The Customer Effect
Inside Beneficial Bank’s business banking strategy
- Philadelphia-based Beneficial Bank focuses on in-person customer relationships to build loyalty
- Branches are an important part of its approach to keep customers, by providing them comfortable spaces to work and have discussions with bankers if they choose to do so
Gerry Cuddy, CEO of Philadelphia-based Beneficial Bank, makes house calls -- visiting customers personally, one by one. It's an approach that Beneficial, a 62-branch community bank whose physical presence is concentrated in southeastern Pennsylvania and New Jersey, is taking to keep customers. Founded by Irish immigrants in 1893 as a savings bank, Beneficial is Philadelphia's oldest. In the age of digital-only fintech players, Beneficial emphasizes real-life interactions and branches modeled like community centers. Beneficial has $5.9 billion in assets, according to the company. "In our market, there's significant brand recognition and loyalty," said Cuddy, who has been CEO since 2006. "One thing that gives us an upper hand over a lot of competitors in the market is, we'll jump in a car and see you on the same day -- that begets client loyalty, commercial referrals and personal referrals." Beneficial's approach is to focus on face-to-face community connections to build customer loyalty and attract new ones, but going forward, it's also broadening that strategy, repurposing branches as networking spaces rather than transactional centers and pursuing fintech partnerships. While Beneficial's history is rooted in consumer banking, Cuddy has overseen the bank's shift toward more profitable business banking products over the past decade, including commercial insurance and loans for equipment and real estate. It typically targets businesses that generate between $5 million and $25 million in revenue. "It was an old-line thrift savings bank that was very reactive to the customer base," Cuddy said. "It was well-operated but not positioned to grow or go forward," particularly after it went public in 2015. The bank still offers consumer banking products like checking accounts, debit cards, mortgages and personal loans. Like other medium-sized banks, Beneficial is reviewing the return on investment from physical branches and has closed 19 over the past eight years. Beneficial began to roll out community center-type branch designs it calls "campuses" eight years ago, an approach Cuddy said isn't about hard sales pitches but providing relaxed spaces where community members can gather and consult bankers if they feel the need. Bookshelves are stocked with financial literacy resources; customers can use the space to work, and community groups can reserve meeting rooms. It's an approach others like Umpqua Bank and Capital One are using to generate client loyalty and provide direct access to bankers for business clients using the spaces. Despite Beneficial's relationships with local clients, Cuddy acknowledges that digital-only startups represent a threat -- both those operating in the commercial and consumer banking space. A focus on business clients who value in-person consultations is part of Beneficial's strategy to scale, as well as an appeal to those customers who want to talk to someone. Cuddy added that keeping up with technology through partnerships -- be it through use of banking-technology giant FIS's software and embarking on fintech partnerships -- is critical for continued growth. "We're at a break point; we're not naive that we're being displaced -- all community banks are," said Cuddy. "Marcus [by Goldman Sachs] is going to take some of our savings business." Cuddy said Beneficial is in talks with half a dozen fintech startups on partnerships, some of which include white-labeling software under the Beneficial name, some in which Beneficial will take an equity stake and others which are straight-up vendor relationships. Areas being explored are loan origination, back-office technology and personal finance management capabilities. From a marketing standpoint, Mark Arnold, a branding consultant who works with small banks and credit unions, said Beneficial's locally focused brand-development strategy is an effective tactic to build continued customer loyalty. The advantage of a local connection, said Arnold, is that customers who are loyal are willing to pay more for the convenience. It's a strategy that isn't without risks, however, because compared to a larger brand, the bank's bottom line is more closely tied to the the highs and lows of the local economy and the conduct of its leaders. "The risk when you go local is that when something like a catastrophic local event takes place, you could be affected ... and if you've built a local brand around a person, and if something happens to that person -- as in, 'if so-and-so happens not to be a great guy,' that could negatively impact you.'"