Using Your ‘Why’ to Navigate Change Successfully

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Investing in change is expensive. Besides the financial aspect, change can drain a financial institution’s resources and severely impact internal processes. The reality is that change is often necessary to continue providing the best experience for both customers and employees. Bankers must invest time, effort and money into selecting the technology partners that will solve a crucial pain point in their organization.

Step 1: Identify Your Common Force
There are four common forces that prompt a bank to invest in a new partner or technology. Depending on which force is driving the decision for change, executives need to prioritize different factors when evaluating potential vendors.

When systems change: When banks change one major technology — whether a core, payment vendor or online banking solution — it has a ripple effect across their other technologies, relationships and processes. Banks often use this opportunity to change or update their other technology partners to create a more cohesive end-user experience that integrates with the new system. They have to ensure that their vendors can handle that new system.

When there is an urgent need: Banks that have a vendor relationship that does not work well with their own internal workflow can be another force for change. This dysfunction can ultimately result in the bankers being forced to step in and help complete responsibilities because the vendor isn’t able to meet expectations. Instead of gaining resources and offering the best end-user experience, the bank focuses its time and effort on putting out fires.

When a solution is under review: New leaders or new managers can be an impetus for change, as they seek to understand their vendors better, evaluate their value and look for where they have efficiencies and where they do not. What benefits do different vendors bring the bank in simplifying and decreasing manual operations? Is this vendor improving efficiency so that end users have the desired experience? This force is more proactive and prompted by an evaluation where the opportunity for change is not a mandatory given. This review of vendors is important for financial institutions to do because it could uncover issues that have yet to reach a pain point level and can still be addressed.

When a vendor impacts the institution’s reputation: Occasionally, banks do not receive the high-quality experience they expect from their vendor and seek change to maintain their reputation. The end product does not feel competitive or has caused errors for its customers, which hurts brand perception and loyalty. Like the previous force, changing vendors before things escalate gives the bank much more power and flexibility to choose the best partner in a timeline that works for them.

Step 2: Ask the Right Questions
Bankers must evaluate their vendors based on their current common force. They must first identify why they need to change. What are they trying to solve? Then, they can leverage that pain point to develop questions for potential new partners based on the root issue impacting their situation.

Questions like, “How do you integrate with our vendors?” or “What does our daily engagement look like?” or “How do you guarantee your process?” can help executives evaluate vendors more efficiently.

Vendors want to avoid viewing themselves as replaceable. The truth is, there is a lot of competition out there, and not a lot of difference between solution offerings. Bankers need to know what to ask to get a solution that meets their needs and addresses their deeper concerns.

Peeling back the onion that is a bank’s current workflow might cause tears, but that is the only way executives can solve vendor issues that impact the institution’s transformation, improve the end-user experience and continue to stay competitive.

What’s Possible for Community Banks Through Fintech Partnerships

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Banks can accelerate their digital transformations by partnering with innovating firms that were built to tackle issues banks have previously found difficult to address. APIs, cloud platforms and artificial intelligence have opened new opportunities for banks to compete and offer innovative digital experiences. Here, we offer concrete examples of what’s possible through successful fintech partnerships and examine key regulatory considerations.

  • Enhancing Customer Experience. Collaborating with fintech firms can give banks access to cutting-edge technology, enabling seamless digital experiences and personalized services for customers. SF Fire Credit Union in San Francisco partnered with Bay Area fintech Finalytics.ai to create personalized digital experiences. Josephine Chew, chief marketing officer at SF Fire, shared the credit union’s challenge in competing with 132 other financial services organizations in the Bay Area. The platform allowed the credit union to personalize the experience within their website to target specific personas. Josephine noted that the personalization that comes from the platform has resulted in an “application completion rate…five and half times better” than without it.
  • Accelerating Innovation. The agility of fintech startups allows community banks to implement new solutions quickly, reducing the time needed to bring innovative products and services to market. When $568.2 million The Cooperative Bank partnered with Carefull after recognizing the growing vulnerability of its elderly customers to scams. Carefull’s platform uses advanced AI technology to scrutinize transactions and banking activity to detect changes that could indicate potential scams or errors and alerts the customer and/or their designated financial caregiver. Peter Lee, CIO of the Roslindale, Massachusetts-based bank, notes that “TCB was not alone when we discovered a lack of digital tools to protect our most vulnerable customers — our aging community.”
  • Expanding Product Offerings. Partnerships with fintech firms enable community banks to integrate third-party solutions, offering a more comprehensive range of financial products. We hear from community and regional banks that a challenge they have is how to do relationship banking, which underpins their strategy, in the age of digital. Iowa-based American State Bank partnered with fintech The Postage to build and strengthen relationships with customers and families ahead of major life transitions. Tamra Van Kalsbeek, American State’s digital banking officer, “sees The Postage as a way the bank cares for its customers while gathering deposits and connecting with different family members. It also allows the bank to attract business without competing on price,” according to the piece.

EPAM’s own Chris Tapley, vice president of financial services consulting, is quick to point out that “regional and community banks are nearing a crucial inflection point. They can either forge the necessary fintech partnerships to deliver the services and experiences customers demand, and thereby optimize for growth, or they risk potentially exposing themselves to acquisition from larger, more established players in the market.”

While the opportunities for benefits from banking and fintech partnerships are huge, we cannot forget that regulators are increasingly focusing on risk mitigation and potential client impacts. The latest U.S. regulatory actions include:

  • Recently, U.S. federal banking regulators issued final guidance to help banks manage risks associated with their third-party relationships. The guidance supersedes existing guidance from the individual regulators. The impetus of the updated interagency guidance is the growing number of relationships with fintech firms. While the guidance is general for all third-party relationships, it reflects an understanding of arrangements that go beyond the traditional vendor relationship. The guidance is arranged along a third-party relationship life cycle, from planning and due diligence through monitoring and termination.
  • On Aug. 8, the Federal Reserve announced the creation of novel activities supervision program. The program will focus on novel activities related to crypto-assets, distributed ledger technology (DLT) and complex, technology-driven partnerships with nonbanks to deliver financial services to customers.

The announcement defines complex technology-driven partnerships as partnerships “where a nonbank serves as a provider of banking products and services to end customers, usually involving technologies like application programming interfaces (APIs) that provide automated access to the bank’s infrastructure.” The novel activities supervision program will be risk-based and applies to all banking organizations, including those with assets of $10 billion or less.

The program consists of heightened examinations leveraging existing regulatory agencies and processes, based on the level of engagement in novel activities. Organizations that fall under these reviews will receive a notice from the Fed.

Banks will want to make sure that their fintech partners are well-versed in the guidance and this newly announced program to ensure that they understand how to navigate compliance and risk management rules that banks put forward.

Community and regional banks have a tremendous opportunity to transform their digital futures through fintech partnerships. The path to digital success may present challenges, but community banks have a way to revolutionize their offerings and secure a prosperous future in the digital era.

Finding Fintechs: A Choose Your Own Adventure Guide

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In my role as editor-in-chief, I attend countless off-the-record conversations with bankers who confess their experiences with financial technology companies. Sometimes, those experiences are anything but good, including a host of empty promises, botched integrations and disillusioned bank staff. It’s like the fintechs took off on the rocket ship but never made it to the moon, after all.

For one, banks and fintechs have a hard time speaking each other’s language. Banks, by nature and necessity, are focused on regulatory compliance. By contrast, technology companies tend to focus on growth, driven by nature and necessity to promise the world to their clients.

That seems to be changing. In the current economy and amid falling valuations for fintechs, many of them are focusing on profitability rather than growth for its own sake. And banks are changing, too. Small community banks, which we’ll define loosely as those below $10 billion in assets, historically have been reluctant to engage directly in partnerships with fintech companies unless those companies are offered by their core processors.

Traditionally, banks’ own policies forbid contracting with young firms that lack several years of audited financial statements, a fact that has excluded the vast majority of early-stage fintechs. But as fintechs mature in terms of compliance with banking regulations and as banks try to incorporate better technology into their systems, there is more room to meet in the middle.

This report is intended as a guide to help more banks take advantage of the offerings of financial technology companies to improve efficiency, customer relationships and to facilitate growth, and to do it in a way that mitigates risk.

First, though, I start with some terminology. Partnership gets batted around an awful lot. But what is it?

The Federal Reserve’s 2021 report, “Community Bank Access to Innovation Through Partnerships,” defines partnerships broadly to include traditional vendor relationships as well as more expansive arrangements that include shared objectives and outcomes, such as revenue sharing. We’ll adopt the Fed’s definition here, for ease of discussion.

In your journey to see what the universe may offer, Godspeed.

Evaluating Digital Banking In 2023

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Platforms that offer future flexibility, as opposed to products with a fixed shelf life, should be part of any bank’s digital transformation strategy for 2023, says Stephen Bohanon, co-founder and chief strategy and product officer at Alkami Technology. Chatbots and artificial intelligence can deflect many simple, time-consuming customer queries — saving time and costs — but digital channels can go further to drive revenue for the organization. To do that, bankers need to invest in data-based marketing and account opening capabilities.

Topics include:

  • Platforms Vs. Products
  • Sales Via Digital Channels
  • Advantages of Live Service

What’s Embedded Banking and Why Does It Matter?

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The financial technology industry is notorious for its ever-changing nature. Silicon Valley’s breakneck pace is enough to make some industry veterans’ heads spin. Advancements in technology and changes in economic incentives can create ripple effects that shift the entire fintech industry at a moment’s notice. It can be a lot to keep up with: Web3, blockchain, crypto, NFTs, buy now, pay later, digital ID, know your customer and anti-money laundering laws, two-factor authentication… the list goes on.

Among the latest fintech phenomena to garner attention is embedded banking, a term that sounds both banal and confounding at first blush. Embedded finance has received some attention, but embedded banking remains a little-known concept among banks that have some of the biggest opportunities in the space.

Embedded banking is a model where banks can provide purpose-built digital services to their customers, including retail and small- to medium-sized businesses (SMBs). Embedded banking enables banks to offer a bespoke technology solution through an open framework that can meet the expanding business requirements of their SMBs customers. As opposed to embedded finance, where businesses access financial services through a third-party platform that is not a specific solution from a financial services company, embedded banking places the bank at the heart of an SMB’s operations. Embedded banking both helps strengthen an SMB’s technology and its relationship to their bank.

Embedded banking is not completely novel. The concept has existed for a few years now, but recent innovations have completely revolutionized the field. Embedded banking is moving from an “inside out” model to an “outside in” model. The inside out model of embedded banking used siloed digital channels per customer segment and direct integration with core banking systems. For example, each individual business segment — like SMB, commercial and treasury management — needed their own separate digital channel. Through an outside in approach, a bank can offer their SMBs one secure environment and a unified digital experience for integrating data from multiple backend systems.

The outside in approach to embedded banking is both more flexible and provides more robust services for customers. Outside in embedded banking also offers the customer an open view of multiple financial institution relationships and streamlines access to a portfolio of services through a unified user experience. This gives SMBs access to a much wider array of services to fit their unique needs, all through the bank’s digital channel.

Outside in embedded banking is the perfect solution for banks that want to provide top-of-the-line financial services in a constantly changing economic environment that requires small businesses everywhere to adopt more efficient technology. Inflation and interest rates increases means money is becoming tighter than ever; small businesses are the most at risk in an economic slump. In particular, SMBs want more payments options and faster access to their cash, while solutions like flexible invoicing options, expedited collection of payments and automated data exchange could become vital for a business’s survival.

Outside in embedded banking represents a chance for SMBs to modernize their digital experiences and streamline operations, and for banks to form stronger relationships with their SMB partners. Banks are perfectly positioned to throw a lifeline to their small business customers. Embedded banking might still be relatively unknown to many bankers, but it may just be thing that helps countless SMBs get through the imminent economic crunch.

Building a Robust Digital Ecosystem, Regardless of Size

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Let’s get right to the punch: Size should not limit how progressive your bank can be with its digital innovation strategy. Don’t let asset size fool — or limit — you.

As a 2022 ICBA ThinkTECH Accelerator graduate, we’ve had the opportunity to speak to over 150 banks of every shape and size, and here is what we’ve heard. Not all banks are created equal. However, large or small, asset size shouldn’t box you in and prevent you from giving your customers and teams the digital experiences they expect.

That’s because asset size doesn’t correlate to a more-advanced digital ecosystem. We’ve seen $105 million banks act like $5 billion banks, and $8 billion banks act like $250 million banks. Every bank is at a different stage of its digital transformation journey. So, what’s the difference?

Smaller banks may not have as large of a budget for tech, but they are often able to move faster and experiment more easily because there are fewer stakeholders who need to buy-in. These banks are increasingly having to decide if they are going to grow and stay independent or become a more attractive acquisition target. Either way, digital systems are critical to their future.

Larger banks, on the other hand, usually have larger budgets, but more stakeholders involved in the decision-making process and more entrenched operations. Turning the Titanic can take time if the organization does not have a history of supporting experimenting with innovative technology solutions.

No matter the size, banks should assess whether their current technology stack is driving efficiency or dragging the team down due to platform fatigue or lack of clean integrations. In fact, banks have the ability to use digital innovation to decrease the efficiency ratio and increase returns on investment. In our experience, there are a few key things any institution needs to consider when evaluating digital platforms:

  • Does it create a delightful experience?
    Any platform you’re exploring should provide a clean, easy and delightful experience for both your borrowers and employees. Any sense of friction for either group and your institution could lose leads or operational efficiency.
  • Can the platform support a fully integrated environment?
    Platforms should not only be configured to align with your institution’s operational process, but also able to directly connect to essential technology providers: the core, customer relationship management software, know your customer or business solutions, credit providers and spreading platforms, among others. A well-integrated solution should eliminate duplicate work for your team and provide a 360-degree view of the customer, allowing staff to more effectively maximize each customer relationship.
  • Does it do more with the same size team?
    Digital solutions shouldn’t be used to justify letting employees go. They should elevate team members out of busy work to their best and highest use: establishing and growing customer relationships. Having a robust technology stack can help attract and retain top talent in today’s environment.
  • Can the platform scale with the bank?
    Digital platforms should help drive the efficiency ratio down and scale as your bank grows. Below are how two banks on different ends of the asset spectrum have embraced this concept.

Andrew Black, CEO of $105 million Princeville State Bank, based in Illinois, says, “We don’t let our asset size define how we want to serve our customers and team members. At the end of the day, we want to make sure we’re providing a customer-centered, easy experience that helps us continue to grow and expand our customer base. Digital banking capabilities are table stakes for any bank these days, regardless of how large they are.”

Allan Rayson, American Banker’s digital banker of the year and chief innovation officer at Arkansas-based Encore Bank has seen some of the fastest organic growth of any bank in the country. The $2.8 billion bank has a goal of hitting $5 billion in assets with a team of fewer than 400 people — and they’re on track to do it.

“We’re not trying to be the biggest bank in every market, but a bank that delivers an exceptional customer experience. The key is focusing on partnering with best-of-breed technology partners to make that happen. What we have seen with this approach is incredible growth, a transformation of our operations that supports our bank team members and an increase in our overall efficiency,” says Rayson.

Cornerstone Advisors’ annual report states that 86% of banks say their spend on tech is going to be somewhat or significantly higher this year. It’s not a question of “If,” but when and how your team tackles creating a digital ecosystem. Don’t let your asset size dictate what you think your institution can and can’t do. Make sure you’re partnering with a platform that meets you where you are and can scale with you as your bank grows.

Leveraging Innovations to Double Down Where Fintechs Can’t Compete

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For years, financial technology companies, or fintechs, have largely threatened the domain of big banks. But for community banks — perhaps for the first time — it’s getting personal. As some fintechs enter the lending domain, traditional financial institutions of all sizes can expect to feel the competitive impact of fintechs in new ways they cannot afford to ignore.

The good news is that fintechs can’t replicate the things that make local community banks special and enduring: the relational and personal interactions and variables that build confidence, trust and loyalty among customers. What’s even better is that local financial institutions can replicate some of the fintechs playbook — and that’s where the magic happens.

It’s likely you, the board and bank management understand the threat of fintech. Your bank lives it every day; it’s probably a key topic of conversation among the executive team. But what might be less clear is what to do about it. As your institution navigates the changing landscape of the banking industry, there are a few topics to consider in creating your bank’s game plan:

  • Threat or opportunity? Fintechs give consumers a number of desirable and attractive options and features in easy-to-navigate ways. Your bank can view this as a threat — or you can level up and find a way to do it better. Your bank should start by identifying its key differentiators and then elevating and leveraging them to increase interest, engagement and drive growth.
  • It’s time for a culture shift. Relationships are not built through transactions. Banks must move from transactional to consultative by investing time, talent and resources into the relational aspects of banking that are best done in-person. They also need to find ways to meet the transactional needs of consumers in low friction, efficient ways.
  • It’s not about you … yet. Step outside of the services your bank directly provides. Think of your institution instead as a connector, a resource and trusted advisor for current and prospective consumers. If your bank doesn’t provide a certain service, have a go-to referral list. That prospect will continue to come back to you for guidance and counsel and one day soon, it will be for the service you provide.
  • What’s in your toolbox? What is the highest and best use of your team’s time? What are your team members currently spending time on that could be accomplished more efficiently through an investment in new, different or even fintech-driven tools? By leveraging technology to streamline operations, your bank can benefit from efficiencies that create space and time for staff to focus on relationship-building beyond the transaction.
  • Stop guessing. You could guess, but wouldn’t you rather know? Banks have access to an incredible amount of data. Right now, many financial institutions are sitting on a treasure trove of data that, when activated appropriately, can help target and maximize growth efforts. Unlocking the power of this data is key to your financial institution’s growth and evolution; data drives action, offering valuable insight into consumer behaviors, preferences and needs.

Your bank can adopt a view that fintechs are the enemy. Or it can recognize that fintechs’ growth stems from an unmet consumer need — and consider what it means for your bank and its products and services. The key is doubling down on the who, what and why that is unique to your brand identity, and capitalizing on the opportunity to highlight and celebrate what makes your bank stand out, while simultaneously evolving how your institution determines and delivers against your consumers’ needs.

Managing Risk When Buying Technology for Engagement

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No bank leader wants to buy an engagement platform, but they do want to grow customer relationships. 

Many, though, risk buying engagement platforms that won’t grow relationships for a sustained period of time. Most platforms are not ready-made for quality, digital experience that serve depositors and borrowers well, which means they threaten much more than a bank’s growth. They are a risk to the entire relationship with each customer.  

Consumers are increasingly expressing a need for help from their financial providers. Less than half of Americans can afford a surprise $1,000 expense, according to a survey from Bankrate; about 60% say they do not have $1,000 in savings. One in 5 adults would put a surprise expenditure on a credit card, one of the most expensive forms of debt. More than half of consumers polled want more help than they’re getting from their financial provider. However, the 66% of those  who say they have received communication from their provider were unhappy about the generic advice they received. 

This engagement gap offers banks a competitive opportunity. Consumers want more and better engagement, and they are willing to give their business those providers who deliver. About 83% of households polled said they would consider their institution for their next product or service when they are both “satisfied and fully engaged,” according to Gallup. The number drops to 45% if the household is only satisfied. 

Banks seeking to use engagement for growth should be wary of not losing customer satisfaction as they pursue full engagement. As noted earlier, about 66% of those engaged aren’t satisfied with the financial provider’s generic approach. What does that mean for financial institutions? The challenge is quality of engagement, not just quantity or the lack thereof. If they deliver quantity instead of quality, they risk both unsatisfied customers as well as customers who ignore their engagement. 

According to Gallup, only 19% of households said they would grow their relationship when they are neither satisfied nor fully engaged. This is a major risk banks miss when buying engagement platforms: That the institution is buying a technology not made for quality, digital experiences and won’t be able to serve depositors and borrowers well any time soon. 

But aren’t all engagement platforms made for engagement? Yes — but not all are made for banking engagement, and even fewer are made with return on investment in mind. Banking is unique; the tech that powers it should be as well. Buyers need to vet platforms for what’s included in terms of know-how. What expertise does the platform contain and provide for growing a bank? Is that built into the software itself?

A purpose-built platform can show bankers which contact fields are of value to banking engagement, for example, and which integrations can be used to populate those fields. It can also show how that data can become insights for banks when it overlaps with customers’ desired outcomes. And it offers the engagement workflows across staff actions, emails, print marketing and text messaging that result in loan applications, originations, opened accounts or activated cards.   

Previously, the only options available were generic engagement platforms made for any business; banks had to take on the work of customizing platforms. Executives just bought a platform and placed a bet that they could develop it into a banking growth tool. They’d find out if they were right only after paying consultants, writers, designers, and marketing technologists for years.  

Financial services providers no longer need to take these risks. A much better experience awaits them and their current and prospective customers clamoring for a relationship upgrade.

2022 Technology Survey: Complete Results

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Bank Director’s 2022 Technology Survey, sponsored by CDW, surveyed 138 independent directors, chief executives, chief operating officers and senior technology executives of U.S. banks below $100 billion in assets to understand how these institutions leverage technology in response to the competitive landscape. The survey was conducted in June and July 2022, and primarily represents banks under $10 billion in assets. Members of the Bank Services program have exclusive access to the full results of the survey, including breakouts by asset category.

The survey finds that most respondents (81%) say their bank increased its 2022 technology budget over last year, reporting a median 11% increase. Banks have primarily prioritized investments in new technology features and updates in areas like security, or where customers frequently interact with the bank, like payments or digital loan applications. 

Leveraging technology to create a more competitive and efficient organization requires internal know-how, and directors and executives find this to be a key area for concern: 48% worry about an inadequate understanding within the bank of emerging technologies. Forty-five percent say they’re worried about their organization’s reliance on outdated technology. 

While directors aren’t involved in day-to-day decisions about the bank’s technology, the board needs to align technology with strategy and ensure that the bank has the resources it needs to achieve its goals. Forty-two percent of respondents say their board has at least one member they would consider to be an expert in technology, including digital transformation, user experience or data analytics. 

Click here to view the complete results.

Key Findings

The Competitive Landscape
Fifty-six percent of all respondents view local banks and credit unions as their top competitive threat, followed by big and superregional banks, at 46%. One-third worry about competition from big tech companies such as Apple, while an equal number are concerned about competition from digital, nonbank business lenders. 

Hit-or-Miss on Digital Applications
Nearly half of respondents say their bank has a fully digital process for opening retail deposit accounts, with larger shares representing banks over $1 billion reporting as much. Far fewer respondents report a fully digital process for retail loans, small business deposits or loans, or commercial loans. 

Generational Divides
Just 25% of the directors and executives surveyed say their bank has the tools it needs to effectively serve Generation Z (16-25 years old), and half believe their institution can effectively serve millennials (26-40). Eighty-five percent say as much about Generation X (41-56), and 93% say this of baby boomers (57-75). 

All-In on the Cloud
Eighty-eight percent say their bank uses cloud technology to generate efficiencies internally; 66% use application programming interfaces (APIs), which allow different applications or systems to exchange data. Robotic process automation (32%) and artificial intelligence or machine learning (19%) are far less commonly used. 

New Frontiers
Three-quarters say their board or leadership team has discussed risks or opportunities related to cryptocurrency or digital assets in the past 18 months. Sixty-four percent say the same of banking as a service (BaaS), and 69% say that of environmental, social and governance issues. Cannabis, on the minds of 58%, has been more commonly discussed at banks under $5 billion of assets. 

Views on Collaboration
More than half of respondents view technology companies as vendors only, as opposed to collaborating with or investing in these firms. Thirty-nine percent, primarily representing banks over $1 billion in assets, say their institution has collaborated with technology providers on specific solutions. Twenty percent have participated in a venture fund that invests in technology companies, and 11% have directly invested in one or more of these companies. 

2022 Technology Survey Results: Investing in Banking’s Future

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In mid-July, at the peak of second quarter earnings, large regional banks showed off an array of technology initiatives. 

Providence, Rhode Island-based Citizens Financial Group, with $227 billion in assets, highlighted a new mobile app for its direct-to-consumer digital bank. And $591 billion U.S. Bancorp in Minneapolis realized the benefits of its ongoing investments in digital payments capabilities over the years, reporting $996 million in payments services revenue, or a year-over-year increase of nearly 10%.

Community banks, with far fewer dollars to spend, have to budget wisely and invest where it makes the most sense. For many, that means prioritizing new technology features and updates in areas like security, or where customers frequently interact with the bank, like payments or digital loan applications.

Bank Director’s 2022 Technology Survey, sponsored by CDW, delves into some of these strategies, asking bank senior executives and board members about the concerns and challenges that their institutions face, and where they’ve been investing their resources in technology.

Eighty-one percent of respondents say their bank increased its 2022 technology budget over last year, reporting a median 11% increase. Asked where their bank built more efficient processes by deploying new technology or upgrading capabilities in the past 18 months, 89% named cybersecurity as a key area for investment, followed by security and fraud (62%). During the same time period, 63% implemented or upgraded payments capabilities to improve the customer experience; 54% focused on enhancing digital retail account opening.

Leveraging technology to create a more competitive and efficient organization requires internal know-how, and directors and executives find this to be a key area for concern: 48% worry about an inadequate understanding within the bank of emerging technologies. Forty-five percent say they’re worried about their organization’s reliance on outdated technology.

While directors aren’t involved in day-to-day decisions about the bank’s technology, the board needs to align technology with strategy and ensure that the bank has the resources it needs to achieve its goals. Forty-two percent of respondents say their board has at least one member they would consider to be an expert in technology, including digital transformation, user experience or data analytics.

Following on the heels of Bank Director’s 2022 Compensation Survey, which found technology talent in demand, the 2022 Technology Survey indicates that most banks employ high-level executives focused on technology, particularly in the form of a chief information security officer (44%), chief technology officer (43%) and/or chief information officer (42%). However, few have a chief data officer or data scientists on staff — despite almost half expressing concerns that the bank doesn’t effectively use or aggregate the bank’s data.

Key Findings

The Competitive Landscape
Fifty-six percent of all respondents view local banks and credit unions as their top competitive threat, followed by big and superregional banks, at 46%. One-third worry about competition from big tech companies such as Apple, while an equal number are concerned about competition from digital, nonbank business lenders.

Hit-or-Miss on Digital Applications
Nearly half of respondents say their bank has a fully digital process for opening retail deposit accounts, with larger shares representing banks over $1 billion reporting as much. Far fewer respondents report a fully digital process for retail loans, small business deposits or loans, or commercial loans.

Generational Divides
Just 25% of the directors and executives surveyed say their bank has the tools it needs to effectively serve Generation Z (16-25 years old), and half believe their institution can effectively serve millennials (26-40). Eighty-five percent say as much about Generation X (41-56), and 93% say this of baby boomers (57-75).

All-In on the Cloud
Eighty-eight percent say their bank uses cloud technology to generate efficiencies internally; 66% use application programming interfaces (APIs), which allow different applications or systems to exchange data. Robotic process automation (32%) and artificial intelligence or machine learning (19%) are far less commonly used.

New Frontiers
Three-quarters say their board or leadership team has discussed risks or opportunities related to cryptocurrency or digital assets in the past 18 months. Sixty-four percent say the same of banking as a service (BaaS), and 69% say that of environmental, social and governance issues. Cannabis, on the minds of 58%, has been more commonly discussed at banks under $5 billion of assets.

Views on Collaboration
More than half of respondents view technology companies as vendors only, as opposed to collaborating with or investing in these firms. Thirty-nine percent, primarily representing banks over $1 billion in assets, say their institution has collaborated with technology providers on specific solutions. Twenty percent have participated in a venture fund that invests in technology companies, and 11% have directly invested in one or more of these companies.

To view the high-level findings, click here.

Bank Services members can access a deeper exploration of the survey results. Members can click here to view the complete results, broken out by asset category. If you want to find out how your bank can gain access to this exclusive report, contact [email protected].