How Innovative Banks Make Mortgages Work

“Push button. Get mortgage.”

That’s the simple value proposition touted by Rocket Mortgage — and it’s a message that was heard by over 100 million people this month in a star-studded Super Bowl 54 ad that may have cost upwards of $15 million. How can community banks compete with such bold promises and big budgets? The secret could lie in working with the same technology titans that have shaped current customer expectations around financing home purchases.

Mortgages are a notoriously volatile product for financial institutions to offer — both from an economic standpoint and a regulatory one — and many banks struggle to break even on them. While a spike in refinancing and a healthy purchase market led to increased profits in the last half of 2019, the Mortgage Bankers Association (MBA) warned that an anticipated dip in refinancing during the second half of 2020 could once again increase margin pressures. Those pressures may result in numbers reminiscent of 2018, when mortgage banking production profits fell to just $367 per loan, according to data from the MBA.

The challenges posed by heightened competition and pricing pressure are accompanied by rules and requirements that are constantly shifting. For banks, it’s not as simple as “Push button. Get mortgage” to make these loans safely, soundly and profitably.

Yet mortgages are a touchstone product that customers expect their bank to provide. This is the rock and the hard place that Brett Fulk, president and CEO of Riverview Financial Corp., found his institution between after his team worked for over a year to set up an FHA loan product.

“We no sooner got ourselves approved, with all of the vendors we needed lined up, [when] the market shifted from FHA to USDA,” he says. “We were now ready to go with a product that wasn’t necessarily the lead product anymore in our market, and I thought there has to be a better way to do this.”

The bank, which has $1.1 billion in assets and is headquartered in Harrisburg, Pennsylvania, found an unlikely ally in Quicken Loans, the parent company of Rocket Mortgage. And Fulk built a partnership that gave the bank access to technology and new products, while insulating it from rivalry with Rocket.

Riverview is working with Quicken through its wholesale program. The bank uses Quicken’s technology platform, underwriting and servicing to make mortgages to its clients, who benefit from Quicken’s slick interface and fast turnaround. Riverview keeps the customer relationship through the application process, staying front and center to provide customer service and also exploring in-house loan options if the application doesn’t conform to Quicken’s protocols.  Quicken retains the servicing for the life of the loan so customers won’t see their loans being sold and resold.

The bank’s customer relationships are further insulated by some rules of engagement that Rocket Mortgage must follow. Riverview customers do not receive offers from Rocket and, if a current bank customer applies through Rocket for refinancing, that application is immediately kicked back over to the bank.

The partnership has translated into tangible benefits. It gives the bank access to Quicken’s full suite of products, while removing processing and underwriting pressures from the bank’s staff. Quicken has made it possible to increase the bank’s mortgage volume without increasing headcount, Fulk says.

And technology isn’t just helping in terms of efficiency. Riverview makes more on transactions when they sell loans because of the volume the bank has achieved through Quicken.

Banks that are examining their mortgage businesses closely need to consider a wide range of technology options at play. Word on the street is that Black Knight Empower is a popular choice for big banks looking to completely replace legacy loan origination systems, and it’s hard to miss the mega funding rounds that Blend, a San Francisco-based fintech firm, has raised for its mortgage-focused consumer lending platform.

Headliners aside, there are numerous other technology companies helping banks of all sizes make mortgages work from multiple angles. Some help banks take part in aspects of the customer’s home-buying journey that institutions don’t usually play a part in; others streamline back office requirements and closing processes. Whatever the application, mortgage tech solutions could be a critical component to helping banks stay in the game.

Fulk says the partnership with Quicken helped keep Riverview Bank in the mortgage business. It stands to reason that the right technology partners could help other institutions do the same.

Potential Technology Partners

Blend

Powering the mortgage experiences for Wells Fargo & Co., U.S. Bancorp and community banks alike, Blend’s “one-tap” pre-approval feature launched in 2019 to compete head-to-head with Rocket Mortgage.

Roostify

This digital mortgage solution boasts impressive loan officer adoption rates. The company has invested heavily in new integrations with pricing systems, document originators and other key vendors over the last few years.

NestReady

NestReady helps banks become hubs for the home-buying journey with a co-branded search tool that locates everything customers need from their real estate agent to their ideal neighborhood and mortgage loan officer.

LenderClose

This aggregation platform accelerates loan processing by delivering all of the reports and services required to close on a loan — from flood certification and valuation products to title reports and e-recording — in seconds.

SimpleNexus

SimpleNexus automates the information flow between loan officers, borrowers and referral partners. The digital mortgage platform allows banks to track loan officer activity and see when referral partners are sharing the app with potential clients.

Learn more about the technology providers in this piece by accessing their profiles in Bank Director’s FinXTech Connect platform.

Defending Commercial Deposits From Emerging Risks

The competition for commercial deposits has become fiercer in the new decade.

The rate of noninterest deposits growth has been declining over the last three years, according to quarterly reports from the Federal Deposit Insurance Corp. The percentage of noninterest deposits to total deposits has also dropped over 250 basis points since 2016. This comes as the cost of funding earning assets continues to rise, creating pressure on banks’ net interest margins.  

At the same time, corporate customers are facing changes in their receipt of payments. Emerging payment trends are shifting payers from paper-based payments to other methods and avenues. Checks and paper-based payments — historically the most popular method — continue to decline as payers’ preferred payment method. Electronic payments have grown year-over-year by 9.4%.

Newer payment channels include mobile, point of presentment and payment portals. However, these new payment channels can increase the cost of processing electronic payments: 88% of these payments must be manually re-keyed by the accounting staff, according to one study. This inefficiency in manually processing payments increases costs and often leads to customer service issues.

Treasurers and senior corporate managers want automated solutions to handle increased electronic payment trends. Historically, banks have served their corporate customers for years with wholesale and retail lockbox services. But many legacy lockbox services are designed for paper-based payments, which are outdated and cannot handle electronic payments. Research shows that these corporate customers are turning to fintechs to solve their new payment processing challenges. Payments were the No. 1 threat that risked moving to fintechs, according to a 2017 Global Survey from PricewaterhouseCoopers.

Corporate customers are dissatisfied with their current process and are looking to use technology to modernize, future-proof, and upgrade their accounts receivable process. The top five needs of today’s treasurer include: enterprise resource planning (ERP) integration, automated payment matching, support for all payment channels, consolidated reporting and a single historical archive of their payments. 

Integrated receivables have three primary elements: payment matching, ERP integration and a single reporting archive. Automation matches payments from all channels using artificial intelligence and robotic process automation to eliminate the manual keying process. The use of flexible business rules allows the corporate to tailor their operation to meet their needs and increase automated payments over time. A consolidated payment file updates the corporates’ ERP system after completing the payment reconciliation process. Finally, integrated receivable provides a single source of all payment data, including analytics and reporting. An integrated receivables platform eliminates many disparate processes (most manual, some automated) that plague most businesses today. In fact, in one recent survey, almost 60% of treasurers were dissatisfied with their company’s current level of AR automation.

Banks can play a pivotal role in the new payment world by partnering with a fintech. Fintechs have been building platforms to serve the more-complex needs of corporate treasury, but pose a threat to the banks’ corporate customers. A corporate treasurer using a fintech for integrated receivables ultimately disintermediates the bank and now has the flexibility to choose where to place their depository and borrowing relationships. 

The good news is that the treasurer of your corporate customer would prefer to do business with their bank. According to Aite Research, 73% of treasurers believe their bank should offer integrated receivables, with 31% believing the bank will provide these services over the next five years. Moreover, 54% of the treasurers surveyed have planned investments to update their AR platform in the next few years. 

Many fintechs offer integrated receivables today, with new entrants coming to market every year. But bankers need to review the background and experience of their fintech partner. Banks should look for partners with expertise and programs that will enable the bank’s success. Banks should also be wary of providers that compete directly against them in the corporate market. Partnering with the right fintech provides your bank with a valuable service that your corporate customers need today, and future-proofs your treasury function for new and emerging payment channels. Most importantly, integrated receivables will allow your bank to continue retaining and attracting corporate deposits.

Three Tech Questions Every Community Bank Needs to Ask

Community banks know they need to innovate, and that financial technology companies want to help. They also know that not all fintechs are the partners they claim to be.

Digitization and consolidation have reshaped the banking landscape. Smaller banks need to innovate: Over 70% of banking interactions are now digital, people of all ages are banking on their mobile devices and newer innovations like P2P payments are becoming commonplace. But not all innovations and technologies are perceived as valuable to a customer, and not all fintechs are great partners.

Community banks must be selective when investing their limited resources, distinguishing between truly transformative technologies and buzzy fads

As the executive vice president of digital and banking solutions for a company that’s been working closely with community banks for more than 50 years, I always implore bankers to start by asking three fundamental questions when it comes to investing in new innovations.

Does the innovation solve problems?
True innovation — innovation that changes people’s financial lives — happens when tech companies and banks work together to solve pain points experienced by banks and their customers every single day. It happens in places like the FIS Fintech Accelerator, where we put founders at the beginning of their startup’s journey in a room with community bank CTOs, so they can explain what they’re trying to solve and how they plan to do it.

Community banks don’t have the luxury of investing in innovations that aren’t proven and don’t address legitimate customer pain points. These institutions need partners who can road test new technologies to ensure that they’ll be easy to integrate and actually solve the problems they set out to address. These banks need partners who have made the investments to help them “fail fast” and allow them to introduce new ideas and paradigms in a safe, tested environment that negates risk.

Does the innovation help your bank differentiate itself in a crowded market?
In order to succeed, not every community or regional bank needs to be JPMorgan Chase & Co. or Bank of America Co. in order to succeed. But they need to identify and leverage ideas that bolster their value to their unique customer base. A bank with less than $1 billion in assets that primarily serves small, local businesses in a rural area doesn’t need the same technologies that one with $50 billion in assets and a consumer base in urban suburbs does. Community banks need to determine which innovations and technologies will differentiate their offerings and strengthen the value proposition to their key audiences.

For example, if a community bank has strong ties with local small to midsize business clients, it could look for differentiating innovations that make operations easier for small and medium businesses (SMBs), adding significant value for customers.

Banks shouldn’t think about innovation as a shiny new object and don’t need to invest in every new “disruption” brought to market. Instead, they should be hyper-focused on the services or products that will be meaningful for their customer base and prioritize only the tools that their customers want.

Does it complement your existing processes, people and practices?
When a bank evaluates a new type of technology, it needs to consider the larger framework that it will fit into. For example, if an institution’s main value proposition is delivering great customer service, a new highly automated process that depersonalizes the experience won’t be a fit.

That’s not to say that automation should be discarded and ignored by a large swath of banks that differentiate themselves by knowing their customers on a personal level; community banks just need to make sure the technology fits into their framework. Improving voice recognition technology so customers don’t have to repeat their account number or other personal information before connecting with a banker may be just the right solution for the bank’s culture and customers, compared to complete automation overhaul.

Choosing the right kinds of innovation investment starts with an outside-in perspective. Community banks already have the advantage of personal customer relationships — a critical element in choosing the right innovation investment. Ask customers what the bank could offer or adjust to make life easier. Take note of the questions customers frequently ask and consider the implications behind the top concerns or complaints your bank staff hear.

Can your bank apply its own brand of innovation to solve them? Community banks don’t need to reinvent the wheel to remain competitive, and can use innovation to their advantage. Think like your customers and give them what no one else will. And just as importantly, lean on a proven partner who understands the demands your bank faces and prioritizes your bank’s best interests.

Four Takeaways from One of the Biggest Events in Banking

One of the marquee events in banking has concluded, and what promises to be an interesting and important year for many institutions is underway.

More than 1,300 attendees, including 800-plus bankers, assembled in Phoenix for Bank Director’s 2020 Acquire or Be Acquired Conference. We heard from investment bankers, attorneys, accountants, fintechs, investors and — yes, other bankers — about the outlook for growth and change in the industry. There was something for everyone.

To that end, I asked my editorial colleagues to share with me their biggest takeaways from the conference. Here’s what we came away with.

 

Mergers Get Political

The discussions I found to be the most surprising were executives’ concerns about political regime change, especially as it relates to their decisions around M&A or remaining independent.

“The elephant in the room is that there are two radicals running for president right now,” says Dory Wiley, CEO of Commerce Street Capital. And it’s not just investment bankers who see risk in the potential political change.

Executives of both Lafayette, Louisiana-based IBERIABANK Corp. and Memphis, Tennessee-based First Horizon National Corp. cited political uncertainty on the horizon in their motivations to combine through a merger of equals, which was announced in November 2019. Daryl Byrd, IBERIA’s current president and CEO, says the $31.7 billion bank saw the potential for political risk evolving into economic risk at a time when competition from the biggest banks for customers and deposits remains high. First Horizon saw emerging regulatory risk if the political tides turned.

“Generally speaking, we like a fair and balanced regulatory environment. We knew with the upcoming election that the regulatory would, at best, stay the same, but that it could get worse. So that was a consideration,” says BJ Losch, CFO at $43.3 billion First Horizon.

The mention of these concerns — and the magnitude of the response — has interesting implications. Banks operate in all types of environments, and many elements are outside of executives’ control. The industry has demonstrated resilience and flexibility before, during and after the financial crisis. What are the remaining 5,000-plus banks supposed to do in the face of the impending presidential election?

Kiah Lau Haslett, managing editor

 

Tipping the Scales

The most remarkable observation I had is how important scale has become in the banking industry. It was clear from comments at the conference that the large banks have been taking deposit market share away from the smaller banks, and that is partly a function of size and partly a function of technology. But the two seem to be inexorably connected — it’s the scale that allows those big banks to afford the technology that enables them to dominate the national deposit market.

The recent flurry of MOEs seem inspired partially by the perceived need to create enough scale to afford the technology investments needed to compete in the future. There also seems to be evidence that large banks have become more profitable than smaller banks (although I’m waiting for Bank Director’s 2020 Bank Performance Scorecard to confirm that), and that advantage may be in part because they have become more efficient and driven down costs. JPMorgan Chase & Co. had an overhead ratio (which is basically the same thing as an efficiency ratio) of 55% in 2019, down from 57% in 2018 — that’s better than many banks a 10th of its size. And I bet they continue to drive that ratio even lower in the years ahead because they know they have to.

We may be entering the Era of Big Banks, driven by scale, MOEs and technology. It will be interesting to watch.

Jack Milligan, editor in chief

 

The Attributes of a Trusted Partner

A growing number of technology companies have been founded to serve the banking industry. Not all of them have what it takes to satisfy bankers. What specific attributes is a bank looking for in a partner?

This was the question that inspired a session featuring Erin Simpson, EVP and chief risk officer of Little Rock, Arkansas-based Encore Bank, and Ronny Chapman, president of Compliance Systems.

One of the most important attributes, according to Simpson, is financial sustainability. A bank doesn’t want a partner that may or may not be around in a year or two. Flexibility and configurability are also desirable. “We want partners that will work with us,” says Simpson. “We want partners that are willing to tailor their solutions to our needs.”

A comprehensive product offering is another attribute identified by Simpson. As is the proven viability of products. “We don’t want to be your beta bank,” she says of the $247 million institution. “We don’t want you to be testing your products on us. We want a partner that knows more than we do.”

In short, given the growing role of technology in banking, articulating a defined list of desirable attributes for third-party tech vendors seems like a valuable exercise.

John J. Maxfield, executive editor

 

Learning the Language

“We have to be agile. We have to be nimble.”

That insight was shared by Brent Beardall, the CEO of $16.4 billion asset Washington Federal in Seattle, on the main stage during Day 2.

Since the financial crisis, Beardall has transformed his bank from tech-phobic to more tech-centric. And his thoughts sum up the strategic imperative faced by banks seeking to survive and thrive in today’s challenging marketplace.

In response, boards and executive teams need to learn to speak the language. Technology is no longer an issue that can be delegated to the IT department; it impacts the entire bank.

Talent is needed to drive these strategies forward. Presenters in a session on artificial intelligence asked attendees, how many banks have a chief digital officer? Data scientists? Few bankers raised their hands, identifying a talent gap that aligns with the results of Bank Director’s 2019 Technology Survey.

And change promises to be a constant. “If we go back five years and look back to what we thought this point in time will look like, we would’ve been so wrong,” said Frank Sorrentino III in another panel discussion. Sorrentino is CEO of ConnectOne Bancorp, a $6.2 billion asset bank based in Englewood Cliffs, New Jersey. “The future is still being written.”

Emily McCormick, vice president of research

Industry Perspectives at Acquire or Be Acquired 2020

People, Products & Performance – In this interview with Bank Director CEO Al Dominick, John Eggemeyer shares his thoughts on what drives performance.
Super-Connected Customers – Data, payments and other technology-related issues were top of mind for bankers at the 2020 Acquire or Be Acquired conference.
Who Gets the Dog? – On the heels of the CenterState Bank Corp./South State Corp. merger, Al Dominick evaluates a core cultural issue around these deals.
Spotlight on M&A – Drivers of M&A, balancing organic growth with acquisitions, and nonbank deals were key topics discussed from the stage at Acquire or Be Acquired.
Exploring Opportunities – Bank Director CEO Al Dominick shares three important takeaways from the first day of the 2020 Acquire or Be Acquired conference.
Technology’s Impact – Hear how banking industry leaders view today’s quickly evolving technology landscape.
Focus on Consolidation – Big mergers of equals and tech deals defined the banking market in 2019.

Winners Announced for the 2019 Best of FinXTech Awards


Awards-9-10-19.pngBanks face a fundamental paradox: They need to adopt increasingly sophisticated technology to stay competitive, but most have neither the budget nor the risk appetite to develop the technology themselves.

To help banks address this challenge, a legion of fintech companies have sprung up in the past decade. The best of these are solving common problems faced by financial institutions today, from improving the customer experience, growing loans, serving small business customers and protecting against cybersecurity threats.

To this end, we at Bank Director and FinXTech have spent the past few months analyzing the most innovative solutions deployed by banks today. We evaluated the performance results and feedback from banks about their work with fintech companies, as well as the opinions of a panel of industry experts. These fintechs had already been vetted further for inclusion in our FinXTech Connect platform. We sought to identify technology companies that are tried and true — those that have successfully cultivated relationships with banks and delivered value to their clients.

Then, we highlighted those companies at this year’s Experience FinXTech event, co-hosted by Bank Director and FinXTech this week at the JW Marriott in Chicago.

At our awards luncheon on Tuesday, we announced the winning technology solutions in six categories that cover a spectrum of important challenges faced by banks today: customer experience, revenue growth, loan growth, operations, small business solutions and security.

We also announced the Best of FinXTech Connect award, a technology-agnostic category that recognizes technology firms that work closely with bank clients to co-create or customize a solution, or demonstrated consistent collaboration with financial institutions.

The winners in each category are below:

Best Solution for Customer Experience: Apiture

Apiture uses application programming interfaces (APIs) to upgrade a bank’s digital banking experience. Its platform includes digital account opening, personal financial management, cash flow management for businesses and payments services. Each feature can be unbundled from the platform.

Best Solution for Revenue Growth: Mantl

MANTL developed an account-opening tool that works with a bank’s existing core infrastructure. Its Core Wrapper API reads and writes directly to the core, allowing banks to set up, configure and maintain the account-opening product

Best Solution for Loan Growth: ProPair

ProPair helps banks pair the right loan officer with the right lead. It integrates with a bank’s systems to analyze the bank’s data for insights into behaviors, patterns and lender performance to predict which officer should be connected with a particular client.

Best Small Business Solution: P2BInvestor

P2Binvestor provides an asset-based lending solution for banks that helps them monitor risk, track collateral and administer loans. It partners with banks to give them a pipeline of qualified borrowers.

Best Solution for Improving Operations: Sandbox Banking

Sandbox Banking builds custom APIs that communicate between a bank’s legacy core systems like core processors, loan origination, customer relationship management software and data warehouses. It also builds APIs that integrate new products and automate data flow.

Best Solution for Protecting the Bank: Illusive Networks

Illusive Networks uses an approach called “endpoint-focused deception” to detect breaches into a bank’s IT system. It plants false information across a bank’s network endpoints, detects when an attacker acts on the information and captures forensics from the compromised machine. It also detects unnecessary files that could serve as tools for hackers.

Best of FinXTech Connect: Sandbox Banking

The middleware platform, which also won the “Best Solution for Improving Operations” category, was also noted for working hand-in-hand with bank staff to create custom API connections to solve specific bank issues. In addition, banks can access three-hour blocks of developer time each month to work on special projects outside of regular technical support.

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.

Connecting with Millennials By Going Beyond Traditional Services


technology-8-28-19.pngBanks are at a crossroads.

They have an opportunity to expand beyond traditional financial services, especially with younger customers that are used to top-notch user experiences from large technology companies. This may mean they need to revisit their strategy and approach to dealing with this customer segment, in response to changing consumer tastes.

Banks need to adjust their strategies in order to stay relevant among new competition: Accenture predicts that new business models could impact 80% of existing bank revenues by 2020. Many firms employ a “push” strategy, offering customers pre-determined bundles and services that align more with the institution’s corporate financial goals.

What’s missing, however, is an extensive “pull” strategy, where they take the time to understand their customers’ needs. By doing this, banks can make informed decisions about what to recommend to customers, based on their major consumer life milestones.

Only four in 10 millennials say that they would bundle services with financial institutions. Customers clearly do not feel that banks are putting them first. To re-attract customers, banks need to look at what they are truly willing to pay for — starting with subscription-based services. U.S consumers age 25 to 34 would be interested in paying subscription fees for the financial services they bundle through their bank such as loans, identity protection, checking accounts and more, according to a report from EY. With banks already providing incentives like lower interest rates or other perks to bundle their services, customers are likely to view a subscription of bundled services with a monthly or annual fee as the best value.

Subscription-based services are a model that’s already found success in the technology and lifestyle sector. This approach could increase revenue while re-engaging younger generations in a way that feels personal to them. Banks that decide to offer subscription-based services may be able to significantly improve relationships with their millennial customers.

But in order to gain a deeper understanding of what services millennials desire, banks will need to look at their current customer data. Banks can leverage this data with digital technology and partnerships with companies in sectors such as automotive, education or real estate, to create service offerings that capitalize on life events and ultimately increasing loyalty.

Student loans are one area where financial institutions could apply this approach. If a bank has customers going through medical school, they can offer a loan that doesn’t need to be repaid until after graduation. To take the relationship even further, banks can connect customers who are established medical professionals to those medical students to network and share advice, creating a more personal experience for everyone.

These structured customer interactions will give banks even more data they can use to improve their pull strategy. Banks gain a more holistic view of customers, can expand their menu of services with relevant products and services and improve the customer experience. Embracing a “pull” strategy allows banks to go above and beyond, offering products that foster loyalty with existing customers and drawing new ones in through expanded services. The banks that choose to evolve now will own the market, and demonstrate their value to customers early on.

2019 Survey Results! Here’s How Banks Are Spending Money on Technology

The desire to streamline customers’ experience and improve efficiency is driving bank technology strategies across the industry, as most executives and directors believe their offerings are “adequate,” according to Bank Director’s 2019 Technology Survey, sponsored by CDW.

The survey, conducted in June and July 2019, reflects the views of CEOs, technology executives and independent directors. It seeks to better understand bank strategies, staffing and budgets around technology and innovation, as well as banks’ relationships with legacy core providers and newer vendors.

Seventy-eight percent of survey respondents say that improving the customer experience is a top objective driving their bank’s strategy around the investment, development and implementation of technology. Seventy-two percent say that fueling efficiency is a top objective.

These strategic objectives are driving where banks are investing in technology: 68% say they’re investing in automation in fiscal year 2019, and 67% are investing money to enhance the bank’s digital channels.

Most banks rely on their core provider to advance these goals. The cores are the primary providers for many of the technologies used by banks today, including application programming interfaces (68% say that API technology is provided by the core), business process automation (43%), data aggregation (42%) and peer-to-peer (P2P) payments (47%).

That relationship isn’t stopping many banks from searching for new potential partners; 60% are willing to work with newer fintech startups. The survey finds that the use of alternate providers is gaining ground, in particular when it comes to the cloud (57%), data aggregation (25%) and P2P payments (29%).

Despite the rise of the digital channel, 51% of respondents say the branch is equally important to online and mobile channels when it comes to growing the bank. More than half indicate they’re upgrading branch and ATM technology.

Just 30% say that driving top-line growth fuels their technology strategy, which indicates that most banks see technology as a way to save money and time as opposed to generating revenue.

Key Findings

  • Loyal to the Core. More than half of respondents say their core contract expires within the next five years. Sixty percent say they’re unlikely to switch to a new provider.
  • But Banks Aren’t Satisfied. Just 21% say they’re completely satisfied with their core provider.
  • Technology Pain Points. Sixty percent say their current core provider is slow to provide innovative solutions or upgrades to their bank, and almost half cite difficulty in implementing new solutions. These are major sticking points when 60% rely on their core provider to introduce innovative solutions.
  • It’s All on IT. Almost three-quarters point to the senior technology executive as the individual responsible for identifying, developing and implementing technology solutions. Almost half task a management-level committee to make decisions about technology.
  • Rising Budgets. Forty-five percent say their technology budget has risen between 5% to 10% for FY2019. Almost one-quarter report an increase of more than 15%. Responding banks budgeted a median of $750,000 for FY2019.
  • Where the Money’s Going. In addition to automation, digital enhancements and branch improvements, banks are hiring consultants to supplement in-house expertise (50%), and bringing on additional employees to focus on technology and innovation (43%).
  • Data Gap. Almost half describe their bank’s data analytics capabilities as inadequate.
  • More Expertise Needed. Fifty-three percent say technology is on the agenda at every board meeting — up three points from last year’s survey. Yet, 80% say the board needs to enhance its technology expertise. Forty-three percent say they have a technology expert on the board.
  • Cybersecurity Top of Mind. Protecting the bank from cyberattacks dominates board technology discussions, according to 96% of respondents. Many boards also focus on process improvements (63%) and implementing innovative customer-facing technology (46%).

To view the full results of the survey, click here.

How to Deliver a Full Customer Experience Over Mobile Banking


mobile-8-21-19.pngWith most banking activity taking place on mobile, banks must innovate in order to deliver the full customer experience straight to customers’ fingertips.

With more people using their phones to access banking services, banks cannot afford to miss out on the massive opportunity to go beyond transactions and offer the sales and service customers seek. A Citigroup study found that mobile banking is among the top three most-used applications on a consumers’ phone, increasing 50% from 2017 to 2018.

Many banks still have a siloed mindset, considering in-branch, mobile and online experiences as separate and distinct entities. But their customers don’t differentiate between channels; they view banking as an omni-channel experience.

Their expectations are the same, whether they go to a branch, visit their bank’s webpage at home or open an app on their phone. If they have questions, they expect the ability to ask their bank within the mobile app just as easily as they would in branch. And if they are interested in learning about savings accounts or loan rates, they expect to easily find that information within the mobile banking space.

Banks have long thrived by delivering seamless transactions, competitive and unique products and outstanding service. They have responded to the growing popularity of mobile banking by investing in technology to build out robust transactional experiences for their customers. From mobile deposit to transferring funds to bill pay, the ability to conduct fundamental banking transactions is available to and frequently used by customers.

Where bank mobile apps are lacking, however, is in providing the sales and service that they excel at delivering in their branches to the mobile devices of their customers. This is a huge opportunity many banks are missing. Based on our data, there are about 2,000 opportunities per every 25,000 accounts where a customer expresses an intent to inquire about how to do something or how to adopt a new product that is entirely uncaptured in mobile banking.

With the advent of digital transformation and more activity moving to mobile channels, the sales and service aspects of banking have gradually become more diluted. Banking has become less sales and service oriented and increasingly more transactional.

There is only one direction for banks to go: give consumers what they want and demand. Banks need to offer customers the ability to connect with them on their phone anytime, anywhere, and to receive the same level of sales and service they do at a branch. Mobile banking provides a plethora of opportunities to do just that.

Banks need to do more to provide the same support and service in their mobile channels as they do within their branches. There are three easy ways they can begin to leverage mobile banking to go beyond transactions to deliver sales and service to their customers.

1. Embed a robust help center within mobile banking.
Make finding and accessing digital support a breeze. Embed support content from your website within your mobile banking application to allow customers easy access to help content like resetting passwords and fund transfers. Make sure the most frequently asked questions are answered in a manner that answers the questions, provides additional information and creates a call to action.

2. Utilize chatbot to further engage customers.
Add live chat or an automated chatbot for an additional avenue to engage with your mobile customers. Banks can use chat to suggest relevant content or products and services, help point customers in the right direction and to learn more about their financial goals and needs.

It’s not uncommon for chat usage to double once it is added to mobile banking, which can put a sizeable strain on contact centers. Use support content in the form of a chatbot to allow customers the ability to self-answer common support questions, and offer live chat for more complex questions and issues.

3. Provide clear, concise product information.
Customers no longer consider mobile banking to be purely transactional. They think of it as an extension of a branch, where they’ve come to expect support and sales information. Providing links to your key products within mobile banking can encourage customers to explore your offerings.

When banks fail to go beyond transactions in mobile banking, they miss out on a vast opportunity to provide sales and service through the channel customers are the most present. The consequences of not doing so can result in greater contact center volume, and missed opportunities to increase wallet share.