With vaccinations underway and a sense of normalcy returning to everyday life at the start of Q2 2021, the big question of “What comes next?” was the main focus for banking leaders. For those running forward-thinking institutions, the acceleration of digital and demand from customers & members for digital-first tools created new (and sometimes overwhelming) challenges.
To help move the conversation forward, we brought together some of the most innovative and informed digital banking and fintech leaders for our Digital Banking Transformation Summit.
Here is what our panel experts shared as the two biggest digital banking opportunities for regional & community financial institutions for 2021 and beyond.
Even before COVID-19 upended the traditional relationship many people have with their bank and credit union, it was clear that digital-first channels were growing in importance. When social distancing measures and branch closures started impacting how financial institutions reach and serve their communities, there was little doubt that investing in digital was part of defining the “New Normal”.
During the second session of the Digital Banking Transformation Summit, McKinsey Partner and banking expert Peter Noteboom shared the conversations he’s heard taking place in boardrooms of banks during the pandemic, “I don't think there's a single CEO or board member that would say that they don't wish they had more digital capabilities going into 2020 than what they ended up with,” further explaining that the financial institutions that made early investments in their digital infrastructure, applications, and their ability to engage with customers all benefited greatly. With many later seeing those critically important shifts as life-saving investments.
“I think the same way we've seen customer interactions with channels changing as they shifted to digital, the thought processes within boardrooms and the executive suite have also shifted,” Peter pointed out. “With many of the trends they thought they had years to address, that timeline has really compressed.”
With many of the trends they thought they had years to address, that timeline has really compressed.
For Michelle Spellerberg, VP of Digital Strategy, and the Alliant CU team the acceleration of digital was most noticeable through both a spike in support contact and more members making the switch to mobile banking. As their members navigated the challenges of the pandemic, Michelle and her team observed an increase in contact from people seeking digital solutions for typically in-branch banking services; “People are really trying to be hands-off and doing more and more digitally – even with more complicated transactions.”
The acceleration of digital marks a step-change in the way people are interacting with their finances and banking needs. This change in user behavior has helped clarify what “Digital Transformation” actually means for financial institutions. As we saw with a poll we conducted during the virtual summit, the general consensus is that Digital Transformation in banking means improving a user’s experience within an online and mobile banking product.
For too long, the conversation around technology disruptors in banking has pitted traditional institutions against fintechs. This zero-sum look at fintech has only served to confuse and hide the opportunities that exist for the majority of credit unions and community banks.
Expectations of digital banking functionality and user experience have evolved. As Plaid’s Head of Product Niko Karvounis shared, Plaid’s research into consumer & member expectations has shown an increase of demand for connectivity from users trying to turn one account into their primary banking hub.
Being able to provide account primacy for users is an attractive goal for community and regional financial institutions, and partnering with fintech vendors like Plaid allows them to meet user expectations. This was the motivating factor for Michelle and her team at Alliant to partner with Plaid after seeing an increase in the usage of aggregators from people trying to better manage their money.
We can get to the point where we're able to aggregate the data, use the data, and then automate some of the things that are going to make their financial life better. I think that's really the next big step. -Michelle Spellerberg
In addition to fintech providing approachable and affordable solutions for connecting user data, selecting the right fintech vendor relationships allows credit unions and banks to grow their digital functionality without having to invest in added developer and IT resources.
A poll we conducted during this session asking about the biggest challenges Financial Institutions are facing with their digital transformation revealed some common trends we’ve heard from our customers. Second to limitations from core banking system providers, a lack of developer and engineering resources, and confusion around the ROI of digital investments are the top pain points felt by the industry. Despite changes in thoughts around the pace of adopting digital-first solutions, Peter pointed out that leaders of mid-cap banks and credit unions still feel they, “can’t be all things to all people.”
There was a strong consensus amongst our panelists that streamlining the processes and user experiences of digital services is a valuable investment to make. While this includes developing new digital functionality for more complicated banking services, our experts highlighted how smaller improvements like mobile balance preview & travel notifications, can have a big impact. “It’s simple [features] so far that have been our most used features and the things that people liked the most,” according to Michelle. This makes sense given the instability people have felt during the pandemic navigating a wide range of financial challenges.
A less obvious example where streamlining processes pays off can be found in the selection and integration with new digital vendors. All too often, the biggest roadblocks to digital transformation come from compliance and regulation-focused internal teams. Understanding the opportunities that can come with new digital-first products and services is easy to grasp, but knowing the downstream compliance and security implications for account holders is not.
If you wait until contract stage to get legal and compliance & risk to sign-off, you've waited too long and you're going to get more questions than answers.
The solution for this pain point Michelle Spellerberg outlines, is to bring your compliance team member and regulation business partners into the process early and often. “A ‘best practice’ for me has been to bring them into demos we’re doing with vendors, and have them talk to the vendors early. If you wait until contract stage to get legal and compliance & risk to sign-off, you've waited too long and you're going to get more questions than answers.”