenge me to think even more deeply about the questions that you have on your mind. And every single time I do an episode like this, I always see things a little bit differently than how I saw things before. And that in turn makes me think about things a little bit differently than how I thought about them before. So if you're thinking about a digital marketing or sales or leadership question that you would like to get clarity and insight around, text me that question right now, text it, pick up your phone, 415-579-3002. Text that question to 415-579-3002, there are no bad questions. So as always and until next time, be well, do good, and make your bed.

Brief Summary of Episode #203

Niche banking is an untapped opportunity for financial brands to cure common problems for common people.

By creating value for those consumers with specialized needs, banks and credit unions can set themselves apart from the tedious template of old brick and mortar.

I see a future in which financial brands resemble exclusive boutiques more than legacy institutions.

In this episode of our Inside Digital Growth series, I answer questions from you, the dear listeners, about niche banking.

It’s time for banks to think smaller when reaching out to a viable market.

Picture niche banking as sport fishing with a single hook as opposed to commercial fishing with large nets. Are you trying to catch every fish in the ocean, or just the ones who appeal to your brand?

Which brings us to the branding issue - making your brand appealing to your ideal customer is the name of the game.

Lastly, we’ll dive into the technology needed for niche banking.

But is tech really the answer for your niche banking needs, or merely a tool to support the people behind the scenes?

So, is niche banking the key to unlocking the cure for financial stress?

 

Key Insights and Takeaways

  • Growth opportunities and finding a viable niche market (3:58)
  • Rejecting legacy rebranding in favor of transformation (11:34)
  • Technology as a coaching tool for establishing a niche (16:23)

Notable Quotables to Share