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.

Maximizing Profitability Potential Via Push Notifications

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Implementing digital fintech solutions is critical for banks seeking to grow their customer base and maximize profitability in today’s increasingly competitive industry.

To engage account holders, banks must explore digital-first communication strategies and mobile-friendly fintech products. Push notifications are an often overlooked, yet powerful, tool that enables financial institutions to proactively deliver important messages to account holders that earn higher engagement rates than traditional communication methods.

Push notifications are delivered directly through a banking app and sent to account holders’ mobile devices and can provide timely alerts from a financial provider. While push notifications can act as a marketing tool, they can also convey critical security alerts via a trusted communication channel — as opposed to mediums that are vulnerable to hacks or spoofing, such as email or SMS texts. Push notifications can be used for personalized promotional offers or reminders about other financial services, such as bill pay or remote check deposit, transaction and application status updates, financial education and support messaging, local branch and community updates and more.

Banks can also segment push notifications using geo-location technology, as long as customers get permission, to alert account holders at a time, place and setting that is best suited to their needs. Banks can customize these notifications to ensure account holders receive messages notifying them of services that are most relevant to their financial needs.

When leveraged effectively, push notifications are more than simple mobile alerts; they’re crucial tools that can significantly increase account holder engagement by nearly 90%. Push notifications can be more effective in reaching account holders compared to traditional marketing methods like email or phone calls and receive engagement rates that are seven times higher.

Boosting customer engagement can ultimately have a significant impact on a bank’s profitability. Studies show that fully engaged retail banking customers bring in 37% more annual revenue to their bank than disengaged customers. Enhancing ease of use while offering greater on-demand banking services that consumers want, banks can leverage push notifications to encourage the use of their banking apps. Enabling push notifications can result in a 61% app retention rate, as opposed to a rate of 28% when financial providers do not leverage push notifications.

Bank push notifications come at a time when consumer expectations for streamlined access to digital banking services have greatly accelerated. In a study, mobile and online access to bank accounts was cited by more than 95% of respondents as a prioritized banking feature.

This focus forces financial institutions to explore fintech solutions that will elevate their customers’ digital experience. Traditional institutions that fail to innovate risk a loss of market or wallet share as customers migrate to technologically savvy competitors. U.S. account holders at digital-only neobanks is expected to surge, from a current 29.8 million to 53.7 million by 2025.

Banks should consider adding effective mobile fintech tools to drive brand loyalty and reduce the threat of lost business. Push notifications are a unique opportunity for banks to connect with their audience at the right moments through relevant messaging that meets individual account holder needs.

Real-time and place push notifications can also be a way for banks to strengthen their cross-selling strategies with account holders. They can be personalized in a predictive way for account holders so that they only offer applicable products and services that fit within a specific audience’s needs. This customization strategy can drive revenue while fostering account holder trust.

To gain insight on account holders’ financial habits and goals, institutions can track user-level data and use third-party services to tailor push notifications about available banking services for each account holder. Institutions can maximize the engagement potential of each offer they send by distributing contextually relevant messaging on services or products that are pertinent to account holder’s financial needs and interests.

Push notifications are one way banks are moving toward digital-first communication strategies. Not only do push notifications offer a proactive way to connect with account holders, they also provide financial institutions with a compelling strategic differentiator within the banking market. Forward-looking financial institutions can use mobile alerts to strengthen account holder relationships, effectively compete, grow their customer base and, ultimately, maximize profitability.

How Bank Executives Can Address Signs of Trouble

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As 2021’s “roaring” consumer confidence grinds to a halt, banks everywhere are strategizing about how best to deal with the tumultuous days ahead.

Jack Henry’s annual Strategic Priorities Benchmark Study, released in August 2022, surveyed banks and credit unions in the U.S. and found that many financial institutions share the same four concerns and goals:

1. The Economic Outlook
The economic outlook of some big bank executives is shifting. In June 2022, Bernstein Research hosted its 38th Annual Strategic Decisions Conference where some chief executives leading the largest banks in the U.S., including JPMorgan Chase & Co., Wells Fargo & Co. and Morgan Stanley, talked about the current economic situation. Their assessment was not entirely rosy. As reported by The New York Times, JPMorgan Chase Chairman and CEO Jamie Dimon called the looming economic uncertainty a “hurricane.” How devastating that hurricane will be remains a question.

2. Hiring and Retention
The Jack Henry survey also found 60% of financial institution CEOs are concerned about hiring and retention, but there may be some hope. A 2022 national study, conducted by Alkami Technology and The Center for Generational Kinetics, asked over 1,500 US participants about their futures with financial institutions. Forty percent responded they are likely to consider a career at a regional or community bank or credit union, with significant portion of responses within the Generation Z and millennial segments.

3. Waning Customer Loyalty
The imperative behind investing in additional features and services is a concern about waning customer loyalty. For many millennials and Gen Z bank customers, the concept of having a primary financial institution is not in their DNA. The same study from above found that 64% of that cohort is unsure if their current institution will remain their primary institution in the coming year. The main reason is the ease of digital banking at many competing fintechs.

4. Exploding Services and Payment Trends
Disruptors and new competition are entering the financial services space every day. Whether a service, product or other popular trend, a bank’s account holders and wallet share are being threatened. Here are three trends that bank executives should closely monitor.

  • The subscription economy. Recurring monthly subscriptions are great for businesses and convenient for customers: a win-win. Not so much for banks. The issue for banks is: How are your account holders paying for those subscriptions? If it’s with your debit or credit card, that’s an increased source of revenue. But if they’re paying through an ACH or another credit card, that’s a lost opportunity.
  • Cryptocurrency. Your account holders want education and guidance when it comes to digital assets. Initially, banks didn’t have much to do with crypto. Now, 44% of execs at financial institutions nationwide plan to offer cryptocurrency services by the end of 2022; 60% expect their clients to increase their crypto holdings, according to Arizent Research
  • Buy now, pay later (BNPL). Consumers like BNPL because it allows them to pay over time; oftentimes, they don’t have to go through a qualification process. In this economy, consumers may increasingly use it to finance essential purchases, which could signal future financial trouble and risk for the bank.

The Salve for It All: The Application of Data Insights
Banks need a way to attract and retain younger account holders in order to build a future-proof foundation. The key to dealing with these challenges is having a robust data strategy that works around the clock for your institutions. Banks have more data than ever before at their disposal, but data-driven marketing and strategies remains low in banking overall.

That’s a mistake, especially when it comes to data involving how, when and why account holders are turning to other banks, or where banks leave revenue on the table. Using their own first-party data, banks can understand how their account holders are spending their money to drive strategic business decisions that impact share of wallet, loyalty and growth. It’s also a way to identify trouble before it takes hold.

In these uncertain economic times, the proper understanding and application of data is the most powerful tool banks can use to stay ahead of their competition and meet or exceed account holder expectations.

7 Key Actions for Banks Partnering With Fintechs

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A longer version of this article can be read at RSM US LLP.

Many banks are considering acquiring or partnering with existing fintechs to gain access to cutting-edge technologies and remain competitive in the crowded financial services marketplace.

There are many advantages to working with fintech partners to launch newer services and operations, but failing to properly select and manage partners or new acquisitions can have the opposite effect: additional risks, unforeseen exposures and unnecessary costs. Partnership opportunities may be a focus for leadership teams, given the significant growth and investments in the fintech space over the last decade. Consumer adoption is up: 88% of U.S. consumers used a fintech in 2021, up from 58% in 2020, according to Plaid’s 2021 annual report; conventional banks’ market share continues to drop.

Planning is everything when partnering with or acquiring a fintech company. Here are seven key actions and areas of consideration for banks looking for such partnerships.

1. Understand your customers on a deeper level: The first step before considering a fintech partner or acquisition is to understand what your consumers truly want and how they want those services delivered. Companies can pinpoint these needs via surveys, customer focus groups, call centers or discussions and information-gathering with employees.

Organizations should also explore the needs of individuals and entities outside their existing customer bases. Gathering data that helps them learn about their customers’ needs, lifestyle preferences and behaviors can help banks pinpoint the right technology and delivery channel for their situation.

2. Understand leading-edge technological advancements: While fintech partnerships can give a traditional bank access to new cutting-edge technologies, leaders still need to understand these technologies and the solutions. This might involve helping teams gain fluency in topics such as artificial intelligence that can improve credit decisioning, underwriting processes and fraud detection, automation that speeds up service delivery responses and customer onboarding, data analysis and state-of-the-art customer relationship management tools and more.

3. Prepare for culture shock: Fintechs, particularly those in start-up mode, will be used to operating at a different pace and with a different style than typical banks. Fintechs may behave more entrepreneurially, trying many experiments and failing often and fast. This entrepreneurial mindset has implications for how projects are organized, managed, measured, staffed and led.

4. Take a 360-degree view of risk: Fintechs may not have been subject to the same strict compliance as banks, but as soon as they enter a partnership, they must adhere to the same standards, regulations and controls. Any technology-led, third-party partnership comes with the potential for additional risks in areas such as cybersecurity, data privacy, anti-money laundering and myriad other regulatory compliance risks. Banks need to have a solid understanding of the viability and soundness of the fintech they might partner with, as well as the strength and agility of the leadership team. They should also ensure the new relationship has adequate business continuity and disaster recovery plans.

From vendor selections and background checks to mutual security parameters and decisions around where servers will be located, all potential exposures are important for banks to assess. A new fintech relationship could open new avenues for outside threats, information breaches and reputation damage.

5. Don’t underestimate the management lift needed:Acquiring or partnering with a fintech or third-party vendor involves significant management work to meet customer needs, keep implementation costs in line and merge technologies to ensure compatibility between the two organizations.

Employees at each company will likely have different approaches to innovation, which is one of the major benefits of teaming up with a fintech company; your organization can rapidly gain access to cutting-edge technologies and the overall agility of a startup. But management needs to ensure that this union doesn’t inadvertently create heartburn among employees on both sides.

6. Build ownership through clear accountability and responsibility: A fintech partnership requires management and oversight to be effective. Banks should consider the ownership and internal staffing requirements needed to achieve the full value of their investment with a fintech organization.

Don’t underestimate the time and effort needed to develop and deploy these plans. Based on the automation levels of the solution implemented, these resources may need dedicated time on an ongoing basis for the oversight and operations of the solution as well.

7. Stick to a plan:While in a hurry to launch a service, leadership teams may gloss over the whole steps of the plan and critical items may fall off. To combat this, banks should have a robust project plan that aligns with the overall innovation strategy and clear definitions around who is responsible for what. A vendor management program can help with this, along with strategic change management planning.

Balancing the demands of innovation with a thorough and thoughtful approach that considers customer behaviors, risks, resources and plans for new solutions will make fintech partnerships go as smooth as possible. Institutions would do well to incorporate these seven key areas throughout the process of a potential third-party partnership to ensure the maximum return on investment.

6 Tactics to Win Customer Engagement

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One topic that’s commonly discussed in financial institution boardrooms is how to serve customers and meet their expectations. This topic is especially pertinent now that consumer expectations are at an all-time high.

Bank consumers want delightful, simple customer experiences like the ones they get from companies like Uber Technologies and Airbnb, and they’re more than willing to walk away from experiences that disappoint. As a result, financial institutions are under immense pressure to engage and retain customers and their deposits. Bankers cannot afford to stand idly by and watch a generation of customers increasingly lean on fintechs for all their financial needs.

Fortunately, your financial institution can take action to win the battle for customer engagement — some are already doing so with initial successes. Incumbents like Bank of America Corp. use financial assistants powered by artificial intelligence to assist customers, and fintechs such as Digit offer an auto savings algorithm to help people meet their financial goals. These efforts and features bring the disparate components of a consumer’s financial life together through:

  • An intense focus on the user experience.
  • Highly personalized experiences.
  • “Do it for me” intelligent features.
  • The right communications at the right time.
  • Intuitively-built and highly engaging user interfaces.

How can your bank offer experiences like these? It comes down to equipping your financial institution with the right set of data and tools.

1. Data Acquisition: Data acquisition is the foundation of customer experience.
The best tools are based on accurate and comprehensive data. The key here is that your bank needs to acquire data sourced not only from your institution, but to also allow customers to aggregate their data into your experience. The result is that you and your customers can see a full financial picture.

2. Data Enrichment: Use data science to make sense of unstructured data.
Once your bank has this data, it’s critical that your institution deploys an enrichment strategy. Advanced data science tactics can make sense of unstructured and unrecognizable transaction data, without needing to add data scientists to bank staff. Transforming these small and seemingly unimportant bits of the user experience can have a huge overall effect.

3. Data Intelligence: Create personalized and timely user experiences from the data.
By consistently looking at transactional data, data intelligence tools can identify different patterns and deliver timely, unique observations and actionable insights to help consumers improve their financial wellbeing. These are the small, but highly personalized user experiences that fintechs have become known for.

4. Data Productization: Provide a user interface with advanced pre-built features.
One of the most difficult things for a bank to pull off is data productization. The right tooling and advanced, pre-built features allow banks to unite data and analysis and encapsulate it into intuitively designed digital experiences. This way, consumers can engage naturally with your bank and receive relevant, personalized products and services they need from you. Digital notifications can be part of your strategy, and many customers opt in to receive them; case in point is that 90% of the customers using a Goals-Based Savings application from Envestnet opt into notifications.

5. AI Automation: Utilize AI to enhance self-service capability.
Wouldn’t it be nice if you could ask someone to cancel a check at anytime? Or type in a question and get the answer on the spot? Tools like AI-powered virtual assistants with an automation layer make it simple for consumers to do all this and more, wherever they are. Financial institutions using the Virtual Financial Assistant from Envestnet have automated up to 87% of contact center requests with a finance domain-specific AI.

6. Trusted Partners: Leverage partner to compete.
Competing with fintechs often means, “If you can’t beat ‘em, join ‘em.” But leveraging trusted partners is a tried and true strategy. Your bank’s partner could be a traditional financial institution you’ve pooled assets with to create and embed financial technology deep into your experience. It could be a fintech focused on business-to-business capabilities. Or it could be a partner offering world-class data aggregation as well as analytics and innovative tools to enhance your customer experience.

Fintechs have done a phenomenal job at connecting the disjointed components of consumers’ financial lives through amazing customer experiences. Your financial institution can do the same. By using the right data and tools and partnering up, your bank can deliver the personalized experiences consumers expect, delight and empower them to take control of their finances and future.

5 Ways Banks Can Keep Up With Consumer’s Digital Demands

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As technology progresses, more financial institutions will face scrutiny from consumers seeking features powered by advanced digital banking platforms.

Consumers are actively searching for banks that value them by giving them remote, customized experiences. Many banks have seen record growth in digital banking usage in recent years, according to a Deloitte Insights report. While this might create a challenge to many financial institutions, it can also be an opportunity to further build relationships with consumers. Below are five things banks should do to proactively respond to customers’ digital needs in their next stage of growth.

1. Analyze Consumer Data
Gaining real-time insights from consumer data is one way banks can start improving customer experiences. Analyzing data allows banks to see how, when and where consumers are spending their money. This data is a gold mine for creating custom approaches for individuals or recommending products that a consumer could benefit from. This electronic trail of customer information can ultimately lead to more personalized financial strategies, better security features and more accurate insights as to what digital banking features will be needed in the future.

2. Humanize The Digital Experience
Financial Institutions are being given a chance to humanize their digital banking platforms. Banks can build and strengthen relationships with their consumers by customizing their mobile experience — right down to the individual. Listening to feedback and valuing a customer’s experiences can create productive and useful relationships. It is important to take a customer-centric approach, whether in-person or through digital platforms. Financial institutions can use consumer purchase history to create custom reward offerings — like 10% off at their favorite coffee shop or rewards on every purchase — that lay the foundation for a bespoke, valuable experience.

3. Understand Digital Trends
According to Forbes, 95% of executives say they are looking for new ways to engage their customers. Financial institutions that remain complacent and tied to their legacy systems can expect to fall behind their competitors if they do not keep up with advancing digital trends. Consumers increasingly shop around and compare account offerings and benefits; they are choosing customizable, digital solutions. Banks that don’t, or refuse to, keep up with digital trends will lose these relationships. As technology expands, so do the needs of consumers —it is up to banks to keep up with those needs.

4. Utilize Advance Card Features
Technology’s rapid advancement means that the digital features that banks can take advantage of have also advanced. Consumers want features that correspond with their everyday financial management strategies and spending. Virtual cards with state-of-the-art security features are just one of the many digital solutions available to banks. Adjustable settings, like the ability to block and unblock merchants, create family hubs, set spending limits for individuals and family members, are just a few of the ways that banks can differentiate their card programs.

5. Keep Evolving
Many banks use legacy systems that are outdated, expensive and difficult to uproot. This technology strategy holds them back from being on a level playing field with their competitors. However, partnering with fintechs that can integrate with their current systems is one way that banks can keep up with digital trends — without the upfront cost of installing an entirely new system.

According to a FICO study, 70% of U.S. bank customers report that they would be “likely” or “very likely” to open an account at a competing provider if that provider offered services that addressed their unmet needs. Today, consumers do not just prefer digital banking: They expect it. Banks that cannot provide their consumers with customizable digital options are at a disadvantage.

How Bankers Can Use Relativity to Power Tech Decisioning

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“A good plan, violently executed now, is better than a perfect plan next week.” – Gen. George Patton Jr.

Banking has been around for thousands of years, but digitization of the industry is new and moving fast. The changes have left some bankers feeling stuck, overwhelmed with the sheer number of technology choices, and envious of competitors rocketing into the future.

Back in the boardroom, directors are insisting the team design its own rocket, built for speed and safety, and get it to the launch pad ASAP. The gravity of this charge, plus the myriad other strategic initiatives, means that the bank is assessing its tech choices and outlook with the same exhaustive analytical vigor as other issues the bank is facing, and at the same speed. This is a subtle, but significant, error.

Based on experience leading both financial institutions and fintechs, I’ve seen how a few firms escaped this trap and outperformed their competitors. The secret is that they approach tech decisions on a different timescale, operationalizing a core principle of Albert Einstein’s theory of special relativity known as time dilation: that, put very simply, time slows down as velocity increases.

How can executives apply relativity to banking?
Our industry exercises its colossal analytical muscles every day, but this strength becomes a weakness when we overanalyze. Early in my career, I reported to a credit officer who routinely agonized over every small business loan. Each one seemed unique and worthy of lengthy discussion. He would only issue a decline after investing many hours of the team’s time analyzing together; the team lost money on loans the bank never made.

The same mistake can occur when banks assess their fintech options. Afraid of missing a risk factor and anxious to please the board, executives fall into the trap of overanalyzing. There’s good reason to justify this approach; major projects like a core conversion are truly worthy of great care and deliberation.

But most tech decisions are not as risky and irreversible as a new core. Just as we can download apps to a phone and later remove them, the industry has embraced the concept popularized by Amazon’s former CEO Jeff Bezos of a “two-way door” to deliver turnkey solutions that are fully configured and ready to use in a matter of hours. Developers are writing new code and deploying to the cloud continuously, with no downtime. A few companies, including Cirrus, even offer money-back guarantees, to eliminate a bank’s perceived risk from the decision.

Tech moves fast. What can happen when a bank accepts this challenge and invests in rapid tech decisioning? There are three important aspects of time dilation to consider:

1. Even at only a slightly higher velocity, it has been empirically proven that time marginally slows down. The rate of change in time increases parabolically as velocity increases.
This means that increasing the speed with which your bank makes decisions, even a tiny bit, pays off immediately, and the learning curve will magnify payoffs as the bank improves its decision-making process. There’s a significant compounding effect to this discipline.

2. When traveling at faster speeds, time appears to be passing no differently; to an outside observer, your clock is ticking slower.
Once the team is accustomed to making good tech decisions rapidly, its normative behaviors may seem odd to outsiders. Your colleagues in other internal departments who have become jaded by previous approval cycles may not be able to believe how rapidly your bank is now able to stand up new solutions. Your firm will accomplish much more than before.

3. The faster your velocity, the more mass you accrue.
Making decisions quickly frees up time for more decisions. Decision-making is a force multiplier. It’s not just your clients who will appreciate the upgrade — your vendors will be energized as well, and far more likely to treat you as a valued partner than a counterparty.

Intrinsically, banking exists to solve problems, but to solve problems, we must make decisions. Decision-making is a core competency of good banking. The bankers who are winning — and, candidly, having a lot more fun these days — approach their tech decision process with the same care and weight as their credit decision process. They no longer make tech decisions on a banking timetable; instead, they are creating time by moving faster.

A Look Ahead to 2022: The Year of Digital Lending

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2021 has been a year of challenge and change for community bankers, especially when it comes to lending.

Banks modernized and digitized significant portion of loan activity during the pandemic; as a byproduct, customers have begun to realize the inefficiencies in traditional lending processes. Community financial institutions that hope to stay ahead in 2022 should prioritize the incorporation of digital and automated loan processes.

Although the need to digitize commercial lending has long been a point of discussion, the Paycheck Protection Program (PPP) sparked a fire that turned talk into action for many institutions. Bankers quickly jumped in to help small businesses receive the funding they needed, whether that meant long hours, adopting new technologies or creating new processes. The amount of PPP loans processed in that small window of time would not have been possible without many bankers leveraging trusted technology partners.

One result of this approach was enhancing transparency and boosting efficiencies while helping small businesses at the same time. Many in the banking industry saw firsthand that, despite the commonly held belief, it is possible to digitize lending while maintaining personal, meaningful relationships. Bankers do not have to make a choice between convenience and personal connection, and we expect to see more institutions blend the two going forward.

Bankers also have a newfound familiarity with Small Business Administration programs following the wind down of the PPP. The program marked many institutions’ first time participating in SBA lending. Many now have a greater understanding of government guaranteed lending and are more comfortable with the programs, opening the door for continued involvement.

Embracing digitization in lending enhances efficiencies and creates a more seamless experience not only for the borrower, but for employees institution-wide. This will be especially important as the “Great Retirement” continues and bank executives across the country end their careers with no one in place to succeed them. To make the issue even worse, recruiting and maintaining technology talent has become increasingly difficult — even more so in rural markets. Such issues are leading some banks to sell, disrupting the businesses and communities that rely on them.

Partnering with technology providers can give institutions the bandwidth to effectively serve more small businesses and provide them with the customer experiences they have come to expect without increasing staff. Adopting more digital and automatic aspects in small business lending allows banks to reduce tedious manual processes and optimize efficiencies, freeing up employee time and resources so they can focus on strategy and growth efforts. Not to mention, such a work environment is more likely to attract and retain top talent.

Using technology partners to centralize lending also has benefits from a regulatory compliance standpoint, especially as potential changes loom on the horizon. Incorporating greater digitization across the loan process provides increased transparency into relevant data, which can streamline and strengthen a bank’s documentation and reporting. The most successful institutions deeply integrate lending systems into their cores to enable a holistic, real-time view of borrower relationships and their portfolio.

Community institutions have been a lifeline for their communities and customers over the last two years. If they want to build off that momentum and further grow their customer base, they must continue to lean into technology and innovation for lending practices. Developing a comprehensive small business strategy and digitizing many aspects of commercial, small business and SBA lending will position community banks to optimize their margins, better retain their talent and help their communities thrive.

Furthering Digitization, Automation to Push Digital Transformation

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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

What Does Today’s Community Banker Look Like?

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After more than a year of great uncertainty due to the coronavirus pandemic, the biggest driver of change for community banks now will likely come from customer behavior.

The shift towards digital banking that took off during the pandemic is expected to become permanent to some degree. Customers are most likely to use online or mobile channels to transact and they are becoming more involved in fraud prevention, with measures such as two-step verification. They are also performing an increasing number of routine administrative tasks remotely, like activating cards or managing limits. Branches are likely to endure but will need to rethink how to humanize digital delivery: The Financial Brand reports that 81% of bankers believe that banks will seek to differentiate on customer experience rather than products and location.

Digitalization is good news for community banks. It reduces pressure on the branch network and increases opportunities to develop the brand digitally to reach new customers. But it also creates an obligation to deliver a good digital experience that reduces customer effort and friction. In the digital age, customers face less costs of switching banks.

Banks that assume they will be the sole supplier of a customer’s financial services or that a relationship will endure for a lifetime do so at their own risk. President Joseph Biden’s administration is promoting greater competition in the bank space through an executive order asking the Consumer Financial Protection Bureau (CFPB) to issue rules that give consumers full control of their financial data, making it easier for customers to switch banks. Several countries have already implemented account switching services that guarantee a safe transfer. How should community banks respond so they are winners, not losers, with these changes?

With their familiar brands, community banks are well positioned for success, but there are things they must do to increase customer engagement and build loyalty. Continuing to invest in digital remains crucial to delivering a digital brand experience that’s aligns with the branch. Such investment will be well rewarded — not only in retaining customers but also attracting new ones, particularly the younger generation of “digital natives” who expect a digital-first approach to banking. The challenge will be migrating the trust that customers have in the branch to the app, offering customers choice while maintaining a similar look and feel.

The branch will continue being a mainstay of community banking. Customers are returning to their branches, but its use is changing and transactions are declining. Customers tend to visit a branch to receive financial advice or to discuss specific financial products, such as loans, mortgages or retirement products. Some banks already acknowledge this shift and are repurposing branches as advice centers, with coffee shops where customers can meet bankers in a relaxed atmosphere. In turn, bankers can go paperless and use tablets to guide the conversation and demonstrate financial tools, using technology augmented by a personal touch.

Community banks can play a crucial role in promoting financial literacy and wellness among the unbanked. As many as 6% of Americans are unbanked and rely on alternative financial services, such as payday loans, pawnshops or check cashing services to take care of their finances. According to a 2019 report by the Federal Reserve, being unbanked costs an individual an average of $3,000 annually. By increasing financial inclusion, community banks can cultivate the customers of tomorrow and benefit the wider community.

Cryptocurrencies are the next stage of the digital revolution and are becoming more mainstream. Although community banks are unlikely to lose many customers in the short term over cryptocurrency functionality, these digital assets appeal to younger customers and may become more widely accepted as a payment type in a decade. Every bank needs a strategy for digital assets.

The shift to digital banking means bank customers expect the same experience they get from non-financial services. Application program interfaces (APIs) have ushered in a new era of collaboration and integration for banks, their partners and customers. APIs empower banks to do more with data to help customers reduce effort, from automating onboarding to access to funds and loans immediately. At a time when community banks and their customers are getting more involved with technology, every bank needs an API strategy that is clearly communicated to all stakeholders, including partners and customers. Although APIs cannot mitigate uncertainty, they do empower a bank to embrace change and harness the power of data. Banks without an APIs strategy should speak to their technology partners and discover how to find out how APIs can boost innovation and increase customer engagement.