Community banks need cutting-edge tech to remain competitive

Chermaine Hu

Episode Six is an Austin, Texas-based firm that develops software for financial services companies and others that use payment products. Chermaine Hu, CFO, talked to BankBeat about choosing tech that is adaptable for the long haul, but also stays in tune with the needs of commercial customers. 

 

If I’m a community banker looking for an acquisition, what is the first thing I should assess when it comes to the target bank’s technology?

Chermaine Hu: The first thing is the adaptability and flexibility of another bank’s core system. A couple of questions to consider are: “Is this something that I can integrate into my own?” or “Can it be relatively easily adapted to work with ours?” or “What would a migration effort look like?”

What does a successful tech merger look like? 

C.H.: Success is where both party’s technology either works together seamlessly (unlikely) or one side successfully replaces the other. Different systems with different database schemes, potentially written in different languages, make integrations and migrations challenging.

A big goal must be for customers to not notice anything has changed, yes? 

C.H.: Without flexible and adaptable technology, it will be difficult to offer the consumer a seamless transition. The right digital platform can help solve this and set the financial institution up long-term by providing the capabilities to roll out new digital products and services in the future. Of course, the right technology gives banks a competitive edge when it comes to attracting and retaining customers in any circumstance.

When looking for a long-term, flexible digital partner what should bankers be eyeing?

C.H.: Community banks often fall behind on innovation in part due to legacy technology and disparate back-end systems that are not seamlessly integrated. When considering fintech partnerships, community bankers should look for technology solutions that help back-end systems better communicate by leveraging Application Programming Interfaces. APIs help community banks handle complex integrations without disrupting the customer experience. In some cases, they also serve as a foundation for more rapidly creating and rolling out digital products and services to fit the needs of increasingly digitally savvy customers.

Could you expand on the use of APIs?

C.H.: APIs can make it easier to access core accounting structures. For community banks, this may mean a shorter path to developing their own mobile banking services. Without API access, there could be a need for larger IT staffs or outsourcing to get anything done. APIs can allow smaller institutions to build their own user experiences to meet their specific customers’ needs. Today many small banks have to rely on cookie-cutter solutions from vendors.

How can banks begin to change their culture to become more tech-oriented and nimble?

C.H.: More than ever consumers expect streamlined, user-friendly digital banking capabilities as technology continues to develop, and this is especially true now that COVID-19 has impacted people’s ability to visit their bank in person. Without cutting-edge fintech, from mobile payments to lending, community banks will have a hard time retaining customers let alone attracting new ones. Technology is about attracting and retaining customers, which will always be critical to a bank’s success.

In order to get ahead of this, community banks need to embrace the current opportunity to partner with innovators to help bring their institutions into the 21st Century. It’s really a mindset shift. Rather than looking at fintechs as competitors, it’s important to view the relationship as symbiotic: Community banks gain the capabilities to roll out new products based on customer demand while fintechs gain the opportunity to serve a new pool of customers.

What is something every community bank should have on its fintech radar?

C.H.: An easy-to-use, adaptable, digital framework that allows for easy-to-create, market-specific products for consumers and local businesses should be on every community bank’s radar. Since no two markets are the same, community banks should not have to settle for what have previously been one-size-fits-all solutions.