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  • Amber Buker

Getting a seat at the table with ag banking clients

Banks provide about half of all loans to the agriculture sector, and about a third of all banks claim to specialize in lending to ag customers. Yet scant attention has been paid to creating dedicated programs for deepening relationships with these clients in comparison with the other sectors banks serve. In addition, banks continue to face steep lending competition from non-banks such as the Farm Credit System. These circumstances moved a small group of banks to explore the needs of agriculture clients and paths to differentiation in a recent (co)Lab session led by the Alloy Labs Alliance.


Much of the (co)Lab session centered around understanding the network of experts that agricultural clients turn to for advice. Typically, farmers turn to veterinarians, nutritionists, tax professionals, and consultants for regular business advice. Farmers turn to these experts often, sometimes on a monthly basis. They look to them for data, financial advice, and other expertise. In contrast, ag customers typically go to banks for limited support; often, they seek support solely to ensure they’re meeting the minimum requirements to secure funding.


Banks want a seat at the table that will enable them to deepen client relationships and ensure that the ag operation’s business stays with the bank throughout the generations.



Because data is something that farm consultants offer and banks typically don’t, it would have been tempting for the bankers participating in the (co)Lab to identify building a technology-enabled tool as the solution to their problem. But the banks went deeper and discovered the most obvious solution isn’t always the right one.


Academic research and customer interviews uncovered that farmers often lack intrinsic motivation to use formal financial tools or to engage with multiple farm management systems. What’s more, they may not trust a system’s ability to make accurate recommendations. Simply building technology wouldn’t be enough to move the needle if farmer’s weren’t likely to use it.


When the banks took a step back, they realized they might already have the resources they needed to take on some of the roles farmers were looking to outside advisors for. A bank’s most seasoned lenders, they reasoned, could have the expertise needed to become relevant, frequent advisors to ag clients if the bank had a way to identify and harness that expertise.


This hypothesis begged a few important questions, though. If banks already have this expertise and claim to differentiate their service on relationships, then why are ag customers rarely turning to them for advice today? The banks identified some other potential roadblocks to this solution: if the advice they could provide was valuable, would there be a way to scale it? Could they offer it without running afoul of lender liability rules? And did the proverbial “table” they wanted a seat at to give that advice exist, or would they have to build one? And could they do that in a way that generated a sufficient financial return?


Together, the bank participants developed a set of hypotheses about their ability to deepen relationships via the talent they already had. They developed a series of Fast, Iterative, Responsive Experiments they could conduct in order to test their hypotheses. And they were off to the races.


The Alloy Labs Alliance will reconvene this growing group of bankers and help them continue to define a workable solution through (co)Labs, the Alliance’s dedicated Ag Banking Workgroup and partnerships with emerging technology companies in its upcoming Concept Lab accelerator program. To join in the conversation, reach out to jason@alloylabs.com. Because when competition looks different and more threatening than the institution down the block, banks are better together.

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