One of the recurring themes discussed during our 2023 Innovators Retreat was the importance of leveraging technology to help future-proof community banks and credit unions. This sentiment is especially pertinent when facing turbulence in the industry as we are now.
While it may be tempting for financial institutions to change (or cut back on) innovation strategies when facing times of uncertainty, Cornerstone Advisors’s Chief Research Officer, Ron Shevlin, highlighted the importance of leveraging tailwinds (such as emerging technology trends) to “help push you forward toward the future.”
When planning a digital transformation, it is crucial to define specific goals and stick to them. Otherwise, these moving targets may tend to sprawl and can be difficult to draw results from. By creating an impactful and innovative (but stable) plan, community banks and credit unions can ensure they are incorporating technologies that will actually drive success.
Especially given the uncertainty facing the banking industry, community banks and credit unions should prioritize technology investments that first and foremost enhance user experience.
As the collapse of Silicon Valley Bank and Signature Bank brought to light, financial institutions must maintain communication channels that allow for immediate and concise messaging, especially during times of crisis.
“How do we ensure that we are communicating effectively in a high-risk, low-trust scenario?” Jonathan Alloy of Publicis Sapient asked attendees. “This is about facts, but it is also about empathy and emotions… We need to be equipped as an industry to be communicating effectively in a way that our customers will hear us through all of our channels.”
Whether that be through personalized alerts, email updates, or even chatbots, enhanced communication channels will help to further build trust with customers and members.
It is also necessary for community financial institutions to focus on gaining more deposits as the potential for new liquidity and funding regulations loom. A key way to accomplish this is through a seamless account opening platform that offers transparency and instills trust in potential customers and members.
Since these are two clear goals that community financial institutions should focus on in 2023 and beyond, it is important to consider how technology investments can support such efforts.
When dealing with a complex plan that requires a multi-year infrastructure change, J.P. Morgan’s Lucia Li suggests dividing it into components, so it does not feel as daunting. “How do we actionably execute on [innovation objectives]?” said Lucia. “The first thing is recognizing you need a change, and then breaking it down into piecemeal.”
By deconstructing a larger plan into smaller components, not only are the necessary technologies easier to identify, but this also allows key stakeholders more insight into the process. The better senior leadership understands the objective, the easier it will be to garner support.
While senior management and board members may initially focus on the ROI of the technology investments, Ron Shevlin explains why it is important to push them to think about the additional impacts on the customer and member experience (which can be harder to measure).
“[In the past] senior management looked at technology infrastructure investment as a [cost] they want to minimize as much as possible,” Ron said. “[However] there is a connection to the customer experience and the bottom line. Making better investments in infrastructure creates lower cost structures and impacts your reliability and delivery capability.”
Financial institutions must also understand the consumer behavior they want to encourage, reward, and then repeat.
Jonathan Alloy suggested that instead of having an FAQ section, financial institutions should push themselves to update their technology, processes, and systems so that customers and members do not need to ask these questions in the first place. By doing this, the user experience is not only enhanced (since confusion and uncertainty is eliminated), but it also leads to the perception that these financial institutions are offering higher quality products and services.
“If your customers are frequently asking a question, why haven’t you changed your system so they don’t have to ask that anymore?” Jonathan noted. “Customers are free to vote with their feet and vote with their money [and will move] to perceived quality for a whole host of reasons.”
It is also crucial to draw inspiration from different industries when thinking about how to influence consumer behaviors and increase user engagement. Lucia Li asked participants to identify who Netflix thought their original competition was. Responses from the audience included: Blockbuster, Amazon Prime, television networks, and Disney+. The answer? Uber.
Just as Netflix positioned itself against companies outside of its industry, financial institutions must do the same, especially when it comes to their digital offerings.
“They started with Uber as a competitor because, think about the behavior. If you’re using Netflix, you’re at home and relaxing. If you’re using Uber, you’re outside and not watching Netflix. That’s actually how they started thinking about their competitors.” – Lucia Li
Whether it’s the personalized recommendations offered in a music app, or the usability of a travel site, it is important for community banks and credit unions to compare themselves to the last digital interaction their customers and members had, versus only benchmarking against competitors in the banking sector. By pulling inspiration from other industries, financial institutions can ensure that their user experience is up to par, thus leading to better engagement.
“You’re creating a better customer experience not to drive more traffic, but to drive more meaningful engagement.” – Ron Shevlin
When planning long-term goals, financial institutions must consider how additional technology enhancements will build upon and integrate with current offerings.
During his opening remarks at the Innovators Retreat, Narmi Co-Founder, Nikhil Lakhanpal stated, “It’s important to keep our products modern, relevant, and innovative instead of just adding what’s new.”
By focusing on stable innovation, this ensures compatibility and integration between current products and future offerings. This prioritization also makes it harder to get knocked off course by the latest technology offerings (which may seem cool, but don’t necessarily help to better serve customers and members). What does serve them, however, is a tech stack that is fully integrated, offers them transparency into their finances, and is a seamless experience.
“We could pile on features, functions and new technologies, but if you are not taking care of what you have, it’ll just become stagnant and stale and you’ll never really move forward.” – Aaron Mickelson, Twinstar Credit Union
By leveraging inspiration from different industries and focusing on stability, community banks and credit unions will be able to use their technology investments to better serve their customers and members while helping to future-proof their financial institutions.