Powering the Web of Partnerships to Make Innovation Easy

The right platform can help banks accelerate innovation, navigate the changing tech landscape and offer next generation solutions to customers. Public clouds are the platform to achieve these outcomes.

The cloud has moved from an ambiguous and amorphous buzzword to the platform that powers much of the innovation happening in the financial industry. Clouds, like Microsoft’s Azure, serve as the modern foundation banks, digital cores and other fintech firms use to build, develop, house and host their solutions. Participating in the cloud eco-system allows these players to seamlessly integrate with each other to expand their customer reach, take advantage of pre-built accelerators, and access third party fintech solutions. This ecosystem, with its multiple connection points, when housed on the same cloud means innovation can happen faster — at every level.

That accelerated innovation is crucial to small and mid-sized banks like Hawthorn Bank, a subsidiary of the Jefferson City, Missouri-based Hawthorn Bancshares. Banks must balance providing high-quality customer service and relevant products to customers while keeping up with nonbank and big bank competitors, but have limited staff and capacity for adding new tech projects and offerings. Hawthorn wanted to add more services and solutions for its business customers, like expedited online and in-person payments, which didn’t always fit into its traditional suite of offerings.

Hawthorn didn’t realize it at the time, but belonging to the right cloud network helped it address a number of their business customer’s pain points. The $1.7 billion bank relies on Jack Henry’s Banno digital banking platform, which now offers embedded invoicing and digital payment acceptance functionality through a partnership with Autobooks, as well as the full Autobooks small business solution as a seamless add-on to Banno platform users.

Both Autobooks and Jack Henry reside in Microsoft Azure, which made it easy for Banno to incorporate Autobooks as an additional service, as well as for Hawthorn to flip a switch to enable the service. And Autobooks proved to be a complementary, revenue-generating solution that Hawthorn Bank could bring to its business customers.

Examples like this show how coexisting in a cloud ecosystem can remove friction at all levels of development, deployment and integration. This has several benefits for banks and the end user. Being in the same cloud means that fintechs like Autobooks and service providers like Jack Henry can roll out new features and updates to their banks faster. It also helps banks control their third-, fourth- and fifth-party risks, which regulators have highlighted as a way to manage operational and cyber risk.

Selecting that cloud provider, however, starts with trusting the tech company as a secure partner who can meet regulatory expectations. Azure’s developers engage with more than 200 global financial regulators to meet compliance and security requirements, including hosting an annual summit to discuss new regulations and threats. Microsoft also accompanies regulators during audits at financial institutions. And Microsoft works with banks at the platform level to help them navigate projects with other partners, including audit, analytics and other digital banking overhauls and core integrations.

A relationship that close requires shared values — and increasingly, banks are noticing that some of their vendors may not be true partners. A number of large tech firms providing cloud, analytics and platform services to banks are also developing financial products on the side that could compete directly for the bank’s customers. Banks may find that their big-tech cloud provider doesn’t share their values or definition of partnership or compliance; they may treat private customer data differently. The ultimate risk for banks is that they partner with a firm that could one day become a competitor. Banks should look for cloud providers with a proven track record of staying focused on delivering value to the institution.

Community banks like Hawthorn are constantly looking for ways to serve customers better through innovative products and services, while keeping a close eye on costs and managing employee workloads. The right digital platform, powering their service providers and fintech partners alike, is key to unlocking and accelerating their digital transformation.

Furthering Digitization, Automation to Push Digital Transformation

 

Banks proved during the pandemic that they are capable of rapid digital transformation when absolutely necessary, with minimal interruptions. Now, they must build on those recent investments by evaluating what improvements will be most valuable to deliver an optimal customer experience.

With the multitude of touchpoints, both in-person and online, each step in a customer’s journey presents an opportunity for you to learn more and uncover insights. Banks can unlock insights with always-on customer engagement. Being agile and nimble will give them the ability to both react to changing market conditions — and get ahead of them.

Topics addressed include:

  • Evaluating Further Digitization
  • Shifting Traditional Mindsets
  • Importance of Staying Agile, Nimble

The Risk of Jaded Consumer Attitudes Toward Cybersecurity

The financial industry has increasingly been a target for cyberattacks as banks accelerated their digital transformation initiatives to maintain operations during the pandemic. While protecting against cybercrime has always been a top priority, the complexity and volume of attacks indicate that cybersecurity will remain one of the most important tasks banks face.

Consumers are feeling the impact, too. A recent CSI survey found that 85% of Americans reported cybersecurity concerns when it came to their personal confidential data. But that figure is down from 92% of Americans expressing cybersecurity concerns in a 2019 survey from CSI. The number of respondents not concerned about cybersecurity increased 7 percentage points compared to 2019, which could indicate that many consumers are becoming desensitized to cybersecurity risks.

It’s possible the size, scope and frequency of cybersecurity attacks makes these breaches appear abstract and distant to the average American. The constant media coverage could also contribute to a broader jaded attitude toward the seriousness of cybercrime risk that some consumers now hold.

When taking these factors into consideration, it is likely that a growing percentage of bank customers have fatalistic acceptance of cybersecurity breaches. As evidenced in CSI’s survey, this acceptance has resulted in lower security standards and more lenient practices in customers’ personal lives, which could ultimately increase the likelihood of their becoming victims of cyberattacks. And broader adoption of this mindset among consumers could have further adverse effects for financial institutions, making cybersecurity education a top priority for banks.

While cyberattacks may seem inevitable, there are consequences for financial institutions and consumers alike. There’s no doubt cyberattacks can cost banks money to resolve, but there are also reputational implications that can be harder to overcome. Banks that experience a cyberattack may face lower customer retention and adoption rates due to their tarnished reputation post-breach. According to CSI’s survey, nearly half of respondents (48%) strongly or somewhat agree they would leave their institution if it suffered a breach.

Additionally, consumers who are lax with cybersecurity awareness increase the risk they’ll fall victim to cyberattacks, including, but not limited to, identity theft and stolen card information. Due to the vast amount of time and resources often needed to resolve these threats, banking customers should take precautions to protect themselves. And to mitigate this risk and prevent attacks, institutions should, in turn, provide education and promote good cyber hygiene to their customers.

According to CSI’s survey, 69% of respondents claim they know what to do if their personal information is compromised. However, additional research suggests that consumers may be overconfident in this assessment. The Norton Cyber Safety Insights Report revealed that 46% of Americans don’t know what to do if their identity gets stolen, and 40% admit they don’t know how to protect themselves from cybercrime.

This data suggests an opportunity for banks to educate their customers about how to react when they notice suspicious activity and ensure that customers can easily obtain assistance if they suspect a breach. Banks that prioritize customer education have the potential to become experts in cybersecurity advice and resolution, which could expand their market reach.

As the frequency of cyberattacks continues to increase, it is vital that bank customers recognize the signs of cyber threats and react appropriately to suspicious activity. Their awareness is an important first step in the fight against cybercrime; as evidenced in the survey, awareness among consumers on the importance of cybersecurity needs to be higher than its current level. Banks should create tailored campaigns to educate their customers and provide actionable tips and insight on how to best protect themselves from attacks.

Looking ahead, banks should also embrace a layered approach to cybersecurity to strengthen their defenses, including continued customer education that reinforces the importance of cybersecurity awareness and best practices for staying secure. Banks that provide valuable education and promote cybersecurity awareness have the opportunity to increase new business through knowledge sharing while retaining current customers by building trust and maintaining strong brand reputation.

Business Banking’s Digital Transformation Pain Points

Digital bank transformation often comes with some fairly common pain points. For most banks, these can be distilled down to issues of speed, transparency and unification of systems.

Successfully addressing these issues starts at the strategy level. The industry’s rapid pace of change means banks should look further than just their usual 1 to 5-year outlooks. Institutions must focus on several key steps to craft the best strategy, approach and outcome. This ties back to fundamental questions: Where do we make our money? Where do we see our future growth? Where are we headed as an organization? It allows banks to gain a better understanding of their needs and ensure they are on the best path. And it often means taking a step back before proceeding.

Phase Zero
Creating the best plan requires perspective. This “Phase Zero” is critical for ensuring any project begins, and stays, on the right trajectory. In addition to curbing spending waste, it can greatly eliminate “shiny object syndrome” that plagues organizations during these projects. During this step, organizations should run front-end surveys to shed light on the possible outcomes, including some that may not have been considered prior to embarking on the digital journey.

A pitfall for many banks is taking a tech-first approach for these projects; the tech tends to become both the problem and solution for every issue. While technology is important, people are critical. People can be resistant to change, so approaching projects with a people-first viewpoint before beginning can preemptively turn a project’s nay-sayers into its biggest advocates. Conducting workshops or focus groups ahead of any project not only allows team members to become more comfortable with the changes, it can provide valuable input on their concerns.

Banking is a compliance-driven industry; many bankers struggle with the innovation mindset, even as regulators often push for new, more efficient processes. But the current interest environment has put fee income at a premium and competition for small business accounts continues to grow. The question for many banks is how to leverage what they already have to push further, while aiming for better efficiency at the same time.

Speed and Transparency
While the consumer bank side has made good strides when it comes to digital transformation, commercial and business banking have remained somewhat neglected. For these accounts, it often comes down to two main concerns: speed and transparency.

Successful digital transformation projects can involve a lot of trial and error. It is here that banks should learn a lesson from the tech world: be agile, fail fast, move on. Moving to a more agile mindset can result in outcomes perhaps once considered impossible. Banks must maintain compliance even as they push and innovate, and this requires speed.

Banks understand the need and benefits of making things easier for their customers, but the employee experience is equally as important. Tools and technology that allow employees to do their jobs faster and more efficiently means less time needed to help customers. It also means they can spend their time focused on other tasks, like new business.

Unification of Processes and Systems
Typically, there are multiple systems across a digital transformation project that must communicate. Conveying data between these systems can consume time and resources better spent on more strategic elements. For a commercial lender, answering calls on the status of a loan or opening a new account can require numerous queries and manual processes. While commercial loans may not have the compliance issues of consumer lending, the desired outcome is the same. It is about decision speed, convenience and transparency to the customer, and also for the team member working with the customer.

With so many disparate systems in a typical commercial lending process, this is often the biggest pain point for banks seeking a true 360° view of their business clients. Not only is it inefficient and makes tracking the process a challenge, it also makes it difficult to know where the data is located. Does that view include not only the loan process, but the treasury, deposits and personal accounts of the business owner? Is the bank even collecting this information? With so many different systems involved for a single commercial loan mapping, it is vital that banks bring that information into a transparent view that is easy to read and understand.

It is crucial that banks solve these specific points to grow their margin and fend off the competition. Both traditional and non-traditional competitors are growing, becoming a looming challenge on the commercial side. While client relationships are still very important, tech-enabled relationships are the future of the industry. Technology is the enabler, rather than a driver. Those banks that can thoughtfully, effectively innovate in these areas will be much better able to help their customers and thus, better positioned for success.

Community Banks and the Adoption of Real-Time Payments

The Covid-19 pandemic dramatically reshaped how community banks approach digital transformation.

This is largely in response to the shift in fundamental consumer behaviors and new technology, as Americans adapted to the realities of the pandemic. According to a report from Mojo, 44% of consumers who wait to adopt new technology have shifted to an “early adopter” stance. Additionally, 41% of “later adopters” stated they were likely to adopt new technology at a faster pace, even after the pandemic subsides.

Digital innovation is no longer an option for banks. Financial institutions must evaluate their digital products against consumer expectations. Leading the list of customer demands is access to more convenient and immediate payments. The pandemic’s remoteness made receiving and making immediate payments a necessity, accelerating the movement to real-time payments (RTP).

RTP are not a new concept; many countries have transitioned from paper-based payments and directly to real time. The U.S. has successfully worked with electronic payments, but is now behind in the global shift to real time. The Clearing House launched RTP in 2017; it experienced slow but steady growth initially but has been propelled by the pandemic more recently.

Addressing the growing need for immediate payments, the Federal Reserve announced plans for FedNow to streamline the clearing and settlement process. FedNow will enable customers to move funds instantly between accounts, pay bills and transfer between family and friends. Though FedNow garnered strong support from banks, it is not expected to launch until 2023 at the earliest.

No Time to Wait
Financial institutions are finding it difficult to wait for FedNow. Although vaccinations have blunted most of the impacts from the pandemic, the changes in consumer habits engendered by the pandemic persist — including demand for innovation in real-time payments. Consumers looked to technology for shopping, entertainment, paying bills and banking in general. A recent PYMNTS survey found that 24% of consumers would switch to financial institutions that offered RTP capabilities. It’s critical that banks recognize and react to this paradigm shift in payment by prioritizing RTP solutions.

Popular P2P payments apps like Venmo, PayPal Holdings, and other solutions from big tech companies underline that consumers are willing to adopt new technologies to meet a need. Now, these firms are offering credit cards, loans and even demand deposit accounts. (I even received an invitation to open a checking account from my cell phone company!) This should be a wake-up call to banks. In the same PYMNTS survey, researchers found 35% of consumers consider access to real-time payments as “extremely” important. These survey results reflect a growing trend and reality that financial institutions must recognize and address.

The race is now on to compete with non-traditional providers and megabanks to attract and retain tech-interested customers. Real-time payments are where consumers and businesses are headed. Financial institutions need to be fully engaged to connect to RTP or FedNow.

This is not an easy path for financial institutions that are used to making project decisions based on calculating the return on investment of the project alone. Strategic technology initiatives should be evaluated broadly, including the cost of doing business in banking. Large financial institutions have already moved forward to deliver top-notch digital services and experiences. To level the playing field, smaller institutions should look to technology savvy leaders and fintech partners to help deliver innovative solutions. Unheralded sources for fintech solutions are the bankers’ banks, which play a vital role for technology and as funding agents in RTP/FedNow and are offering innovative solutions to help community banks connect to real-time payments.

Changes in customer behavior and heightened demand for immediate payments driven by Covid-19 are here to stay; adoption of RTP will only continue to grow. In just the last year, real-time payments in the United States grew 69% year-over-year, according to Deloitte.

To act now, financial institutions should consider fintech partnerships to remain relevant in a dynamic financial and regulatory landscape. Financial institutions that tap into technology companies’ speed to market and access to a broader audience can approach RTP as a competitive advantage that distinguishes them in their local markets and attract new customers. Those taking a “wait and see approach” are already behind.

How to Modernize Your Payments Strategy

2020 induced widespread digital transformation in response to the coronavirus pandemic.

In payments, we saw the rise of options for contactless payments, digital wallets, P2P transfers and more. The challenge for banks was that consumers often did not have to go through their bank to use any of these solutions.

The developments in the payment space over the past year make one thing clear: Banks should keep up with the newest available consumer technology to retain and attract customers, and modernize their digital payments strategy for future success as well.

Consumer demand remains strong, and the experience companies provide matters more than ever. After leaning so heavily on digital solutions for the past year and a half, they expect everything to be easy and instant. It is now relatively easy to find payment apps that provide real-time payments, P2P, bill pay and more. Banks that don’t offer similar solutions runs the risk of losing market share to non-banks that do.

Customers are weighing their banking experience against their experience with fintech apps as well as  any other experience they have when shopping online, ordering food or taking a rideshare. Any good customer experience — no matter the industry — is one that the bank must now measure up to.

Take artificial intelligence (AI) and machine learning, for example. While not every financial institution is using AI and machine learning today, retailers like Amazon.com use AI and machine learning to predict consumer behavior, knowing what they need and when they will need it. They estimate when consumers will repurchase a product or try something new. A bank that is not doing the same is falling behind in providing the experiences that many consumers are growing accustomed to.

Where to Start?
By leveraging technologies like AI and machine learning, banks can use the tremendous wealth of customer data at their disposal to provide a more personalized experience. This is a tremendous advantage over non-bank competitors that do not have access to the same consumer information. It can seem like a challenge to effectively put customer data to use, but there are a few steps banks should take to make the change a successful one.

First, a bank must set clear goals for what it wants to achieve when updating its payment platform or adding a technology like AI and machine learning. For most, the goal will be to provide a better experience, but it is helpful to dig even deeper than that. Ask: Do we want better customer satisfaction? More engagement with the platform? More bill pay users? More account-to-account (A2A) transactions? More P2P transactions? Be as specific as possible with goals, as these form the roadmap for the remainder of the process.

Once goals are set, find the partner that can help achieve those goals. Look for a partner that shares the bank’s vision for payments and has the right skill sets and capabilities to achieve those goals. Finding the right vendor partner will ensure the bank is successful in the end.

Clear goals and a like-minded vendor ensure that the tech a bank uses can help meet its goals. Just as Amazon uses AI and machine learning to predict a consumers’ purchases or recommend a product, banks can predict customers’ payment habits or make proactive payment recommendations to manage their financial health. The use cases of AI and machine learning are versatile, and can serve many different purposes to help banks reach their unique goals.

Finally, do not lose sight of the future. It is easy for banks to get concerned with what will make them successful now, but keep looking ahead. Work with your vendor to think about where both the industry and your bank are going. Be sure to choose solutions that can grow and change with the bank and its customers for years to come, rather than focusing too heavily on the here and now.

Change can be intimidating, but following the right steps to implement a tool like AI will ensure success by creating a better customer experience. Revitalizing your bank’s digital payment strategy is a process, but done right, the stronger digital relationships you build with your customers will be worth it.

Principles to Drive Digital Banking Transformation

In the earliest moments just after midnight on January 1 each year, millions of people worldwide establish resolutions. While I won’t bore you with my resolution for 2020, I will admit that it was not to spend 11 months of the succeeding year working from a makeshift office in my bedroom or making sure my 6-year-old son was always adorned with a mask for any non-familial human interaction. Suffice to say, last year provided us all with unsuspected challenges and learning opportunities — banks squarely included.

The most impactful learning for banks wasn’t a novel way of connecting borrowers with capital or a new method of taking deposits. In fact, it wasn’t a lesson learned by banks at all, but instead by their customers. While banks have seen foot traffic into the branches decrease at a predictably steady rate, watched ATM transactions hold strong and cheered the increasing usage of online banking, every new medium they introduced to serve clients inevitably became an “and” versus an “or.” Allow me to explain: When ATMs made their way onto the scene in the 1970s, bank customers didn’t stop walking into branches. They leveraged both channels. Same for interactive voice response (IVR), digital banking and mobile banking.

The pandemic changed that. For the first time, it forced banks to close their doors; customers had to stop straddling the line between the branch and digital realms. The choice had finally been made for them. In 2020, customers learned that they can truly have a digital-only relationship with their bank.

Now, more than ever, the crunch is on for banks. Digital banking trends are consistently increasing and the competition is coming in from all sides. Between the moneycenter national banks, a seemingly endless wave of fintechs like Chime and Revolut, and the ever-looming threat of technology firms like Alphabet’s Google and Amazon.com jumping into the mix, how can banks compete? It’s time for a digital transformation.

Where to begin?
There are a number of paths to success in a digital transformation — and an untold figure that lead to failure. Whether your bank starts with the core and works its way out to the digital banking service, or vice versa,– there are a few driving principles to keep in mind.

  1. The cloud provides unparalleled economies of scale. If your bank isn’t taking advantage of a cloud-based solution to realize both the economic benefits and the cutting-edge innovation made available by the hyperscalers (architecture built to scale appropriately as demand fluctuates throughout the day), your institution risks falling further behind.
  2. Data is a bank’s most valuable asset. Unfortunately, it is also the most underutilized. A digitally transformed bank will replace the personal connection of the branch visits by being contextually relevant at the exact right moment, with the proper actionable message to each individual client. Even if they never quite get there, this is the oasis in the desert of commoditized banking relationships and should be every digital transformation journey’s North Star.
  3. Determine how much of the digital banking experience you want to own, really. Many banks strive to create a unique digital experience for their clients, but that uniqueness comes at a mighty expense in both time and money for the duration of its existence. The importance of choosing the technology partner that aligns most closely with your bank’s desired balance of technical prowess and partnered innovation can’t be overstated.
  4. Look for opportunities to leverage your institution’s banking APIs to extend its reach beyond traditional domains. Through initiatives like embedded banking, banks are able to establish mutually beneficial partnerships to empower non-banking services and leverage the functionality of their bank partner. Embedded banking is a growing way for banking services to be integrated into traditionally non-bank websites and mobile applications, like Shopify’s business account offering as part of their seller services. Embedded banking opens the door to perform simple tasks like view account balances, make payments or even originate new deposits and loans.

Even just 10 years ago, these options weren’t available to most institutions. That’s no longer the case. Banks no longer have to resign themselves to providing a mediocre, commoditized digital experience — in fact, it’s the last thing they can afford to do. While the pandemic taught us many things, the most pressing lesson for banks is that the time for a digital transformation is now.

How Banks Can Beat Big Tech at Its Own Game

For the last decade, headline after headline has predicted the demise of banks at the hands of the tech giants. Why? One word: data.

Finance is — and always has been — a data-dependent business. Providing a commercial loan relies on knowing how likely the would-be borrower is to default, a rudimentary data-processing task that is exactly the expertise that Big Tech has. These companies, which include Amazon.com, Apple, Facebook and Alphabet’s Google, can generate and leverage large-scale, granular and real-time data on their users, and have used this to build the largest and most valuable businesses in the world.

By comparison, many banks still don’t fully appreciate the value of their data, and have yet to generate meaningful financial returns from it. This is because most of their data is siloed and sprawled throughout the organization across customer onboarding, marketing, financial crime and fraud and credit risk. Instead of being regarded as a valuable commodity, data is seen as a potential temptation for hackers and a cost that needs to be managed.

If banks can learn to leverage their data like these technology giants — embracing digital transformation to lend faster, smarter and more to businesses — they can beat Big Tech at its own game. Unlike Big Tech, banks have long-worked in regulated environments that require all participants to follow the same rules. As a result, they figured out how to work collaboratively with regulators at speed and at scale, and established robust processes and governance around areas such as data ethics and privacy. This has helped build consumer trust and burnished relationships.

This proved to be a powerful combination over the last 15 months as Covid-19 forced states and businesses to temporarily shut down. The government turned to banks, not Big Tech, to help support businesses, via initiatives such as the Paycheck Protection Program and the Main Street Lending Program.

West Reading, Pennsylvania-based Customers Bancorp rose to this challenge and leveraged OakNorth’s ON Credit Intelligence Suite to identify which industries in its portfolio were more stressed and which metrics it should use to determine risk profiles. Data helps banks such as Customers identify overlooked market sectors and business types that are good credits, but could be difficult for lenders to take on without the data or analytics to make an informed decision. Embracing technology to leverage data effectively allowed Customers Bancorp to provide over 100,000 loans and become the sixth-most active PPP lender in the US – a substantial feat for a bank with $18.8 billion in assets.

Regulatory know-how, proprietary data sources and specialized services offer ways for banks to compete with — or indeed, collaborate — with Big Tech. This has been demonstrated through partnerships such as Goldman Sachs Group and Apple, and JPMorgan Chase & Co. and Amazon. Leveraging data and digital transformation will empower banks to discover gaps in the market and even attract borrowers which Big Tech is unable to. After all, not every business will be keen on the idea of borrowing from the same company that helps them share goofy photos with their friends.

Tailor Innovation With Fintech, Bank Collaborations

The Covid-19 pandemic reshaped the way that community banks think about their digital products and the expectations that consumers have for them. Digital transformation is no longer an option – it is a necessity.

In fact, 52% of consumers have used their financial institution’s digital banking services more since the start of the pandemic, according to BAI Banking Outlook. However, the research also found that only 61% of consumers feel their community bank understands their digital needs, compared to that 89% of direct bank consumers and 77% of large bank consumers.

As customers’ ever-growing expectations are not being met, banking teams are also concerned that their digital tools may be missing the mark. For many, the investments into digital solutions and tools are not having as wide as an impact as expected; on occasion, they do not hold any true benefit to their current and prospective account holders.

In addition, many community banks find themselves innovating for the sake of innovating, rather than solving real problems that exist within their target market. The communities that these banks serve are distinctive and can present unique challenges and opportunities, unlike those as little as a state away. Community banks must consider practical, powerful digital tools that benefit their one-of-a-kind customer base.

Rather than a product-driven approach to development, community banks must look to the niche needs within the market to discover areas to innovate. Identifying obstacles in the financial lives of existing customers and prospects ensures that community banks are working to solve a problem that will alleviate pain points for accountholders. But, with limited time and resources, how can this be accomplished?

Fintech-Bank Partnerships
Community banks can attract new customers, expand existing relationships and improve customer experience within the specific communities that they serve by implementing fintech solutions that are  specialized to the individual market or demographic.

It makes sense. Fintech-bank partnerships can pair a bank’s distinct market opportunities with technology that can effectively unlock niche verticals. We collaborated with five community banks who were searching for a responsive web app for digital commercial escrow and subaccounting that would eliminate the manual processes that limited their ability to handle commercial escrow and subaccounting accounts. Engaging with a fintech and leveraging extensive resources that are dedicated to developing and improving upon innovative technology gave these institutions a solution built with their companies in mind.

These partnerships between fintechs and banks are also more financially feasible — many community banks are unable to develop similar solutions in-house due to understaffing or lack of resources. With the help of a fintech, the institution can implement solutions faster and reach profitable clients sooner.

Fintech and bank collaborations are changing the way that community banks innovate. Together, they can expand the potential of a solution, both in its specialization and its capability, to better meet customer needs. Banking teams can provide the digital tools that their clients need and attract desirable clients that they hope to serve.

How Community Banks Can Drive Revenue Growth During the Pandemic

Community banks are the beating heart of the American banking system — and they’ve received a major jolt to their system.

While community banks represent only 17% of the US banking system, they are responsible for around 53% of small business loans. Lending to small businesses calls for relationship skills: Unlike lending to large firms, there is seldom detailed credit information available. Lending decisions are often based on intangible qualities of borrowers.

While community banking is relationship lending at its very best, the pandemic is forcing change. Community bankers have been caught in the eye of the Covid-19 storm, providing lifesaving financial services to small businesses. They helped fuel the success of the Paycheck Protection Program, administering around 60% of total first wave loans, according to Forbes. This was no small feat: Community banks administered more loans in four weeks than the grup had in the previous 12 months.

However, as with many businesses, they have been forced to close their doors for extended periods and move many employees to remote arrangements. Customers have been forced to move to online channels, forming new banking habits. Community banks have risen to all these challenges.

But the pandemic has also shown how technology can augment relationship banking, increase customer engagement and drive revenue growth. Many community banks are doing things differently, acknowledging the need to do things in new ways to drive new revenues.

Even before Covid-19, disruptive forces were reshaping the global banking landscape. Customers have high expectations, and have become accustomed to engaging online and through mobile services. Technology innovators have redefined what’s possible; customers now expect recommendations based on their personal data and previous behavior. Many believe that engaging with their bank should be as easy as buying a book or travel ticket.

Turn Data into Insights, Rewards
While a nimble, human approach and personal service may offset a technical shortcoming in the short run, it cannot offset a growing technology debt and lack of innovation. Data is becoming  the universal driver of banking success. Community banks need to use data and analytics to find new opportunities.

Customer data, like spending habits, can be turned into business insights that empower banks to deliver services where and when they are most needed. Banks can also harness the power of data to anticipate customer life moments, such as a student loan, wedding or a home purchase.

Data can also drive a relevant reward program that improves the customer experience and increases the bank’s brand. Rewards reinforce desired customer behavior, boost loyalty and ultimately improve margins. For example, encouraging and rewarding additional debit transaction activity can drive fee income, while increasing core deposits improves lending margins.

The pandemic also highlights the primacy of digital transformation. With branches closed, banks need to find new ways to interact with customers. Digital services and digitalization allow customers to self-serve but also create opportunities to engage further, adding value with financial wellness products through upselling and cross-selling. In recent months, some community banks launched “video tellers” to offset closed branches. Although these features required investment, they are essential to drive new business and customers will expect these services to endure.

With the right digital infrastructure, possibilities are limited only by the imagination. But it’s useful to remember that today’s competitive advantage quickly becomes tomorrow’s banking baseline. Pre-pandemic, there was limited interest in online account opening; now it’s a crucial building block of an engaging digital experience. Banking has become a technology business — but technology works best with people. Community banks must invest in technologies to augment, deepen and expand profitable relationships.

Leverage Transformative Partnership
Technology driven transformation is never easy — but it’s a lot easier with an expert partner. With their loyal customers, trusted brands and their reputation for responsiveness, community banks start from a strong position, but they need to invest in a digital future. The right partner can help community banks transform to stay relevant, agile and profitable. Modern technologies can make banking more competitive and democratic to ensure community banks continue to compete with greater customer insights, relevant rewards programs and strong digital offerings.

When combined, these build on the customer service foundation at the core of community banking.