Compliments to banks for engaging with entrepreneurs

By October 16, 2014Retail in the Know

There’s a term popping up a lot in banking these days, “engagement.” It defines a connection that goes deeper than “acknowledgement”, even beyond “satisfied” and pierces through to intimate feelings where “contentment,” “confidence,” “belonging,” and even “love” live.   This is the realm where banks need to go, no matter how uncomfortable it might be for some to get cozy with such esoteric, even “touchy feely”  things.  One reason to try – engagement can lead to profit, growth, and bank strategy achievement.

The American Banker put together a list of nine tech incubators backed by banks in their 10/16/2014 edition. These are US and International banks creating opportunities for startups.

I would characterize this as “engagement.” Entrepreneurs for the most part have not been given a lot of love from banks. A small percentage of entrepreneurs will change the world, while many others will struggle financially.  That’s simply more risk than bank managements want to take and more than shareholders and board members want them to take.

So why the engagement with entrepreneurs? Because banks are starting to see the value of engagement.

  1. It could advance the bank’s marketing strategy. Citigroup’s involvement for instance helps entrepreneurs, but is directly tied to finding new financial smartphone apps that they might use to augment their consumer experience.
  2. It provides excellent PR. Every dollar needs to be spent wisely, and PR efforts are no exception. They need to do more than generate buzz (which this does big time), it has to advance the strategic plans. Reaching out to entrepreneurs in a way that advances strategy creates “wins” all around. The entrepreneur community will love you. The State will love you for helping catalyze new businesses. The nation will love you for advancing this important source of growth and jobs for the nation. Finally, your shareholders will love you if this ultimately leads to some exciting long term benefits.

Lack of creditworthiness did not stop these 9 banks from diving in. Take Wells Fargo for instance – their “Innovation Wagon” gives capital and mentorship, staying with these companies through a true incubation period. It helps the entrepreneurs, endears the bank to the startup community, while giving Wells a front row seat with any great discoveries that could help the bank.  Pretty smart.

Community banks can get into this too. Gorham Savings Bank in Maine, just under $1 billion in assets, started a program two years ago called Launchpad for example. They welcomed local entrepreneurs in to join in a “shark tank” kind of program with the potential to win $30,000.  The bank is receiving 300 to 400 applicants a year, and have connected with 20 to 30 nonprofit associations around the State that support Maine’s rich entrepreneurial community.  This was a PR bonanza worth every penny, and cost less than a major advertising campaign.  The question from here is how to further engage with these new connections to turn them into even more strategic benefit.  The key will be continuing engagement.  (Peer to Peer lending anyone?)

Engagement is the new secret sauce.  Banks need to be extremely careful with cost and branch cutting that impacts this critical ingredient in the new internet connected social world.  But those who think seriously about engaging their communities can start enjoying some good old fashion growth in relationships.

Photo Credit © Can Stock Photo Inc. / Nevenova