How Banks Can Implement 3 Types of Automation Solutions

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Many banks struggle with digital transformation, often because they lack an effective strategy, clear governance over the transformation process or both.

Common and current inefficiencies include relying on manual reports created in spreadsheets across multiple systems, using email or word processing to capture and document approvals and serve as a system of record and inconsistent procedures across business functions.

A digital-first approach has increasingly become table stakes for financial institutions given consumer adoption. In 2021, 88% of U.S. consumers used a fintech, up from 58% in 2020, according to an annual report from Plaid. Customers expect a frictionless experience from their bank; traditional institutions need to have a plan in place to adapt accordingly.

Banks that don’t already have a digital transformation strategy need to establish one to anchor and govern their process for evaluating, prioritizing and executing digital transformation projects. One area for consideration on that digital journey should be automation, which can help organizations become more efficient and better mitigate a variety of risks. There are three intelligent automation solutions that can help banks reduce costs and improve productivity, among other benefits: robotic process automation, digital process automation and intelligent document processing.

  1. Robotic process automation: In general, RPA is task-based automation focused on accomplishing targeted components of business processes without the need for significant human intervention. RPA is capable of handling high volume, repetitive and manual tasks on behalf of human process owners, filling gaps where systems lack integration capabilities.
  2. Digital process automation: This type of automation focuses on optimizing workflows to orchestrate more collaborative work processes. DPA typically involves highly auditable data flows to improve regulatory compliance, and is scalable in a way that helps the organization adapt to evolving business needs.
  3. Intelligent document processing: IDP automation involves the extraction of semi-structured data from digital documents such as PDFs and image files. This transforms such documents into discrete data elements that can drive decision-making. IDP can enhance the scope of RPA and DPA solutions.

Questions to Ask
On a foundational level, banks need to have a clear, intentional link between technology spending and their overall business strategy if they want to succeed in their digital journey. Leadership teams need to understand issues with current processes to ascertain where streamlining those processes could offer the greatest return on investment. Here are some key questions to consider when evaluating process automation:

  • How does the automation solution reduce friction and improve the customer or user experience?
  • What is the associated market opportunity or efficiency gain enabled by the solution?
  • Is the institution potentially automating a bad process?
  • How does the solution align with what customers want?
  • How will the institution train its teams to ensure adoption?
  • How does the automation solution fit into the organization’s current processes, workflows and culture?
  • How will the bank manage the change and govern post-transformation?

Developing a Framework
Depending on where a bank is in its digital transformation journey, there are a variety of steps the organization will need to take to implement automation solutions. Those banks that are early in their journey can use the following steps to help:

  • Plan: Establish a framework for implementation, including objectives, teams, timelines and a project governance structure.
  • Assess: Understand the current state of functions across the business and identify process gaps where automation can help.
  • Design: Use best practices to establish a “fit for purpose” system design that meets business requirements and is scalable for future growth.
  • Execute: Configure the applications and integrations according to system design; validate, test and resolve any defects identified; migrate the approved configuration to the production environment.
  • Go live: Assess user readiness and deploy the solution.
  • Support: Execute an automation support strategy and establish an external support framework.
  • Monitoring: Establish and track key performance indicators to provide metrics for better visibility into the business.
  • Road map: Evaluate business unit usage and develop a plan for optimization and expansion to realize the company’s digital transformation vision and business goals.

Addressing each of these steps can help banking leadership teams develop a more thoughtful approach to automation solutions and improve their overall digital transformation strategy.

How to Identify the Right Partner — Beyond a Solution

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The decision to outsource a function or task is often a difficult one for banks. Executives need to consider many different factors. And once they decide to outsource, the search for the perfect vendor partner begins. An array of different solution partners often exist for banks to choose, so how can executives select the right partner for their needs?

Bankers should begin by evaluating vendors by inquiring into their implementation process — not solely by reviewing their technology. The key is to ask important questions early. Implementation is often filled with pain points and obstacles that banks and their partners must address; it is easy to forget about the huge implications of implementing new technology and processes. As the bank sheds older processes, how can their new partners help them connect the dots to ensure the end result for employees and customers improves?

Before the Process Begins
Bankers may need to ask themselves some hard questions before they begin the search for a partner. This process will disrupt the current status quo. Is their organization truly ready for changes associated with an implementation?

Usually, the people making partner decisions are not the ones who will have to work with the new technology on a regular basis. Bring the day-to-day employees into the conversation early: they can provide insights about how processes work today and management can give them with a realistic understanding of what the implementation process will look like. These employees have a unique perspective that might trigger additional questions that decision-makers had not thought to ask before.

There are two discussion-driving questions bankers can ask potential vendor partners to help when deciding on which solution is going to work best for their organization.

1. How do I get from Point A to Point B?
The goal is to uncover as many pain points as possible and discuss how the potential partner will work with the bank to solve them. Every implementation is going to have challenges, but many potential vendors do not mention challenges during the sales process without direct questions from the bank. Getting a good idea of what the overall process looks like helps prepare banks for where issues may arise. Executives should ask questions like:

• How does this new process pull data or connect to user information within the core?
• Are all processes automated? Does any human intervention need to occur?
• How does the vendor update the core to keep a single source of truth?

2. How strong is your project management?
Before bankers even have these conversations with a potential partner, they need to make sure they have a good understanding of the technology and workflow changes that will happen. Similarly, bankers need to ensure that their potential partner understands the realistic impact those changes will have on the institution. Shared empathy and understanding will provide both partners with a better implementation process.

Vendors typically have their own project management methodology. It is important to learn what that is and evaluate whether or not it will work for the bank’s team. Bankers should ask questions like:

• Who does the vendor project team consist of?
• Is there a timeline of key deliverables and accountability?
• What are the typical challenges that stall similar projects?
• How does the vendor help the bank overcome these challenges?
• Can they provide a sample testing plan?

Good partners will create and communicate a realistic timeline with drop dead dates to make sure that everything remains on target. Finding a partner that will be open and honest is priceless when it comes to ensuring a smooth implementation.

At the end of the day, the bank is going through a transformation. The ultimate goal is to provide the organization or the end user with better technology or an improved experience — maybe both. Doing due diligence and asking the hard questions early prepares the bank for a better implementation process. Working to understand all the implications that come with integrating new systems and a new partner will set banks up for success and help executives choose the right partner — beyond just a solution.

Fintechs Offer Many Opportunities for Banks. But How Do You Decide?

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Another version of this article was originally published on April 3, 2023, as part of a special report called “Finding Fintechs.” 

As part of his job, Clayton Mitchell once bought a list of global financial technology companies from a data provider. It had 7,000 names on it. 

“I can’t do anything with this,” says the managing principal in the risk consulting practice of Crowe LLP, who advises banks on partnering with fintech companies. “Figuring out the winners and losers is a bit of a needle in a haystack approach.” 

Banks that want to partner with technology companies or buy software from a vendor face the same sort of tsunami of options. On the one hand, fintechs offer real promise for community banks struggling to keep up with bigger institutions, credit unions and other competitors — a chance to cut costs and increase efficiencies, grow deposits and loans, and give customers quicker and easier ways to do business with the bank. 

But in the midst of economic uncertainty, banks face real risks in doing business with early-stage fintechs that might consolidate or even go out of business. So how do you choose? 

The problems banks face making a digital transformation are legion. In Bank Director’s 2022 Technology Survey, 45% of responding CEOs, directors, chief operating officers and senior technology executives said they worried about reliance on outdated technology. Forty-eight percent worried their bank had an inadequate understanding of the impact of emerging technologies. And 35% believed their bank was unable to identify the solutions it needs.

Historically, small and midsized banks have relied on their core processor to identify and vet companies for them. About half of Mitchell’s customers continue to rely on the bank’s core processor exclusively to find and vet technology companies for them. Cornerstone Advisors’ annual “What’s Going On In Banking” survey of community banks found this year that 55% of respondents didn’t partner with a fintech startup in 2022; 20% had partnered with one fintech; 16% with two and the rest with three or more. But Mitchell thinks the opportunities to go beyond the core are better and more feasible for small and community banks than ever, if the bank follows due diligence. “Sometimes you have to solve problems quicker than the core will get it to you,” he says. “There’s a growing appetite to go outside the core.” 

The big three core processors — Fiserv, FIS and Jack Henry & Associates — have started offering newer, cloud-based cores to connect with a greater variety of technology companies, plus there are ways to add additional layers to core systems to connect useful technological tools, using what’s known as application programming interfaces. “There are different layers of technology that you can put in place to relegate the core platform more into the background and let it become less of a focus for your technology stack than it has historically been,” says Neil Hartman, senior partner at the consulting firm West Monroe. 

In combination with technological change, leadership among banks is changing, too. The last three years of the pandemic taught banks and their customers that digital transformation was possible and even desirable. “We’re seeing more progressive bank leadership. Younger generations have grown up in digital environments and with the experiences of Amazon and Apple, those technology behemoths, and are starting to think about their technology partnerships a little more aggressively,” Hartman says. He adds that banks are beginning to reckon with the competition coming from the biggest banks in terms of digital services. “That’s trickling down into the regional and community bank space,” he says. 

Fintechs, likewise, are adjusting to banks’ sizable regulatory compliance obligations, and they’re maturing, too, says Susan Sabo, the managing principal of the financial institutions group for the professional services firm CliftonLarsonAllen LLP. Many fintechs have upgraded their structure around risk management and controls to ensure they’ll get bank customers. “With the onset of the pandemic, I do think it allowed many fintechs to reset and reinvest, and they did start to build some traction with banks,” Sabo says. 

Still, many banks hesitate to use an alternative to the big three core processors or switch the bulk of their lending and deposit gathering capabilities to a fintech, she says. They’re sticking to fintechs that offer what she calls ancillary solutions — treasury management, credit loss modeling and other types of platforms. But even that has been changing, as evidenced by the success of the fintech nCino, which sells a cloud-based operating system and had its initial public offering in 2020. Sabo recommends using proper due diligence to vet fintech companies. It’s also important to consider cybersecurity, data privacy and contractual issues. And last but not least, consider what can go wrong.

One big hurdle for smaller banks is the cost of using third-party solutions. “Nothing about technology is ever cheap,” Sabo says. “Even things as simple as, ‘We need to refresh all of our hardware,’ becomes a massive investment for a [community] bank. And if you’re held to your earnings per share each quarter, or you’re held to your return to your investors each quarter … you may keep putting it off. Many banks are in a situation where they’re anxious about their technology because they haven’t invested along the way.”

Talent is another large obstacle banks face. Small banks, especially those in rural areas, may struggle to find the staff to make the technology a success. Information technology departments often aren’t equipped with strategic decision-making skills to ensure a fintech partner will meet the bank’s big-picture goals.

And banks that want to leverage data analytics to improve their business will have to hire data scientists and data engineers, says Corey Coscioni, director of strategic alliance and business development at West Monroe. “You’re going to need to build some level of internal capabilities,” he says.

Why Digital Transformation Strategies Should Address Financial Wellness

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For banks, financially healthy customers are more profitable and more loyal, sticky customers. That means that effective financial wellness programs are not only the right thing to do for customers — they can also be a powerful tool for growth, even when net interest margins are under pressure.

Consumers who understand the basics of personal finance tend to be more engaged and profitable for the financial institutions they bank with, according to a study by Raddon Research Insights. A thoughtful strategy can make financial wellness programs an important resource for the communities they serve. As a former banker who is passionate about financial wellness and the impact it has on people’s entire life, I want to share my experiences and explain what other bank leaders should consider when strategizing their institutions’ financial wellness offerings.

Rethinking Financial Wellness
First, a financial wellness initiative that resonates for one bank’s customers may not be a good fit for another bank in a different market. Yes, community banks are uniquely positioned to support customers with financial education services and other financial wellness resources. But  a bank located in a college town that primarily serves university students should approach financial wellness and education differently than a bank in an area that’s popular with retirees.

Keep in mind the market and community your bank operates in, and your bank’s budget for its financial wellness program. This makes it much easier for your team to identify the opportunities that will make the greatest impact on customers, without being distracted by the latest digital innovations that may be interesting, but not relevant, to your institution’s needs.

Beyond that, how our industry thinks about financial education needs to change. There is no shortage of content in the market that tells consumers what to do to be financially healthy — but there are very few tools and products that actively help them take steps toward a healthier financial future.

People do not engage their bank with hopes of getting a new buy now, pay later solution, a mortgage or an auto loan. They engage their bank to help them buy a home for their growing family. Or they need to buy a car for the commute to their new job. Today’s customers want their bank to help them reach these important life milestones within their household budget and unique financial situation. Personalization should be a key aspect of any financial wellness program and services that banks roll out.

Personalized Guidance Is Key
A personalized approach gives banks a way to help customers make smarter financial decisions at their exact moment of need. Understanding consumers’ savings priorities and what they are actively saving for can help banks determine where they can make the biggest impact on their customers’ financial health.

Fortunately, Plinqit’s State of Savings Report indicates that an overwhelming majority of Americans — 91% — want to grow their savings and are putting aside at least some money this year. One of the top categories for saving this year was for paying off debt, which is notably different from saving money for the future or for a planned purchase. Yet, this is no surprise, given changes in the economy have led many Americans to rack up additional debt and the Federal Reserve’s interest rate hikes that have made it more expensive to borrow. The State of Savings Report reveals that nearly half of Americans, 42%, are putting money aside to pay down their debt. This is even greater of a focus for consumers between the ages of 18 and 34.

If this group is focused on paying down debt, banks should consider how they suggest personal loans and ways to refinance credit card debt. Credit card debt was the most cited type of debt that consumers are prioritizing paying down this year.

As consumers navigate the complexities of life events, unexpected expenses and economic challenges like inflation, saving money and achieving financial wellness can sometimes feel out of reach. Knowing how much money to put toward savings goals versus debt payments, when to start saving for retirement and other important financial decisions can overwhelm consumers. Banks must meet customers wherever they are in their financial journey to offer personalized financial guidance based on their goals.

Thoughtfully planning your bank’s financial wellness and education strategy will empower your institution to establish healthy financial habits among customers while supporting your bank’s future growth.

An Unlikely Journey Through Digital Transformation

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There are probably few bankers in the country who understand the challenges of digital transformation better than Mike Butler. It’s a journey that Butler has been on for the last several years. It has been unlikely journey as well, because Butler started out his career as a traditional banker and later became president for national consumer finance at Cleveland, KeyCorp.

Butler’s transformation started at First Trade Union Bancorp, a federally chartered thrift in Boston that was once owned by two pension funds. He joined the bank as CEO in 2008 but wasn’t able to start executing on a digital-first strategy until 2014. Over the next several years, Butler oversaw the radical transformation of that thrift into a tech-forward consumer bank. Renamed Radius Bancorp, it sold to LendingClub Corp. in 2020.

Even when he was at KeyCorp, Butler saw digital as the future of banking and he wanted to put that into practice. “I’d rather be where the future is than the past, and I’d rather take a chance on trying to build the organization for what I thought the future was going to be like,” he told Bank Director in a 2016 interview.

Butler is now on his second transformational journey, this time as CEO of Grasshopper Bancorp, a digital bank based in New York that focuses on small businesses and the innovation economy. Like consumer, Butler believes the small business market is ripe for disruption by tech-forward banks.

In this edition of The Slant podcast, Butler shares his experiences at Radius and Grasshopper, talks about what he has learned including the importance of culture, people and passion, and offers advice to other bankers who have embarked on the same journey towards innovation.

This episode, and all past episodes of The Slant Podcast, are available on BankDirector.com, Spotify and Apple Music.

How Bankers Can Take Advantage of AI

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Among the biggest stories in tech remains the astonishing advancement in artificial intelligence, or AI, over the past several months. While AI has been evolving for a very long time, its latest iterations and implementations have reshaped how people think about AI and its capabilities.

Much of the conversation around AI has focused on AI-generated art and ChatGPT, both of which are able to accurately follow detailed prompts and create reasonably convincing works. And many industries have already begun utilizing AI to aid their businesses. What does all this mean for financial institutions? Finally, how can bankers leverage this innovative technology to help their organizations and their end users?

AI has many potential use cases for financial institutions and their processes. One of the most intriguing, in light of ChatGPT, is the ability to interface with customers in a very personalized way. Banks can use large language models, like GPT-3, to automate customer service. AI can take instruction and communicate back with an operator towards a specific goal in a way that feels human and can be very helpful. AI is also capable of following very specific communication styles and guidelines.

This gives banks a way to implement AI that enhances the customer experience. A bank customer with a question or seeking an update on a loan can ask an AI-enabled chatbot that can check the loan’s status on the back end and effectively communicate with the customer. If the bank has customer contact information, the AI can also automatically reach out to a customer and request whatever documents or information the bank needs to complete a loan or any other transaction.

AI can also help in a bank’s back office. AI’s ability to process massive amounts of information, coupled with its ability to change and improve over time, makes it a compelling candidate for decision making roles. One example already in operation is the use of AI in loan underwriting as an alternative to one-size-fits-all credit scoring models like FICO. Once the financial institution has gathered the information needed, an AI can recommend a decision to either approve or deny a loan using parameters that represent the customer’s unique demographic and provide a fairer method to evaluate risk. Even if that AI cannot make a decision on all pending loans or come to a complete decision, it can do the heavy lifting and eliminate the bulk of manual work for bank employees.

Another advanced role AI can play for financial institutions is known as optical character recognition, or OCR. OCR can extract text, handwriting and data from images and documents and move it into a system of record without manually inputting the information. Operators can automatically scan images or PDF files of document as they arrive and automatically draw all the information from each of them. Bankers can use OCR to radically increase efficiency for a wide range of document-based processes.

However, there are inherent caveats and shortcomings in all the aforementioned AI banking use cases. AI decision making is not perfect and requires human supervision. In fact, overreliance on AI for tasks like underwriting can lead to biases and ethical oversights. Even its use as a chatbot is not as straightforward as it sounds. ChatGPT, with all of its recent buzz, is far from perfect. Like most AI solutions, it cannot yet handle highly detailed financial information. Banks looking to implement AI should seek solutions that are specially tailored for financial services, which provide a higher degree of accuracy thanks to its specialization.

Finally, it should be noted that there is no magic bullet solution or product for any financial institution — including AI. Hype is a powerful force in both technology and finance, and it is easy to get swept up in the excitement. It is vital that any organization looking to invest in AI technology start with mapping and deeply understanding their own existing processes and use that starting point to determine the areas best suited for automation enhancement. The right way to think about AI within banking is to understand that while it can’t automate every task, it can eliminate large parts of the manual repetitive work that may be slowing down your financial institution today. That, for any team, is transformational.

Converging Traditional Phone and Digital Experiences for Customers

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Delivering a seamless customer experience has become increasingly important as banks seek more efficient ways to streamline service.

While nearly two-thirds of the U.S. population use digital banking services, many still reach for the phone when a complex issue arises. This challenges banks with how to manage this channel shift in a way that facilitates a smooth experience for customers. Exacerbating the issue is the ongoing expectation for banks to accomplish more with fewer resources; call centers continue to receive a surge in support calls while facing widespread staffing shortages. Banks may also expect to record increasingly thinner margins in the current economic climate.

So, how can banks ensure they are providing an effortless customer experience — on par with tech giants and major retailers — while increasing efficiencies? The answer can be found in uniting traditional phone service with digital engagements and strategically embracing conversational artificially intelligence, or AI.

Uniting Phone, Digital Engagements
Most institutions currently manage at least two disparate systems for customer service, which creates a notable disconnect between digital and phone interactions. This separation perpetuates inefficiencies and can create a fragmented customer experience. Customers expect every interaction with their bank to be personalized and seamless; it isn’t well received when they encounter the stark contrast between the bank’s phone and digital spheres.

To solve this pain point, banks can unite phone and digital engagements within a single customer engagement platform. Incorporating the traditional call center phone service into digital-first customer support can significantly decrease the complexity of managing various point solutions, while also reducing costs and staffing requirements. Plus, this type of consolidation can drives considerable efficiencies across routing, management and reporting for the bank.

Equally as important, this unification facilitates a more consistent, low-effort customer experience. After all, customers care about resolving their issue resolution, not what channel they’re using — they are simply seeking a favorable experience. This can also create a better employee experience: staff sees the same information no matter how a customer is engaging, enabling easier, more accurate personalization.

Incorporating Conversational AI
Incorporating automation into your bank’s customer service channels can increase efficiencies while improving the customer experience across both digital and phone communications. For example, companies and consumers continue to adopt conversational AI technology and virtual assistants that provide intelligent self-service options in both text and voice channels. These assistants offload work from contact center employees, so they can focus on solving more complex problems and participate in higher-value conversations. Virtual assistants can additionally shorten the resolution time for customers, simultaneously improving efficiency and customer satisfaction (CSAT) scores.

However, not all virtual assistants are created equal. Third-party tool kits and do-it-yourself solutions can deliver less-than-ideal results, which negates their value and even creates additional pain points in the customer experience. Compared to their more-generic counterparts, platforms that have been developed specifically for financial services can provide a quicker, more relevant way to deliver a convenient digital experience for customers across both virtual and human assistants.

Virtual assistants become especially beneficial when a bank uses them across a single customer engagement platform. Leveraging a combination of human and virtual assistants in one platform — including chatbots for digital engagements and intelligent virtual assistants optimized for phone and digital voice engagements — eliminates the need for banks to manage multiple solutions across different technologies.

While there tends to be an imagined dilemma between efficiencies and a better customer experience, banks can — and should — have both. Converging traditional phone support and digital interactions onto a single platform, while strategically incorporating conversational AI, allows banks to reduce costs and optimize resources while increasing consistency across customer interactions.

Time to Automate All Bank Processes

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The uncertain economic environment, with a recession likely on the horizon and inflation driving up costs, has given banks a unique opportunity: revisiting their existing compliance and operational systems, and exploring long-term, scalable solutions in response to looming and increasing regulatory pressure.

Leveraging machine learning and automation to power digital transformation can address the concerns that keep bank directors up at night — especially since financial institutions may be expected to begin providing more data over the coming months. This comes at a time when banks are dealing with a number of external challenges; however, bank directors know they cannot skimp on adherence to strict compliance requirements. Missing a revenue goal is unfortunate, but from what we’ve heard from our customers, missing a compliance requirement can be a devastating blow to the business.

Increasing Regulatory Risk
Banks and other lenders may encounter financial strain in adding more compliance staff to their teams to address new regulations. Among them, Section 1071 of the Dodd-Frank Act requires financial institutions to report demographic information on small business loans. Regulators are reworking the Community Reinvestment Act. In response, banks are considering how they can leverage automated compliance systems for fair lending, loan servicing and collections.

Bankers are quick to acknowledge that the manual processes involved in data verification should be eliminated if their institutions have any hope of staying ahead of the curve. Furthermore, labor shortages and increased competition for talent has increased costs associated with these tasks — yet their necessity is imperative, given regulatory scrutiny.

As loan originations decrease during an economic slowdown or recession, it may look like delinquency rates are increasing as the ratio of delinquent loans to originations increases — even with no notable changes in delinquency cases. The increasing ratio could trigger scrutiny from the regulators, such as the Consumer Financial Protection Bureau.

If that happens, regulators look into whether the borrower should have received the loan in the first place, along with any fair lending bias concerns, and whether the bank followed appropriate procedures. Regulators will scrutinize the bank’s loan servicing and collections compliance procedures. Given that traditional manual reviews can be more inconsistent and vulnerable to human error, this becomes an incredibly risky regulation environment, especially where data integrity is concerned.

To mitigate risk and increase operational efficiency, banks can use end-to-end document processors to collect, verify and report data in a way that adheres to existing and pending regulation. Implementing these processes can eliminate a large portion of time and labor costs, saving banks from needing to recruit and hire additional compliance professionals every time fair lending and servicing requirements become more demanding.

Automated Processing
Lenders like Oportun, a digital banking platform powered by artificial intelligence, have found that leveraging intelligent document processing has reduced the cost of handling physical documents and traditional mail by 80%, increased margins, lowered instances of human error and improved data integrity. Enhancing customer experiences and providing quality data are crucial for Oportun; this makes their operational goals more cost-effective and scalable, and increases the capacity for Oportun’s team.

“[Automation] has helped us establish some strong controls around processing mail and servicing our customers,” Veronica Semler, vice president of operations at Oportun, says. “It’s reduced the risk of mail getting lost … it has increased our efficiency and made things easier for our team members in our stores.”

Institutions that leverage automated systems and machine learning for compliance can reduce labor costs, provide customers with high quality, efficient service and deliver accurate data to regulators. This provides companies like Oportun, which was an early adopter of machine learning, with an advantage over competitors that use traditional manual review methods.

Implementing document automation into existing systems allows banks to address compliance concerns while laying the groundwork for growth. Automation systems provide the tools for banks to reduce friction in lending and operations, enhance their controls and reduce human error — giving boards confidence that the bank can provide accurate, quality data ahead of any new fair lending and servicing regulations. Now is the time for boards and executives to recession-proof their banks and facilitate long-term success by investing in automation for document processing.

How Bank Compliance Teams Can Champion Micro-Innovation

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Despite the compliance group’s reputation as a dream-crushing, idea-stomping wielder of power, they actually do want to help the rest of the bank succeed in delighting customers and clients.

It’s time to approach digital transformation as the new normal for banks. The best way to do that is to get compliance teams on board early — and the best way to accomplish that is by practicing micro-innovation. Micro-innovations are incremental changes that run parallel to proven processes, allowing nimble, modern organizations to try new approaches or strategies without sapping time and attention from what’s known to work.

Jeffery Kendall, the CEO of Nymbus and my colleague, says it best: “Modern organizations know that incremental innovation at a quick pace usually wins, compared to spending years developing a single product.”

The key for banks is to start talking with compliance when the bright idea is forming — not when the work is done. When teams are on the same page from the start, compliance can be an invaluable partner that can help balance risk throughout your micro-innovation strategy.

Align Teams From the Start
Start by including front-line staff and, yes, even compliance, when it’s time to set micro-innovations in motion. Long-tenured employees can be change generators. A recent study showed that the average American customer stays with the institution connected to their primary checking account for 14 years. Chances are, some of them have a relationship with tellers and lobby staff who understand their frustrations better than anyone and can bring these insights to the planning table.

Involving compliance from the outset can uncover what’s possible, rather than just reinforcing what can’t be done. By including compliance early, you can enliven achievable possibilities through micro-innovations. Start with monthly level-setting conversations and a deep dive into what projects and initiatives are on the horizon. Include teams in product development, sales, marketing and compliance so the bank is aligned on opportunities and goals from the start.

Find the Compliance Sweet Spot
Banks face a challenging operating environment; for compliance and risk, it’s also an opportunity to innovate. To support innovation in this landscape, compliance officers can ask themselves “How can we get where we want to go?” and “Where are the boundaries?”

In reality, most of a bank’s biggest processes, procedures and inefficiencies route through the risk compliance organizations at some point. This makes compliance staff natural advocates for change. Because they own the processes, empowered compliance officers are well positioned to understand nuance and identify opportunities for improvement and change.

Siya Vansia, chief brand and innovation officer at ConnectOne Bancorp in Englewood Cliffs, New Jersey, notes that when she stepped into her role, she “stopped hiring for innovation” and “started building internal advocates.” By working with compliance and others throughout the organization, Vansia creates a culture of innovation that looks for opportunities instead of tallying roadblocks.

With 70% of banks saying the Great Resignation has challenged their ability to carry out compliance requirements, some are considering unconventional hiring to fill jobs. As your institution prepares for 2023, prioritize retention and employee satisfaction to retain the talent you have on hand.

Digitize Progress, Not Inefficiencies
It can be tempting for banks to build an app and migrate longstanding inefficiencies onto a new digital platform. That’s a missed opportunity for positive change and customer loyalty.

“The future is about making banking better and connected, not simply having a cool app with a lot of features,” says Corey LeBlanc, cofounder and chief operating and chief technology officer of Fort Lauderdale, Florida-based Locality Bank.

As your institution identifies targets for micro-innovations, examine existing processes to ensure they still fit what your customers need and want. Look for opportunities to remove inefficient and cumbersome practices and simplify the customer experience. Even one or two steps in a process can add up over a customer journey; incremental improvements can have a significant impact on satisfaction. Compliance here can be a tool to identify inefficient processes. Leverage these same techniques to assess your people, resources and strategies. Start now with small changes that can have an innovative impact right away.

Your bank’s compliance office doesn’t have to be a “no” factory. Compliance teams can help banks build delightful experiences that matter to their customers — especially when they’re aligned on solving the problem from the start.

It can be daunting to assemble a 2023 strategic plan that hits the key performance indicators, solves the issues and makes digital a reality — all at once. So don’t. Instead, divide and conquer with micro-innovations that allow your institution to take small and mighty steps toward growth and change without delay.

RankingBanking: Fueling Successful Strategies

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Bank Director’s recent RankingBanking study, sponsored by Crowe LLP, identified the best public banks in the U.S. While their strategies may vary, these banks share a few common traits that enable their success. These include a consistent strategy and a laser focus on customer experience, says Kara Baldwin, a partner and financial services audit leader at Crowe. Training and organizational efficiency also allow these bankers to retain that customer focus through challenging times. In the year ahead, banks will need to manage through myriad issues, including credit quality, net interest margin management and new regulatory concerns. 

Topics include: 

  • Cultural Consistency 
  • Organizational Efficiencies 
  • Customer Centricity  

Click here to read the complete RankingBanking study.