Think Community Banks Can’t Innovate? Think Again.

By Lisa Gold Schier

What do fintech firms Acorns, Square, Money Lion and Qapital all have in common?

Lincoln Savings Bank, a $1.3 billion bank founded in Iowa in 1902, works with all four.

In 2013, Mike McCrary was a marketing director at the bank, confronting what many banks have been struggling with in recent years: the need to explore new technologies. According to McCrary, “we spun our wheels for two and a half years before anything came out.” Now, five years later, the bank is forming technology partnerships that allow them to attract new customers while enhancing the experience for existing ones.

Why is the bank doing this? McCrary says it makes them stronger. “We need to be a technology bank if we want to move forward and meet our customers’ expectations. Banking has always relied on technology, it’s now just moving faster.”

How are banks like LSB doing this? It takes a cultural shift within the bank, along with an integrated team, dedicated time and resources. The bank also has to be willing to take some chances. According to McCrary, “when it comes to risks, we don’t just say ‘it’s a risk, so we can’t do it.’ Instead, we identify risks, look at how we’ll mitigate them and decide if we can move forward. It’s a new way of thinking that has allowed us to partner and grow our business while managing risk.” Through one of its partnerships, LSB can now reach 10 times the number of customers they have in their existing markets. Worth the time, effort and new methodology? Absolutely.

I constantly hear that banks are risk-adverse and that moving into new partnerships is often delayed by assessing all that could go wrong and then deciding not to move forward. Banks that partner are doing so by analyzing those risks and putting plans in place should they occur—not putting an end to the partnership because they might happen.

LSB, for instance, looked at what the harm would be to the bank if partnership were to go south. Was there a reputation risk, a risk of monetary loss, risk of customer disruption? And if so, what was the level of that risk? The bank then looked at the potential upsides and the risk of doing nothing. For McCrary, it comes down to this: “If we do nothing, often that is a bigger risk than trying something where we don’t yet know all the answers.”

And then there are the intangibles—the things that the bank learns through the process. These lessons are as valuable as the partnership itself. Iterating along the way, learning from mistakes allows for creativity and new ways of thinking—which in turn fosters innovation—and employee growth. McCrary himself is a prime example: he is now first VP of ecommerce and emerging technology and continues to drive the bank forward in pursuing new and exciting partnerships.

Digital is here. Elevating the customer experience through the digital channel combined with personal interactions need to be front and center. The right partnerships create a collaborative environment for bank/fintech innovation. Community banks like LSB are partnering and you can, too.

ABA SVP Lisa Gold Schier leads the team that works to identify and vet innovative industry partners to provide ABA Endorsed Solutions for banks.