By Dorothy Savarese
Nothing. They’re both long gone. Dinosaurs. Video rental stores. Netflix. Each has been invoked in warnings to banks: Evolve. Disrupt or be disrupted. Keep pace or experience a new kind of ice age moment—losing relevance.Many bankers have been concerned about the potential competitive threat posed by the growth of fintech companies. At the same time, more and more fintech companies are seeking partnerships with banks, as if they have received their own quiet counsel: Don’t try to go it alone—banking’s harder than it looks. So is fintech a friend or foe?
For banks, understanding how to navigate the rapidly changing world of technology seems overwhelming at times. Stepping back, I think the most important rule is not to embrace technology for technology’s sake, but to keep pace with it and anticipate customers’ wants and needs. That’s no small challenge, given the variety of customers we serve.
A recent survey of consumers conducted for the American Bankers Association shows that bank customers are not monolithically leaving behind some channels, like branches and ATMs, in favor of others, like online and mobile. They are consuming them all. As with so many trends today, this poses both challenges and opportunities.
As an optimist, I like to focus on the opportunities. When I started at the Cape Cod Five Cents Savings Bank 24 years ago, I was a commercial lender. I noticed that our customers were changing in terms of their expectations, so in 1998, I volunteered to coordinate the rollout of our internet banking channel. We were the first Cape-based bank to do so. It was, coincidentally, the same year that iTunes was introduced in limited release. This seems like a lifetime ago in tech years.
Customers, their lives and expectations continued to change, so I moved into the role of change agent—a.k.a. the director of product planning—and rolled out a debit card, relationship package and other innovations. Since then, our product and delivery systems have continued to evolve to accommodate changing needs.
But as they say, past performance is no guarantee of future results. Our future success lies in providing the sophisticated products and services our customers need before our competitors do. Yet the sheer volume and variety of fintech opportunities leaves one wondering: what should we do next? New technologies are transforming every part of banking, from lending and the customer experience to payments, back-office efficiencies and data mining. So what is the best way to keep pace and know you are implementing the right technologies for your bank?
One way is to lean on your associations. ABA helps keep bankers abreast of innovations through resources like this issue of the ABA Banking Journal and other resources found at aba.com/fintech and a host of Endorsed Solutions from fintech companies that we have vetted and declared best-in-class solutions. These are great resources.
In addition, I think it is imperative to adopt fundamentally new approaches to running our banks. A good way to keep up is by changing how we plan, implement and manage risk. The evolving needs of our customers take center stage in planning. We have reorganized our bank’s strategic steering committees based on the lean approach, with technology integrated into each one. We have recalibrated our risk appetite in terms of innovation and technology. When we made the decision to implement the mortgage mobile solution, there had been only 30 banks who had signed up for the product. In other days, we would have waited longer to see how these deployments fared. Instead, we realized we needed to move quickly or risk being at the back of the line.
I mentioned earlier that we rolled out our internet bank at the same time iTunes was originally introduced. Within a few years, iTunes became the dominant player in the music market. Now, of course, we have seen its market share erode due to the disruption of streaming music. The lesson there is that even technologies that are on the upswing now could soon be disrupted by new innovations. The only constant with technology is constant change. Get comfortable with that and you’re well on your way to ensuring your bank’s continued relevance.
ABA Chairman Dorothy Savarese is chairman, president and CEO of Cape Cod Five Cents Savings Bank, Orleans, Mass.
