Three Ways to Break the Mold of Digital Banking


digital-9-9-19.pngCommunity banks should look for ways to make their digital banking experience stand out for consumers in the face of increasingly commoditized offerings.

Most community banks in the United States are focusing on enhancing the digital experience for their customers, making sure they offer most, if not all, of the features that the top five banks offer. However, most community banks are doing the exact same thing, creating digital banking experiences that look and feel eerily similar.

These banks are using the same technology, the same channels and the same process workflows. Outside of the bank’s branding, it can be difficult to tell what differentiates one digital bank from another.

While these similarities help ensure that customers don’t switch banks for one down the street, it’s not preparing institutions to hold their own against new competitors. Challenger banks like N26 and Chime are creating a new, different experience for users — and quickly taking over the market.

Creating a differentiated experience for users takes more than new features or an updated interface. It comes down to banks being able to build for the future with a platform that can be scaled and easily integrated — a platform built on APIs.

APIs, or application programming interfaces, provide the flexibility and customization that is often lacking in banking. APIs allow banks to work with a wider pool of partners to build a more-personalized experience at a fraction of the development cost. APIs have enabled three trends and transformations that allow for differentiated community banking: real-time payments, true any-channel offerings and personalized user experiences.

Real time transactions
JPMorgan Chase & Co. recently launched real-time payments, which allows customers to instantly execute provider payments. This move creates urgency for other large institutions to implement similar offerings. But delivering this real time experience could require some midsize banks to undergo a complete digital transformation and create a technical infrastructure that can support real-time interactions: one built with an API-first architecture.

Any-channel
Any-channel, or omni-channel, means delivering the same services across multiple channels. But true, any-channel technology should focus on a platform that allows institutions to adopt any-channel — regardless of what that looks like in the future — while maintaining a single experience.

With an API-first architecture, multiple channels don’t translate to redundant development work. Instead, banks can focus on iterating on the overarching experience and translating that to each separate channel. Any-channel becomes less of a never-ending goal and more of a strategic vision.

The Ideal User Experience
Consumers not only want the same experience across channels — they want a seamless experience. Banks using an API approach can build workflows and processes that update automatically, so that users who start an application online can finish that process in the branch, on their mobile app or over the phone. APIs allow banks to build an experience around the user, not the channel.

When banks focus on the user experience instead of the channel or feature, the options are endless. Any number of micro-services can be integrated into a custom experience that is specific to the bank’s audience.

Just Holding On, or Thriving?
Most banks do a great job at maintaining their online experiences in their current states: their clients won’t leave because their competitors offer the same digital experience. But when it comes to acquiring new customers, it’s a different story.

New, digital-only banks are quickly taking wallet-share from consumers with sleek and personalized user experiences. Only those banks using APIs will have the ability and agility to keep up with the competition.

Banks, Fintechs Share This Three-Letter Word


technology-9-6-19.png“Try.”

This one humble word reflects the mindset I encounter in nearly every high-performing executive today. And it might just be the theme at next week’s Experience FinXTech Conference at the JW Marriott Chicago.

Simple as it first appears, breaking away from the known and attempting to explore what’s possible requires leadership, conviction and a commitment to try something new.

While other fintech-oriented conferences highlight “funding paths” or “successful exits,” we built this event for bank leaders seeking growth and efficiencies through the application of financial technologies. Over two days, we’ll look closely at the implications of technology on the banking business, and explore how and where traditional brick-and-mortar institutions can generate top-line growth and bottom-line profits through new business relationships.

A word of encouragement to those joining us from community banks: Don’t let your asset size limit your aspirations.

Yes, technology companies continue to impact consumer expectations and challenge existing business models. And yes, this is changing the basis of competition in the industry. But it’s your mindset, not the size of your bank’s balance sheet, that will dictate its future. That’s why Experience FinXTech brings banking peers together from across the country to share how they pursue collaboration and creativity.

There’s something for all of us to learn.

For those attending from the technology sector, I urge you to tell us stories that demonstrate your resiliency, curiosity and resourcefulness. I continually hear that banks prize anecdotes that reflect a tenacity of purpose — a trait that many technology companies joining us can rightfully claim.

Ahead of Experience FinXTech, I’m inspired and intrigued by three companies making waves in the financial space:

  • Aspiration, which offers socially responsible banking and investment products and services, and has attracted 1.5 million customers as of June 2019.
  • Chime, which advertises itself as one of the fastest-growing bank accounts in America.
  • N26, a German direct bank that promises to provide real-time payments information and early access to paychecks to woo new U.S. consumers.

Executives should think about what these companies hope to accomplish, how they are building their presence and how it could impact community banks across the country.

At the conference, we’ll talk about companies like these, as well as the technology firms that have gained traction with banks. We look at the choices and challenges facing small and mid-size banks as they apply to payments, lending, data and analytics, security and digital banking. We’ll explore changing the basis of competition when it comes to earnings, efficiency and engagement.

Given that many community banks specialize in particular verticals or business lines to remain competitive, we’ll also talk about how they can cultivate a culture that prizes creativity and authenticity. We’ll look at tools and strategies to help them grow. Throughout the program, we’ll encourage conversations about inspiration and transformation.

The underlying theme is to encourage attendees to try something new in order to build something great.

For those joining us at the JW Marriott Chicago, you’re in for a treat. Can’t make it? Don’t despair: We intend to share updates from the conference via BankDirector.com and over social media platforms, including Twitter and LinkedIn, where we’ll be using the hashtag #FinXTech19.

The Transformative Impact Of Data & Voice



The biggest banks are spending billions on technology, but community banks can level the playing field by choosing technologies that personalize and enhance their interactions with customers, as Michael Carter, executive vice president at Strategic Resource Management, explains in this video. He shares how data and voice-enabled technologies could help community banks provide the digital experience that customers want.

  • Leveraging Data to Enhance the Customer Experience
  • Growing Use of Voice-Enabled Technologies
  • Opportunities for Community Banks

 

How Analytics and Automation Can Improve Shareholder Value


automation-2-8-19.pngAdvanced data science technologies like artificial intelligence (AI), machine learning and robotic process automation are delivering significant benefits to many banks.

As part of their mandate to protect shareholder value and improve financial performance, bank directors can play an important role in the adoption of these promising new technologies.

Technology’s expanding influence
With fintech companies generating new competitive pressures, most traditional banks have recognized the need to adopt some new techniques to meet changing customer habits and expectations. Declines in branch traffic and increased online and mobile banking are the most obvious of these trends.

Yet, as important as service delivery methods are, they are in a sense only the top layer of bigger changes that technology is bringing to the industry. New data-intensive tools such as AI, machine learning and robotic process automation can bring benefits to nearly all areas of a bank, from operations to sales and marketing to risk and compliance.

Advanced data analytics can also empower banks to develop deeper insights and make better, more informed strategic decisions about their customers, products and service offerings.

The power of advanced analytics
Historically, business data systems simply recorded and reported what happened regarding a customer, an account, or certain business metrics. The goal was to help managers understand what had happened and develop strategies for improving performance.

Today’s business intelligence systems advance this to predictive analysis – suggesting what is likely to happen in the future based on what has been observed so far. The most advanced systems go even further to prescriptive analysis – recommending or implementing actions that increase or decrease the likelihood of something happening.

For example, AI systems can be programmed to identify certain customer characteristics or transaction patterns, which can be used for customer segmentation. Based on these patterns, a bank can then build predictive models about those customer segments’ likely actions or behaviors – such as closing an account or paying off a loan early.

Machine learning employs algorithms to predict the significance of these customer patterns and prescribe an appropriate response. With accurate segmentation models, a bank can tailor marketing, sales, cross-selling and customer retention strategies more precisely aligned to each customer.

Automating these identification, prediction, and prescription functions frees up humans to perform other tasks. Moreover, today’s advanced analytics speed up the process and can recognize patterns and relationships that would go undetected by a human observer.

Industry leaders are using these tools to achieve benefits in a range of bank functions, such as improving the effectiveness of marketing and compliance functions. Many large banks already use predictive modeling to simplify stress testing and capital planning forecasts. AI and machine learning technology also can enhance branch operations, improve loan processing speeds and approval rates and other analytical functions.

Getting the data house in order
While most banks today are relatively mature in terms of their IT infrastructures and new software applications, the same levels of scrutiny and control often are not applied to data itself. This is where data governance becomes crucially important – and where bank directors can play an important role.

Data governance is not just an IT problem. Rather, it is an organization-wide issue – and the essential foundation for any advanced analytics capabilities. As they work to protect and build shareholder value, directors should stay current on data governance standards and best practices, and make sure effective data governance processes, systems and controls are in place.

AI, machine learning, and robotic process automation are no panacea, and banks must guard against potential pitfalls when implementing new technology. Nevertheless, the biggest risk most banks face today is not the risk of moving too quickly – it’s the risk of inertia. Getting started can seem overwhelming, but the first step toward automation can go a long way toward taking advantage of powerful competitive advantages this technology can deliver.

Enhancing Shareholder Value



Bank stocks have taken a dive in late 2018, and bank boards play a key role in the strategic decisions driving shareholder value. Scott Sommer and Steve Williams of Cornerstone Advisors explain the issues impacting shareholder value in 2019, including technology.

  • Bank stock trends
  • Focus on fintech
  • Board decisions

A Digital Mindset Must Be Driven From the Top


strategy-12-7-17.pngRecently, I read a study from the research and advisory firm Gartner, in which chief information officers in the financial services industry predict that 45 percent of gross enterprise revenue will come from digital business products and services by 2020. That’s only two years from now and frankly, I think the industry is farther off than that. To meet that prediction, financial institutions will need to embrace a digital-first mentality, and I’m not seeing enough of that shift in thinking. Don’t get me wrong, a shift is occurring—but not quickly enough. Competition from and partnerships with fintech firms are adding pressure to traditional banks, but digital transformation has a long way to go.

CIOs will need to help their organizations change the basis of competition, create new markets and cross-industry boundaries by creating an industry vision for digital business in banking,” according to Gartner. Is the CIO in your organization driving digital transformation, and creating new markets and opportunities?

Before that can even start, a digital-first strategy must be embraced by the institution. Banking remains channel-centric, meaning that bankers tend to think in terms of channels, mediums and devices, so I’m afraid the industry has yet to adopt a digital-first methodology. The term ‘mobile first’ is used frequently, but the term is overused and shortsighted. Digital first, on the other hand, recognizes that the digital landscape will constantly evolve to meet the market’s needs, and to keep in pace with emerging technology and market expectations.

Then there is the issue of culture. Digital transformation is not something that can be steered and driven within an organizational silo. It’s holistic in strategy and execution. Digital transformation must begin with an organizational philosophy that is embraced from the board down, and there should be an enterprise-wide agreement that such a transformation won’t happen overnight, but rather will evolve through a deliberate strategy. The good news is that most of us in the industry understand the underlying rationale to digitalization, and the benefits it brings to customer experience and the ability to drive bottom line revenue. Executive teams now fully comprehend the need to reduce friction in the overall banking experience, regardless of the pursued market segment.

In the ‘80s we all heard the call to emerge as “high tech, high touch” providers of financial services. Finally, this evolution has begun. We acquire, service, engage and retain customers through digitalization now, more than ever before. However, this progress toward a digital-first strategy is due to broad, inescapable cultural shifts and strong leadership, not a lone CIO with a vision.

A financial enterprise runs in a very dynamic environment. A digital-first approach can yield a framework for how financial institutions should evaluate strategy, and change the operational approach and culture of the bank. This framework includes organizing teams, creating customer-centric internal processes and building an experience with flexible, innovative technology. Simply understanding the value of digital transformation is not enough. We all need to see and feel the rubber hit the road. This can start with a very conscious shift in allocation of dollars to digital, and understanding that digital will make “traditional banking” better.

Digital should evolve as a philosophy, and its principles and insights should weave through all aspects of a financial institution. It should be the cord that ties together every retail or business banking experience, be it marketing or delivery. It is the DNA of the new banking experience. Digital is no longer just a channel or a series of tactics, and can have a profound impact on all stakeholders at a financial institution, beginning with its customers.

FinXTech Advisory Group Weighs in on Partnerships Inside and Outside Your Bank


partnership.png

Tasked with providing the most relevant information affecting the financial industry, the FinXTech Advisory Group is comprised of a select number of technology startup founders, established technology providers, innovation leaders in banking, investors and government, and non-government policy leaders. As financial institutions work to find the best technology solutions, we asked them to weigh in on how banks can evaluate their internal resources to maximize opportunity for innovation. When they cannot address these challenges in-house, our advisors also share how fintechs can best approach a bank to make their case guided by a careful understanding of the existing system that is in place.

How can banks create an organizational culture that prioritizes technology initiatives?

  1. Focus on Challenges: The entire organization needs to be in sync with the challenges it is looking to address.
  2. Reward Innovative Thinking: BNY Mellon hosts —innovation jams’ while U.S. Bank holds —Pitch Factory’ competitions to promote innovative thinking. Rewarding innovation will ensure organizations are open to using new technology.
  3. Continue Reinventing: The key to promoting technology initiatives is to ensure there is no dependence on one particular system or technology. Be open to adopt new and better ways of doing things.

Ensure that executive and senior leadership teams have participants that are invested in understanding the potential of applied technology to address the operating and growth needs of the institution. Additionally, the institution should have the appropriate access to customer and market information, along with the analytical capabilities on staff to assess and understand what that data shows. The institution should make appropriate investments to secure its own technical future, not just outsourced to a vendor or processor.


Preaching A but rewarding B has been the modus operandi of too many financial institutions. If a bank truly wants to prioritize technology initiatives, it can reward those that embrace such initiatives 100 percent, regardless of whether or not those initiatives yield near-term results. A bank should also look to make sure that its board includes professionals with a technology background. A board that only includes technology “spectators” and not practitioners will have difficulty in promoting a tech-driven culture.

How can fintech companies begin to work with banks?

I believe it’s highly dependent on the work that is being contemplated. The legacy factors inside banks are what have given rise to fintech companies in many cases. The legacy environment in banks is something that fintech companies have to appreciate and work with, due to the structure, regulatory requirements and other parameters that exist in highly regulated environments.


I get 10-20 calls or emails from vendors daily trying to get a meeting. I would not try to work through the IT departments at community banks. I believe you need to find the “business” or “product” owners. They have an interest in learning more about the potential benefits of the solutions. I am much more open to meeting vendors at conferences or through their FinXTech relationships than through cold calls. If FinXTech or one of the reputable trade groups refers one of the vendors, I would take the call or meeting to try to help them network or provide advice.


Fintech companies need to look at the big picture and the individual needs at the same time. It is important for them to be self-aware: no matter how cool the fintech proposition, you will be one of the few hundred vendors with a small “v”—so deal with that reality dispassionately! Spend time with people at all levels in the organization. Understand the big and small pain points. Give it enough time. Most importantly, especially for small banks, don’t expect them to spend additional resources on integration with other third parties: try to provide a complete solution. Finally, put things in perspective: You may be the best, but you may not win.