Banks transforming their technology offerings must tailor their approach to accommodate their customers’ needs and market niche, said RSM Senior Associate Elia Blankenship Oct. 3 during the Bank Holding Company Association’s fall seminar in Bloomington, Minn.
Blankenship said banks should include peer analysis and client behavior data to help inform their future digital strategy. Banks looking to build their digital roadmaps should also consider who their vendors will be and understand that any contract will likely need to last at least five years. Other key steps include ensuring that their tech plan is aligned with their broader approach to business operations and customer engagement. For some banks, that could include a smaller tech footprint.
Many banks have not sufficiently integrated their existing technology offerings, Blankenship noted as she stressed the importance of banks aligning their back- and front-end offerings. Though the cost of introducing new technology to banks was once the No. 1 hurdle, Blankenship said a bigger challenge now is having the in-house resources needed for the transition. She cited a recent poll in which only 21 percent of banks said they have the skills necessary to successfully digitalize.
Still, Blankenship said, banks should have point automation solutions, access to advanced analytics, machine-learning and other offerings as digital leaders outperform digital followers in labor productivity returns on investments. She cited one company’s digital investment which resulted in a 10-percent reduction in cycle time in buying across channels. Automation played a key role in reducing payment processing times from two months to a week.
Blankenship’s comments came as many banks look to increase their digital spending over the next few years as they face pressure from both larger banks and fintechs. A white paper released last year by Velocity Solutions said banks must develop digital loan platforms as fintech startups increasingly become industry competitors. At the time, the report found that community banks that are not offering small business lending say there is a lack of staffing to implement the changes; believe that doing so is not profitable; are confused over changing regulatory guidance, and lack internal IT resources to build such a platform.
Banks are also facing pressure to update their technology as more fintech investor groups purchase small banks, a trend Hovde Group Senior Managing Director Kirk Hovde described during the BHCA conference as a “game-changer” for the financial industry. Though bank capitalization has reached a record high, the industry’s $1.8 trillion market cap is still less than the $2.42 trillion held by the tech giant Apple alone.