By Kylee Wooten
We’re now years into the era of fintech disruption, and community banks are still grappling with the complexities of adapting to it. In a recent interview, Tom Bugielski, CEO of Republic Bank of Chicago, says, “The retail banking challenge that we face today is something I’ve never seen before, both with the number of branches that are closing and the enhanced utilization of technology and digital channels.”
According to the U.S. Government Accountability Office, the number of community banks has declined by 24 percent between 2010 and 2017—from 7,007 to 5,331 institutions. Many financial institutions face upheaval in customer expectations, regulations, products, branches and even competition for funding.
While technology is certainly a disruptor to the banking landscape, it is also helping to make banks more nimble in addressing their challenges. The question is no longer: “should my bank leverage fintech partnerships and technology?” It’s now: “how can my bank use fintech partnerships and technology to its best advantage?”
We’ve all heard dozens of answers to this question—but it’s easy to get lost in the weeds. Before you start shopping for fintech solutions, you need to address the big-picture issues in order to get started.
Know what you’re solving for.
Are you looking for a better mobile experience? Faster loan decisioning? Maybe online deposits? Whatever it is your bank is searching for, it’s important to identify the problem before chasing after shiny objects. There are numerous technological advancements in the fintech space. Your primary task is to think through your bank’s unique challenges before trying to implement technology that might alleviate your peers’ issues without addressing your institution’s needs.
Take the time to fully assess potential vendors and partners. From compliance and regulatory changes to the bank’s core processor and other internal systems, banks are far from one-size-fits-all. So the solution should be unique to your institution as well. There are many moving parts involved with technology implementation, and finding a partner that will be there for your institution every step of the way is important in order to find value in the investment.
Create the culture.
Picking the right technology provider to collaborate with can be a major hurdle for banks with weaker cultures of innovation. While executives will call the shots when it comes to signing on the dotted line, there are many moving parts to implementation—many of those need to be figured out before implementation even begins. For example, compliance and legal staff, as well as internal stakeholders will need to be involved early in the process. Most likely, the new technology will create operational changes, which will need to be communicated to end users so they can use the system and educate their customers.
Because technology implementation touches nearly every person within an institution, it requires not only operational changes, but also a shift in the cultural mindset. Creating a culture of innovation won’t happen overnight, but it’s critical that the bank garners buy-in and involvement from employees throughout the entire institution.
Executive leadership will need to address a broad range of topics with all bank employees, including:
- The purpose behind the fintech partnership
- How day-to-day operations may change
- Expected benefits of the partnership
- Expected timeline of implementation
- Training and other resources available for employees
Establishing transparency in the partnership will help prepare staff to embrace innovation.
Stick to the plan.
For a successful technology partnership, one of the most important pieces of the implementation puzzle is to create a realistic timeline—and adhere to it. To do this, banks must be as upfront as possible with the provider regarding its current technology, resources and timeline expectations. In turn, the bank must also understand the technology provider’s needs regarding time and resources.
Talk to current customers or other peer institutions that have implemented similar technology. Take into consideration core technology, staff size and other resources that your institution may or may not have in comparison.
While banks will certainly want to see the benefits of the partnership as soon as possible, they need to understand that to fully realize the value of a fintech product, it takes ample time to successfully implement it. If your bank is considering multiple integrations, consider adding multiple phases into your rollout timeline. Be sure to plan for enough time to test and learn the product to the fullest—and to document customer feedback. After all, the purpose of implementing new software is to ultimately heighten the customer experience and product offerings.
Technology will continue to transform traditional banking. And to remain competitive, community banks will continue to explore fintech partnerships as an option. Disruption in the banking industry does not have to mean disruption within the institution. Ensuring that your bank has a strategy to fulfill a need, a plan to bring employees onboard, and a thoroughly thought-out timeline can help alleviate many of the potential obstacles in this transition.
Kylee Wooten is a content marketing and social strategist at Sageworks, a financial information company.