Turning Compliance From an Exercise Into a Partnership

The Greek philosopher Heraclitus once observed that no one can ever step into the same river twice. If these philosophers tried to define how the financial industry works today, they might say that no bank can ever step into the same technology stream twice.

Twenty-first century innovations, evolving standards and new business requirements keep the landscape fluid — and that’s without factoring in the perpetual challenge of regulatory changes. As you evaluate your institution’s digital strategic plan, consider opportunities to address both technology and compliance transformations with the same solution.

The investments your bank makes in compliance technology will set the stage for how you operate today and in the future. Are you working with a compliance partner who offers the same solution that they did two, five or even 10 years ago? Consider the turnover in consumer electronics in that same period.

Your compliance partner’s reaction time is your bank’s reaction time. If your compliance partner is not integrated with cloud-based systems, does not offer solutions tailored for online banking and does not support an integrated data workflow, then it isn’t likely they can position you for the next technology development, either. If your institution is looking to change core providers, platform providers or extend solutions through application programming interfaces, or APIs, the limitations of a dated compliance solution will pose a multiplying effect on the time and costs associated with these projects.

A compliance partner must also safeguard a bank’s data integrity. Digital data is the backbone of digital banking. You need a compliance partner who doesn’t store personally identifiable information or otherwise expose your institution to risks associated with data breaches. Your compliance data management solution needs to offer secured access tiers while supporting a single system of record.

The best partners know that service is a two-sided coin: providing the support you need while minimizing the support required for their solution. Your compliance partner must understand your business challenges and offering a service model that connects bank staff with legal and technology expertise to address implementation questions. Leading compliance partners also understand that service isn’t just about having seasoned professionals ready to answer questions. It’s also about offering a solution that’s designed to deliver an efficient user experience, is easy to set up and provides training resources that reach across teams and business footprints — minimizing the need to make a support call. Intuitive technology interfaces and asynchronous education delivery can serve as silent accelerators for strategic goals related to digitize lending and deposit operations.

Compliance partners should value and respect a bank’s content control and incorporate configurability into their culture. Your products and terms belong to you. It’s the responsibility of a compliance partner to make sure that your transactions support the configurability needed to service customers. Banks can’t afford a compliance technology approach that restricts their ability to innovate products or permanently chains them to standard products, language or workarounds to achieve the output necessary to serve the customer. Executives can be confident that their banks can competitively adapt today and in the future when configurability is an essential component of their compliance solution.

A compliance partner’s ability to meet a bank’s needs depends on an active feedback loop. Partners never approach their relationship with firms as a once-and-done conversation because they understand that their solution will need to adjust as business demands evolve. Look for partners that cultivate opportunities to learn how they can grow their solution to meet your bank’s challenges.

Compliance solutions shouldn’t be thought of as siloed add-ons to a bank’s digital operations. The right compliance partner aligns their solution with a bank’s overall objectives and helps extend its business reach. Make sure that your compliance technology investment positions your bank for long-term return on investment.

On the Docket of the Biggest Week in Banking

Think back to your days as a student. Who was the teacher that most inspired you? Was it because they challenged your assumptions while also building your confidence?

In a sense, the 1,312 men and women joining me at the Arizona Biltmore in Phoenix for this year’s Acquire or Be Acquired Conference are in for a similar experience, albeit one grounded in practical business strategies as opposed to esoteric academic ideas.

Some of the biggest names in the business, from the most prestigious institutions, will join us over three days to share their thoughts and strategies on a diverse variety of topics — from lending trends to deposit gathering to the competitive environment. They will talk about regulation, technology and building franchise value. And our panelists will explore not just what’s going on now, but what’s likely to come next in the banking industry.

Mergers and acquisitions will take center stage as well. The banking industry has been consolidating for four decades. The number of commercial banks peaked in 1984, at 14,507. It has fallen every year since then, even as the trend toward consolidation continues. To this end, the volume of bank M&A in 2019 increased 5% compared to 2018. 

The merger of equals between BB&T Corp. and SunTrust Banks, to form Truist Financial Corp., was the biggest and most-discussed deal in a decade. But other deals are worth noting too, including marquee combinations within the financial technology space.

In July, Fidelity National Information Services, or FIS, completed its $35 billion acquisition of Worldpay, a massive payment processor. “Scale matters in our rapidly changing industry,” said FIS Chairman and Chief Executive Officer Gary Norcross at the time. Fittingly, Norcross will share the stage with Fifth Third Bancorp Chairman and CEO Greg Carmichael on Day 1 of Acquire or Be Acquired. More recently, Visa announced that it will pay $5 billion to acquire Plaid, which develops application programming interfaces that make it easier for customers and institutions to connect and share data.

Looking back on 2019, the operating environment proved challenging for banks. They’re still basking in the glow of the recent tax breaks, yet they’re fighting against the headwinds of stubbornly low interest rates, elevated compliance costs and stiff competition in the lending markets. Accordingly, I anticipate an increase in M&A activity given these factors, along with stock prices remaining strong and the biggest banks continuing to use their scale to increase efficiency and bolster their product sets.

Beyond these topics, here are three additional issues that I intend to discuss on the first day of the conference:

1. How Saturated Are Banking Services?
This past year, Apple, Google and Facebook announced their entry into financial services. Concomitantly, fintechs like Acorns, Betterment and Dave plan to or have already launched checking accounts, while gig-economy stalwarts Uber Technologies and Lyft added banking features to their service offerings. Given this growing saturation in banking services, we will talk about how regional and local banks are working to boost deposits, build brands and better utilize data.

2. Who Are the Gatekeepers of Customer Relationships?
Looking beyond the news of Alphabet’s Google’s checking account or Apple’s now-ubiquitous credit card, we see a reframing of banking by mainstream technology titans. This is a key trend that should concern bank executives —namely, technology companies becoming the gatekeepers for access to basic banking services over time.

3. Why a Clear Digital Strategy Is an Absolute Must
Customer acquisition and retention through digital channels in a world full of mobile apps is the future of financial services. In the U.S., there are over 10,000 banks and credit unions competing against each other, along with hundreds of well-funded start-ups, for customer loyalty. Clearly, having a defined digital strategy is a must.

For those joining us at the Arizona Biltmore, you’re in for an invaluable experience. It’s a chance to network with your peers and hear from the leaders of  innovative and elite institutions.

Can’t make it? We intend to share updates from the conference via BankDirector.com and over social media platforms, including Twitter and LinkedIn, where we’ll be using the hashtag #AOBA20.

Embracing Frictionless Loans by Eliminating Touch Points


lending-9-13-19.pngTo create a meaningful customer relationship, banks should drive to simplify and streamline the operational process to book a loan.

Automated touchpoints are a natural component of the 21st century customer experience. When properly implemented, technology can create a touch-free, self-service model that simplifies the effort required by both customer and bank to complete transactions. One area ripe for technological innovation is the lending process. Banks should consider how they can remove touch points from these operations as a way to better both customer service and resource allocation.

Frictionless loans can move from origination to fulfillment without requiring human intervention, which can help build or enhance relationships with clients. Your institution may already be working on decreasing touches and increasing automation. But as you long as your bank has an area of tactile, not strategic, contact between your staff and your customer, your bank — and customers — will still have friction.

Bankers looking to decrease this friction and make lending a smooth and seamless process for borrowers and originators alike should ask themselves these four questions:

How many human touchpoints does your bank still have in play to originate and fulfill a loan? Many banks allow customers to start a loan application online and manage their payments in the cloud, but what kind of tactile processes persist between that initial application and the payment? Executives should identify how many steps in their lending process require trained staff to help your customers complete that gap. Knowing where those touchpoints are means your digital strategy can address them.

What value can your bank achieve by reducing and ultimately eliminating the number of touches needed to originate a loan? Every touch has the potential to slow a loan through the application process and potentially introduce human error into the flow. But not all touchpoints are created equal.

Bankers should consider the value of digital data collection, or automating credit score and loan criteria review. They may be able to eliminate the manual review of applications, titles and appraisals, among other things. They could also automate compliant document creation and selection. Banks should assess if their technology enablement efforts produce a faster, simpler customer experience, and what areas they can identify for improvement.

Do you have the right technology in place to reduce those touchpoints? Executives should determine if their bank’s origination systems have the capabilities to support the digital strategy and provide the ideal customer experience. Does the bank’s current solution deliver an integrated data workflow, or is it a collection of separate tools that depend on the manual re-entry of data to push loans through the pipeline?

Does your bank have an organizational culture that supports change management? Does your bank typically plan for change, or does it wait to react after change becomes inevitable? Executives should identify what needs to happen today so they can capitalize quickly on opportunity and minimize disruptions to operations.

Siloed functional areas are prone to operational entrenchment, and well-intentioned staff can inadvertently slow or disrupt change adoption. These factors can be difficult to change, but bankers can moderate their influences by cultivating horizontal communication channels that thread organizational disciplines together, support transparency and allow two-way knowledge exchanges.

For banks, a human touch can be one of the most valuable assets. It can help build long lasting and meaningful relationships with clients and enable mutual success over time. This is precisely why banks should reserve it for business activities that have the greatest potential to add value to a client’s experience. Technology can free your bank’s staff from high-risk, low-return tasks that are done more efficiently through automation while increasing their opportunities to interact with customers, understand their challenges and cross-sell products.

Frictionless loan planning should intersect cleanly with your bank’s overall digital strategy. It could also be an opportunity for your bank to scale up planning efforts, to encompass a wider set of business objectives. In either case, the work you do today to identify and eliminate touch points will establish the foundation necessary to extend your bank’s digital reach and offer a competitive customer experience.

Winners Announced for the 2019 Best of FinXTech Awards


Awards-9-10-19.pngBanks face a fundamental paradox: They need to adopt increasingly sophisticated technology to stay competitive, but most have neither the budget nor the risk appetite to develop the technology themselves.

To help banks address this challenge, a legion of fintech companies have sprung up in the past decade. The best of these are solving common problems faced by financial institutions today, from improving the customer experience, growing loans, serving small business customers and protecting against cybersecurity threats.

To this end, we at Bank Director and FinXTech have spent the past few months analyzing the most innovative solutions deployed by banks today. We evaluated the performance results and feedback from banks about their work with fintech companies, as well as the opinions of a panel of industry experts. These fintechs had already been vetted further for inclusion in our FinXTech Connect platform. We sought to identify technology companies that are tried and true — those that have successfully cultivated relationships with banks and delivered value to their clients.

Then, we highlighted those companies at this year’s Experience FinXTech event, co-hosted by Bank Director and FinXTech this week at the JW Marriott in Chicago.

At our awards luncheon on Tuesday, we announced the winning technology solutions in six categories that cover a spectrum of important challenges faced by banks today: customer experience, revenue growth, loan growth, operations, small business solutions and security.

We also announced the Best of FinXTech Connect award, a technology-agnostic category that recognizes technology firms that work closely with bank clients to co-create or customize a solution, or demonstrated consistent collaboration with financial institutions.

The winners in each category are below:

Best Solution for Customer Experience: Apiture

Apiture uses application programming interfaces (APIs) to upgrade a bank’s digital banking experience. Its platform includes digital account opening, personal financial management, cash flow management for businesses and payments services. Each feature can be unbundled from the platform.

Best Solution for Revenue Growth: Mantl

MANTL developed an account-opening tool that works with a bank’s existing core infrastructure. Its Core Wrapper API reads and writes directly to the core, allowing banks to set up, configure and maintain the account-opening product

Best Solution for Loan Growth: ProPair

ProPair helps banks pair the right loan officer with the right lead. It integrates with a bank’s systems to analyze the bank’s data for insights into behaviors, patterns and lender performance to predict which officer should be connected with a particular client.

Best Small Business Solution: P2BInvestor

P2Binvestor provides an asset-based lending solution for banks that helps them monitor risk, track collateral and administer loans. It partners with banks to give them a pipeline of qualified borrowers.

Best Solution for Improving Operations: Sandbox Banking

Sandbox Banking builds custom APIs that communicate between a bank’s legacy core systems like core processors, loan origination, customer relationship management software and data warehouses. It also builds APIs that integrate new products and automate data flow.

Best Solution for Protecting the Bank: Illusive Networks

Illusive Networks uses an approach called “endpoint-focused deception” to detect breaches into a bank’s IT system. It plants false information across a bank’s network endpoints, detects when an attacker acts on the information and captures forensics from the compromised machine. It also detects unnecessary files that could serve as tools for hackers.

Best of FinXTech Connect: Sandbox Banking

The middleware platform, which also won the “Best Solution for Improving Operations” category, was also noted for working hand-in-hand with bank staff to create custom API connections to solve specific bank issues. In addition, banks can access three-hour blocks of developer time each month to work on special projects outside of regular technical support.

Preparing Cards for the Next Era in Payments


credit-card-9-3-19.pngAdvancements in payments technologies have forever changed consumer expectations. More than ever, they demand financial services that stay in step with their busy, mobile lives.

Financial institutions must respond with products and services that deliver convenience, freedom and control. They can stay relevant to cardholders by enabling secure and easy digital transactions through their debit and credit cards. Banks should digitize, utilize, securitize and monetize their card programs to meaningfully meet their customers’ needs.

Digitize
Banks should develop and deploy digital solutions like wallets, alerts and card controls, to provide an integrated, seamless and efficient payments experience. Consumers have an array of choices for their financial services, and they will go where they find the greatest value.

Nonfinancial competitors have proven adept at capturing consumers via embedded payment options that deliver a streamlined experience. Their goals are to gather cardholder information, cross-sell new services and extract a growing share of the payments value chain. Financial institutions can ensure their cards remain top-of-wallet for consumers by developing a digital strategy focused on driving deep cardholder engagement. Digital wallets are the place to start.

The adoption curve for digital wallets follows the path of online banking’s early years, suggesting an impending sharp rise in the use of digital wallets. A majority of the largest retailers now accept contactless payments, according to a 2019 survey from Boston Retail Partners. And one in six U.S. banking consumers reported paying with a digital wallet within the last 30 days, according to a 2018 Fiserv survey. Almost three-fourths of cardholders say paying for purchases is more convenient with tokenized mobile payments, a Mercator Advisory Group survey found.

Financial institutions can deliver significant benefits to consumers and reap measurable returns by leveraging existing and emerging digital tools, such as merchant-based geographic reward offers.

Utilize
Banks need to provide their cardholders with comprehensive information about how digital solutions can meet their expectations and needs. Implementing digital tools, providing a frictionless financial service experience and helping customers understand and use their benefits can empower them to transact in real-time on their devices, including mobile phones, computers and tablets. Banks’ communications programs are important to encourage adoption and use the implemented digital products and services.

Securitize
Banks will have to balance digital innovation with risk mitigation strategies that keep consumers safe and don’t disrupt transactions. Digital payments are highly secure due to tokenization — a process where numerical values replace consumers’ personal information for transaction purposes. Tokenized digital wallet transactions are an important first step toward preventing mobile payments fraud.

Mobile apps that enable cardholders to receive transaction alerts and actively manage card usage also significantly improving card security. Fiserv analysis shows use of a card controls app may reduce signature fraud by up to 53%, while increasing card usage and spending.

Banks need strategies focused on detecting and preventing fraud in real time without impacting card usage and cardholder satisfaction. This can be a significant point of differentiation for card providers. A prudent approach can include implementing predictive analytics and decision-management technology. And because consumers want to be involved in managing and protecting their accounts, they should have the option to create customized transaction alerts and controls. Finally, direct access to experienced risk analysts who work to identify evolving fraud threats can significantly improve overall results.

A recent analysis from the Federal Reserve indicated debit fraud is running at approximately 11.2 basis points, which compares the average value of fraud to total transaction dollars. In comparison, Fiserv debit card clients experience only 5.08 basis points of fraud.

Card issuers balance risk rules that help mitigate fraud against cardholder disruption stemming from falsely-declined transactions. These lost transaction opportunities can reduce revenue and increase reputational risk. An experienced risk mitigation partner can help banks strike the right balance between fraud detection and consumer satisfaction to maximize profitability.

More Engaged Users Are

Based on these average monthly debit transactions: Gray = Low 12.6, Blue = Casual (medium) 18.3, High = High 21.4, Orange = Super (highest) 28.4
Net Promoter Score = Measure of cardholder loyalty and value in institution relationship
Cross-Sold Ration = Percentage of householders with a DDA for longer for longer than six months but open to a new deposit or loan account in the most recent six months
Return on Assets = Percentage of profit related to earnings

Monetize
Banks can turn digital solutions into engines of growth by creating stronger, more lasting consumer relationships. A digital portfolio can be more than just a set of solutions — it can drive significant new revenue and growth opportunities. By delivering secure, frictionless digital services to consumers when and where they need them, banks can maintain their positions as trusted financial service providers. Engaged users are profitable users.

Digitize. Utilize. Securitize. Monetize. Achieving the right combination of innovative products and exceptional consumer experiences will enhance a bank’s card portfolio growth, operational efficiency and market share.

How Innovative Banks Grow Deposits


deposits-8-14-19.pngCommunity banks are under enormous pressure to grow deposits.

Post-crisis liquidity concerns have challenged firms to find low-cost funds, while mega-banks continue to gobble up market share and customers demand digital offerings. In this intense environment, some banks are looking for ways to shake up their approach to gathering deposits. But some of the most compelling opportunities — digital-only banks and banking-as-a-service — require executives to rethink their banks’ strengths, their brands and their future roles in the financial ecosystem.

Digital Bank Brands
When JPMorgan & Co. shut down its digital-only brand called Finn after just one year, some saw it as a sign that community banks shouldn’t bother trying. But Dub Sutherland, shareholder and director of San Antonio, Texas-based TransPecos Banks, argues that there are too many unknowns to make extrapolations from Chase’s decision to ditch Finn.

Sutherland’s bank, which has $224 million in assets, successfully launched a digital-only brand that caters to medical professionals: BankMD. TransPecos is using NYMBUS’ SmartLaunch solution to focus on building products that meet the particular needs of medical professionals. BankMD has its own deposit and loan tracking system, so it doesn’t affect TransPecos’ existing operations. Sutherland says most BankMD customers don’t know and don’t seem to care about the bank on the back end.

Bankers who’ve spent decades crafting their institution’s brand might bristle at the thought of divorcing a digital brand from their brick-and-mortar signage.

I think there’s a fear for those who don’t understand branding and marketing, and don’t understand the new customer. The fact that being “First National Bank of Wherever” doesn’t really carry anything in this day and age,” explains Sutherland. “I do think there are a lot of bankers who fear that they’re going to somehow dilute their brand if they go and launch a digital one.”

That should never be the case, if executed properly. Sutherland explains the digital brand should be “targeting entirely different customers that [the bank] didn’t get before. It should absolutely be accretive.”

Community banks may be able to use a digital-only offering to develop expertise that serves different, niche segments and to experiment with new technologies — without putting core deposits at risk.

Banking-as-a-service
A cohort of banks gather deposits by providing deposit accounts, debit cards and payment services to financial technology companies that, in turn, provide those offerings to customers. In this “banking-as-a-service” (BaaS) model, banks provide the plumbing, settlement and regulatory oversight that enables fintechs to offer financial products; the fintechs bring relatively lower-cost deposits from their digitally native customers.

Essentially, BaaS helps these banks get a piece of the digital deposit pie without transforming the institutions.

“These are low-cost deposits. [Banks’] don’t have to do any servicing on them, there’s no recurring costs, no KYC calls,” says Sankaet Pathak, CEO of San Francisco-based Synapse. Synapse provides banks with the application programming interfaces (APIs) they need to automate a BaaS offering. He says banks “have almost no cost” with deposit-taking in a BaaS model that uses a Synapse platform.

Similar to a digital brand, providing BaaS for fintechs means the bank’s brand takes a back seat. That was a big consideration for Reinbeck, Iowa-based Lincoln Savings Bank when it explored the BaaS model, says Mike McCrary, EVP of e-commerce and emerging technology. Lincoln Savings, which has $1.3 billion in assets, has been running its LSBX BaaS program for about five years, using technology from Q2 Open.

McCrary began his career at the bank in the marketing department, so the model was something his team seriously weighed. In the end, though, McCrary says he’s proud to be enabling fintech partners to do great things.

“It doesn’t diminish our brand, because our brand is really for us, within the places that we touch,” he says. “We definitely continue to try to maximize that and increase the value of the brand within our marketplace, but we’re able to then offer our services outside of that immediate marketplace, with these other really great [fintech] brands.”

Bankers need to grapple with whether they are comfortable putting their firms’ brand on the backburner in order to launch a digital bank or BaaS program. But regardless of how banks choose to grow deposits, the time for considering these new business models is now.

“The cost of deposits, in particular, is a challenge that creates a ‘We need to do something about this’ statement inside a board room or an ALCO committee,” says Q2 Open COO Scott McCormack. “My advice would be to consider alternative strategies sooner than later[.] The opportunity to grow deposits by building a direct bank, partnering with or enabling a fintech … is a strategy that is more compelling than it has ever been.”

Potential Technology Partners

NYMBUS SmartLaunch

SmartLaunch leverages Nymbus’ SmartCore to offer a “digital bank-in-a-box” that runs deposits, loans and payments parallel to the bank’s existing infrastructure.

Q2 Open

Its CorePro system of record helps developers easily build mobile financial services. With a single set of API calls, CorePro can also be used to develop a BaaS offering.

Synapse

BaaS APIs serve as middleware, allowing banks to offer products and services to fintechs and automate the internal Know Your Customer, Anti-Money Laundering and settlement processes for the bank.

Treasury Prime

Their APIs enabled Boston-based Radius Bank to provide BaaS support powering a new checking account called Stackin’ Cash.

Learn more about each of the technology providers in this piece by accessing their profiles in Bank Director’s FinXTech Connect platform.

Getting your Digital Growth Strategy Right from the Start


Digital growth is only as good as the metrics used to measure it.

Growth is one of an executives’ most important responsibilities, whether that comes from the branch, through mergers and acquisitions or digital channels. Digital growth can be a scalable and predictable way for a bank to grow, if executives can effectively and accurately measure and execute their efforts. By using Net Present Value as the lens to evaluate digital marketing, a bank’s leadership team can make informed decisions on the future of the organization.

Banks need a well-thought-out digital growth strategy because of the changing role of the branch and big bank competition. The branch used to spearhead an institution’s growth efforts, but that is changing as branch sales decline. At the same time, the three biggest banks in the country rang up 50% of the new deposit account openings last year (even though they have only 24% of branches) as they lure depositors away from community banks, given regulators’ prohibition on acquisition.

Physical Branch Decline chart.pngImage courtesy of Ron Shevlin of Cornerstone Advisors

Even in the face of these changes, many institutions are nervous about adopting an aggressive digital growth plan or falter in their execution.

A typical bank’s digital marketing efforts frequently rely on analytics that have been designed for another business altogether. They may want to place a series of ads on digital channels or social media sites, but how will they know if those work? They may use data points such as clicks or views to gauge the effectiveness of a campaign, even if those metrics don’t speak to the conversion process. They will also track metrics such as the number of new accounts opened after the start of a campaign or relate the number of clicks placed in new accounts.

But this approach assumes a direct link between the campaign and the new customers. In addition, acquisition and data teams will spend valuable time creating reports from disparate data sources to get the proper measurement, instead of analyzing generated reports to come up with better strategies.

Additionally, a bank’s CFO can’t really measure the effectiveness of an acquisition campaign if they aren’t able to see how the relationships with these new customers flourish and provides value to the institution. The conversion is not over with a click — it’s continuous.

This leads to another obstacle to measuring digital growth efforts: communication. Banks use three internal teams to generate growth: finance to fund the efforts; marketing to execute and measure it; and operations to provide the workflow to fulfill it.

Each team measures and expresses success differently, and each has its inherent shortcomings. Finance would like to know the cost and profitability of the new deposits generated, to assess the efficiency of the spend. Marketing might consider clicks or views. Operations will report on the number of accounts opened, but do not know definitively if existing workflows support the market segmentation that the bank seeks.

There is not a single group of metrics shared by the teams. However, the CEO will be most interested in cost of acquisition, the long-term profitability of the accounts and the return on investment of the total efforts.

But it’s now possible for banks to see the full measurement of their digital campaigns, from the disbursement of funds provided by the finance group to the success of these campaigns, in terms of deposits raised and net present value generated. These ads entice prospects into the account origination funnel, managed by operations, who open accounts and deposit initial funds. Those new customers then go through an onboarding process to switch their direct deposits and bill pay accounts. The new customer’s engagement can be measured six to 12 months later for value, and tied back to the original investment that brought them in the first place.

Bank leadership needs to be able to make decisions for the long-term health of their organizations. CEOs tell us they have a “data problem” when it comes to empowering their decisions. For this to work, the core system, the account origination funnel and the marketing channels all need to be tied together. This is true Integrated Value Measurement.

How Community Banks Can Compete Using Fintechs, Not Against Them


fintech-7-15-19.pngSmaller institutions should think of financial technology firms as friends, not foes, as they compete with the biggest banks.

These companies, often called fintechs, pose real challenges to the biggest banks because they offer smaller firms a way to tailor and grow their offerings. Dozens of the biggest players are set to reach a $1 billion valuation this year—and it’s not hard to see why. They’ve found a niche serving groups that large banks have inadvertently missed. In this way, they’re not unlike community banks and credit unions, whose people-first philosophy is akin to these emerging tech giants.

Ironically, savvy fintechs are now smartly capitalizing on their popularity to become more like big banks. These companies have users that are already highly engaged; they could continue to see a huge chunk of assets move from traditional institutions in the coming year. After all, what user wouldn’t want to consolidate to a platform they actually like using?

The growth and popularity of fintechs is an opportunity for community banks and credit unions. As customers indicate increasing openness to alternative financial solutions, these institutions have an opportunity to grab a piece of the pie if they consider focusing on two major areas: global trading and digital capabilities.

Since their creation, community banks and member-owned organizations have offered many of the same services as their competitors. However, unlike fintechs, these financial institutions have already proved their resilience in weathering the financial crisis. Community banks can smartly position themselves as behind-the-scenes partners for burgeoning fintechs.

It may seem like the typical credit union or community banking customer would have little to do with international transactions. But across the world, foreign payments are incredibly common—and growing. Global trading is an inescapable part of everyday consumer life, with cross-border shopping, travel and investments conducted daily with ease. Small businesses are just as likely to sell to a neighbor as they are to a stranger halfway around the globe. Even staunchly conservative portfolios may incorporate some foreign holdings.

Enabling global trades on a seamless digital scale is one of the best avenues for both community banks and credit unions to expand their value and ensure their continued relevance. But the long list of requirements needed to facilitate international transactions has limited these transactions to the biggest banks. Tackling complex regulatory environments and infrastructure can be not only intimidating, but downright impossible for firms without an endless supply of capital earmarked for these such investments.

That means that while customers prefer community banks and credit unions for their personalization and customer service, they flock to big banks for their digital capabilities. This makes it all the more urgent for smaller operations to expand while they have a small edge.

Even as big banks pour billions of dollars into digital upgrades, an easy path forward for smaller organizations can be to partner with an established service that offers competitive global banking functions. Not only does this approach help them save money, but it also allows them to launch new services faster and recapture customers who may be performing these transactions elsewhere.

As fintechs continue to expand their influence and offerings, innovation is not just a path to success—it’s a survival mechanism.

Sink or Swim in the Data Deep End


data-7-1-19.pngCommunity banks risk allowing big banks an opportunity to widen the competitive gap by not investing in their own data management.

It’s now-or-never for community banks, and a competitive edge could be the key to their survival. A financial institution’s lifeblood is its data and banks can access a veritable treasure trove of information. But data analytics poses a significant challenge to the future success of community banks. Banks should focus on the value, not volume, of their information when adopting an actionable, data-driven approach to decision-making. While many community banks acknowledge how critical data analytics are to their future success, most remain uncommitted.

This comes as the multi-national institutions expand their data science teams exponentially, create chatbots for their websites, use artificial intelligence to customize user interactions and apply machine learning to complete back-office tasks more efficiently. The advantage that a regional bank manager has when working next door to a community bank is growing too large. And the argument that the human touch and customer experience of a community bank will make up for the technological gap has become less convincing as younger customers forgo the branch in favor of their phone.

Small and medium institutions are dealing with a number of obstacles, including compressed margins and a shortage of talent, in an attempt to move past basic data analytics and canned ad hoc reports. If an institution can find a qualified candidate to lead their data management project, the candidate usually lacks banking experience and tends to have a science and mathematics backgrounds. A real concern for bankers is the hiring managers’ ability to ask the right questions and fully discern candidates’ qualifications. And once hired, is there a qualified leader to drive projects and their results?

Despite these obstacles, banks have only one option: Jump into the data deep end, head first. To compete in this data-driven world, community banks must deploy advanced data analytics capabilities to maximize the value of information. More insight can mean better decisions, better service to customers and a better bottom line for banks. The only question is how community banks can make up their lost ground.

The first step in building your organization’s data analytic proficiency is planning. It is crucial to understand your current processes and outputs, as well as your current staff’s capabilities, in order to improve your analysis. Once you know your bank’s capabilities, you can determine your goal posts.

A decision you will need to make during this planning stage will be the efficacy of building out staff to meet the project goals, or outsourcing the efforts to a consultant group or third-party software. A community bank’s ability to attract, manage and retain data specialist could be an obstacle. Data specialists tasked with managing more-complex diagnostic and predictive analytics should be part of the executive team, to give them a complete understanding of the institution’s strategic position and the current operating environment.

Another option community banks have is to buy third-party software to supplement current resources and capabilities. Software can allow a bank to limit the staffing resources required to meet their data analytical goals. But bankers need to understand the challenges.

A third-party provider needs to understand your organization and its strategic goals to tailor a solution that fits your circumstances and environment. Management should also weigh potential trade-offs between complexity and accessibility. More-complex software may require additional resources and staff to deploy and fully use it. And an institution shouldn’t solely rely on any third-party software in lieu of internal champions and subject-matter experts needed to fully use the solutions.

Whatever the approach, community bank executives can no longer remain on the sidelines. As the volume, velocity and variety of data grows daily, the tools needed to manage and master the data require more time and investment. Proper planning can help executives move their organizations forward, so they can better utilize the vast amount of data available to them.

Five Insights into the Top 25 Bank Search Terms


customer-6-20-19.pngBanks can use customers’ search queries to create a more efficient, optimized user experience.

Most marketers rely on search engine optimization to drive traffic to their website, missing a crucial opportunity to optimize searching on the site itself. But on-site search optimization is a critical component of search and self-service for customers, and is a way that banks can create a better experience for users.

Search engine optimization, or SEO, focuses on attracting new visitors to a website. On-site search optimization addresses the existing and returning traffic base—a bank’s current customers and prospects. This approach helps them find helpful and relevant content once they are on the site, which is as important as getting them to the website or mobile application in the first place.

A growing percentage of customers use digital channels to interact with banks and require intuitive search and easy-to-find support information. Banks will benefit from delivering superior on-site search functionality with actionable support answers on their websites and mobile apps.

Transforming a bank’s website, mobile or online banking applications into a true digital support center involves more than a simple search bar. Search terms and activity can be used to inform the support content strategy, while monitoring customers search queries ensures a bank is providing the most sought-after answers across its digital and mobile channels. This continuous process directly impacts an institution’s customer experience, service levels and operational efficiency.

The top 25 search terms across banking websites in 2019 included:

1. Routing Number 10. Direct Deposit 19. Mobile Deposit
2. Overdraft Protection 11. Rates 20. Login
3. Order Checks 12. Address Change 21. ACH
4. Skip Payment 13. Loan Rates 22. Stop Payment
5. Online Banking 14. Debit Card 23. ATM
6. Wire Transfers 15. Check Card 24. Mortgage
7. Credit Card 16. IRA 25. Bill Pay
8. Open Account 17. CD Rates  
9. Account Number 18. Hours  

Customers’ search patterns in a bank’s digital and mobile channels differ the terms used in a search engine platform such as Google or Bing, according to data from SilverCloud. Searches on banking websites and apps average 1.4 words per search, compared to four on search engine platforms. On Google, people search for “the best checking account for me;” on a banking website, they use broader terms like “online banking.”

Two factors drive this search behavior. First, banking consumers are already on the desired site, so they use more narrow search terms. Second, financial terminology can be confusing and unfamiliar. As a result, customers who lack knowledge of specific banking terms tend to use broader search terms to home in on exactly what they need.

There are five takeaways for banks that are interested in how top search terms can help them grow more efficiently:

Banks need to deliver a better customer experience. Having a strong on-site search engine allows customers to service themselves in a way that is easy, fast and efficient.

Strong search could reduce call center volume. Having robust content, frequently asked questions and support answers allows customers to get answers without needing to contact call center agents.

Provide support as mobile adoption increases. Customers will have more questions as banks introduce more self-service options, like online account opening, mobile deposit and online bill pay. Banks should anticipate this and have support answers in place to facilitate faster adoption.

Create opportunity and invite action through search. Banks can drive deeper customer engagement into various product offerings by writing actionable support answers. For example, the answer for a search query for “routing number” could include information about what customers can do with a routing number, like set up direct deposit or bill pay. This approach can increase the likelihood they take such actions.

Banks can do more with less. The more that customers use self-service digital and mobile channels and find information that addresses their queries, the fewer employees a bank needs to staff customer service centers. Institutions may find they can grow without adding a commensurate number of employees.

Banks should review their digital channels to ensure they are providing support content that addresses the ways customers seek information. Content around general search terms needs to be robust. Executives will need to keep in mind that most search terms require 10 or more custom answers to address the transactional, informational and navigational forms of customer intent.