Small banks don't have to take a backseat to fintechs

Community banks will never be able to keep up with startups and online-only banks — or so pundits might have you believe.

But community banks have some big competitive advantages. They are deeply entrenched in their communities and are committed to supporting customer needs. These are the hallmarks that have helped community banks stand the test of time and that consumers today still value.

The trouble is, it’s no longer enough. Consumers want the personal touch and the seamless digital experience.

So how do community banks evolve in the right way? Don’t throw that legacy out and become something different. When e-readers were invented, authors didn’t stop writing; a Pulitzer winner retains that distinction whether in hardback or on a Kindle. Instead, adjust some aspects of the business to stay relevant in a fast-changing marketplace.

Every bank is different, but these are the four investments no community bank can afford to ignore.

Digital capabilities

Our research shows that 73% of consumer banking interactions are now digital. So providing customers with a frictionless, on-demand experience across multiple channels is imperative.

Focus on getting the right mix of personalization, agility and operational and financial efficiency.

Platforms that are built to leverage artificial intelligence and machine learning give community banks the ability to deliver the kind of personalization that reinforces their established brand image.

Systems that are built to accommodate open application programming interfaces, or APIs, and that use mass enablement for new product features and service rollouts will make adding new innovations later both cost-efficient and operationally feasible.

The cloud

In banking, trust and security are synonymous, and investing in — or partnering with companies that have invested in — the cloud is an important strategic decision.

When executed properly, a private cloud infrastructure delivers greater resiliency, enables faster software enhancements and ensures data security. Other benefits include significant decreases in infrastructure issues, improved online response times, enhanced batch processing times and the ability to swiftly respond to disasters and disruptions.

Data

Good data used to be an expense only the largest financial institutions could afford. But the ability to access, filter and focus on data is now in reach for community banks.

In addition to adding even greater personalization to digital and mobile banking tools, community banks can make further use of data to drive cost efficiencies, growth initiatives and service improvement efforts, as they deliver that differentiated customer experience they were built on.

For community bankers who fear they can’t harness an influx of data: Don’t let the flood of information incite “analysis paralysis.” Start with a focus on your key goals. Then, ramp up other functionalities as you gain more confidence and skill. Data is a tool for creating an even better bank.

Regulatory compliance

For all the benefits of increased data, it also demands that banks put in safeguards as part of their fiduciary duty. Do your due diligence and make sure whatever technology you choose accounts for a shifting regulatory environment and is able to adapt to it nimbly. (Spoiler alert: Not all tech does.)

On your marks

Keep in mind, it’s far easier for a community bank to catch up on five years of technical innovation than it is for a neobank to catch up on 50 years of hard-earned customer loyalty. It’s time for the tortoise to get some new sneakers and leave the hare behind.