How Community Banks Can Implement New Technological Solutions

Forbes Business Council with Mike Sekits, Managing Director of the Btech Consortium, a partnership between community banks, Elizabeth Park Capital Management and Strandview Capital.

Community banks are vital in supporting local economies and providing financial services directly and indirectly to underserved small businesses and consumers. However, community banks’ reliance on legacy technology systems has historically limited their ability to deliver leading-edge products to their customers.

Smaller community banks often believe they need to be bigger and more resourced to identify, adopt and maintain newer technologies that allow them to compete against the offerings provided by money center banks like Chase and Bank of America. This is beginning to change.

Increasingly, relatively small and mid-sized banks are beginning to utilize newer technologies to develop customer verticals further, extend product and reach, and gain competitive advantages. Interestingly, smaller banks have the advantage over larger banks when upgrading their tech stacks as they have less legacy to rewrite, rip out and recreate.

The key is finding the right resources, implementing the appropriate solutions and looking to emerging tech to capture opportunities and reduce pain points.

Implementing Solutions That Have A Large Impact

With all the new fintech and banking solutions coming to market, often with oversized marketing budgets relative to their importance, it can be easy to get caught up in the sparkle of highly publicized products like artificial intelligence, machine learning, blockchain and crypto. But ultimately, community banks should focus on finding and implementing practical, functional solutions that drive efficiencies and meet their customers' needs.

As an example, newer API integration tools built on low- and no-code technology platforms allow even small, less-resourced community banks to extract data from their core system providers and begin operating in a digital native environment. Currently, legacy software tends to silo data by product and business segments, utilize batch files rather than real-time data access and is inherently difficult to integrate with other solutions due to excess customization requiring one-to-one integration rather than one-to-many. Relying on core system providers to make changes can be costly and may require long lead times.

Built as a more a-la-carte solution, less known low- and no-code technology platforms can seamlessly connect onto existing legacy systems in a way that requires little IT lift or maintenance. While not an entire system overhaul, newer cloud-based technology platforms provide banks with real-time access to data, allowing for better reporting and data analytics to cultivate a hyper-personalized customer experience.

Implementing changes to the tech stack for small and mid-sized community banks can seem daunting. However, they can readily start using their own resources and staff.

How To Successfully Implement New Technology

For any tech implementation to succeed, community banks should ensure they’re actively engaging with their teams for buy-in. Begin with an internal assessment or audit—what tools and resources currently exist that could be better utilized or perhaps don’t fulfill their intended purpose? What are some of the teams’ biggest pain points where new processes or technology could prove beneficial?

From there, look for opportunities to automate processes and research solutions to address identified gaps. It is often helpful to look at how larger banks are utilizing technology and then seeking solutions that mimic those capabilities, but in a manner best suited for their specific bank’s needs. 

Having team members ask other community bankers how they have addressed similar challenges can be a highly efficient way to shift through various tech solution providers. Most banks are surprisingly willing to share technology insights with others. 

Early employee engagement can also help lead to more successful adoption and implantation in future stages. Making this an open, full-team effort helps foster a culture of innovation, making staff feel heard while also opening the door to bring ideas and solutions to the table. 

Community banks are well positioned to derive tremendous efficiencies and functionality by adding these types of tech platforms into their tech stacks.

What Community Banks Can Look To Next

Technologies are being developed and rolled out precisely to help community banks efficiently offer more products, increase their market penetration and extend their bank services outside their regional branch footprint. Key themes include mobile-first strategies that enable excellent user experiences and easier API integrations with third-party platforms to leverage existing customer relationships and broaden a bank's appeal.

B2B Payments

Another area we see strong development interest in is business-to-business (B2B) payments. It’s an opportunity to better serve customers through real-time payment options and increase back-office efficiencies by reducing check processing costs. Given this opportunity, there is significant interest by venture capitalists and their portfolio companies to develop turnkey B2B payment solutions for banks of all sizes. The market for B2B payment platforms was valued at almost $950 billion in 2021 and is estimated to reach $1,564 billion by 2028. 

While there is significant chatter and hype around blockchain and stable coin solutions, there are technology companies capable of delivering turnkey payment solutions using pragmatic, digital ledger technology at attractive price points. Aside from driving cost efficiencies, the delivery of real-time payments can create tremendous competitive advantages for community bank customers that result in effective deposit-gathering strategies.

Data Analysis

Another area of great importance is in the realm of data analysis. By using data analytics tools, small community banks can gain insights into their customers' financial habits and preferences, which can help them tailor their products and services to meet their customers needs better. Properly managed data can also help community banks better understand their local market and make more informed business decisions.

Conclusions

Ultimately, small community banks can benefit from technology innovation by embracing new solutions that address existing pain points and reduce reliance on core operating systems. When these solutions are appropriately introduced and applied, they enhance and complement the long-term, personal relationships community banks are known for rather than exclude and replace the personal relationships that customers like about their local community bank.

By staying up to date on newer technology and efficiently integrating practical solutions into their operations, small community banks can improve their efficiency, better serve customers and stay competitive in today's market.