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.

How Strategic Banks Use Micro-innovation to Fuel New Growth

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With digital financial experiences booming and young consumers flocking to app-focused banking, institutions are assessing which of their products and services will prove popular in the future and exploring how to ensure growth continues among a new demographic of consumers.

For the 65 million members of Generation Z in the U.S., “going to the bank” or “writing a check” are quickly becoming tasks from a bygone era. A 2021 survey underlined that 32% of these customers would prefer to do all their banking outside a physical branch, which presents banks with an opportunity for their digital products to take the lead.

If digital banking is the way of the future, why shouldn’t banks drop everything and go all-in? For most banks, that’s not feasible — or economically wise. It’s vital that banks understand the importance of solving problems while adding value for the customer. Former Apple co-founder CEO Steve Jobs explained, “when we created the iTunes music store, we did that because we thought it would be great to be able to buy music electronically, not because we had plans to redefine the music industry.” Solely focusing on innovation isn’t a practical strategy; the aim should be to make small bets that lead to big breakthroughs.

Most banks don’t need to adopt an “innovate or die” mindset toward the future to drive change. Not every bank will launch a groundbreaking app, and not every company can be Apple. Nor should there they be. Instead, leaders can look to micro-innovation: A scalable, stepwise growth model that supports agile technology integration and novel processes without a major overhaul to the bank’s core or existing infrastructure.

Flex and Expand the Core
A traditional full core conversion can take a bank five years or more to complete. The digital world won’t wait that long; it’s important that banks start implementing change now with micro-innovation. Rather than reinventing the essential processes that are working, micro-innovation allows institutions to launch services in a parallel run to test fresh ideas and offer new products. A micro-innovation approach allows core processes and revenue streams to remain intact while your institution welcomes the future.

Our partner, Holyoke, Massachusetts-based PeoplesBank, efficiently launched a compelling financial brand, ZYNLO, operating alongside its traditional offerings. The new digital bank is designed for younger customers and offers features to support financial health with tools like Zyng Roundup, Zyng matching and early access to paychecks. PeoplesBank is looking beyond the traditional realm of innovation and embrace new thinking by partnering with social media influencers to spread brand awareness and increase visibility.

Where to Begin?
The best incremental innovations are those that can be brought to market swiftly at an affordable cost. Consider leveraging your customer data to pluck low-hanging opportunities to serve groups of customers while providing valuable insights to improve their financial journey.

There’s an opportunity to start small by implementing a fresh onboarding experience. New customers are oriented to digital solutions; if it makes sense for your customers, consider building in-app account opening and educational tools to help them seamlessly engage with their financial future from their smartphone.

Get attention by testing out new product types and fine-tuning processes. Automatically rounding up transactions and deposit that change into savings, early access to paychecks with direct deposits, mobile-first initiatives and financial education tools like monthly spending reports are all popular among young consumers.

Ready to go further? By collaborating with a knowledgeable fintech partner, your institution can launch a own digital financial brand and deliver compelling hooks, such as invoice factoring, tax tools, credit builders and financial modeling, that better serve a niche group of individuals with shared financial needs and goals. Niche digital banks market to a wide range of geographically dispersed customers centered around identities (African Americans, LGBTQ), professions (doctors and lawyers), or shared life experiences and passions (individuals who have previously been incarcerated, pet owners, newly married couples).

In a time of economic uncertainty, organizations looking to win the moment should approach the future with a flexible and entrepreneurial mindset. Identify where your institutions wants to be, determine what’s required to get there and take the first steps in parallel to what’s already working. There’s no time like today.