Executive Director, Btech Consortium Fund .Btech Consortium invests in technology companies serving the banking industry.
It is no secret that the banking sector is experiencing difficult conditions. But since many state-owned banks are very focused on strengthening deposit strategies and assuring customers that their money is safe, I see an opportunity for smaller banks to adopt and develop tools to better compete.
Although the large state-owned banks have considerable resources, most of them are now concerned with reducing industry risk and controlling losses. I believe smaller public and private banks, which have mostly been impacted by public exposure, are in a unique position to use their excellent customer service to gain market share. I also see that small banks are more agile and can adapt more quickly.
Technology is one area where smaller banks have historically been less competitive. Resource constraints make technology adoption and development difficult, but that is changing. As someone who invests in new technologies to serve the community banking industry, I have seen these tools become less expensive to develop and maintain, and more powerful and flexible. The pace of innovation is accelerating. This is great news for banks with the right mindset.
Technology as an opportunity, not a threat
Many bank executives worry that technology will destroy customer relationships instead of improving them. I see this type of thinking as an excuse not to be more proactive in learning and adopting better technologies.
The main advantage of community banking is the personal relationship. The best technology increases the productivity of customer-facing employees by reducing back-end processes through automation.
Start with a solid foundation
Thanks to the many innovations of recent years, community banks have had a great opportunity to implement new and more efficient technologies. Before doing so, many must first try to implement technology that can reduce reliance on traditional banking solutions that are difficult to adapt or scale in today's cloud-based digital world. today.
Unfortunately, nearly 60% of community banks believe that existing technology carries some level of liability. I've found that many banks struggle with legacy solutions that isolate data and don't interact well with third-party vendors, discouraging new initiatives.
By initially reducing reliance on legacy solution providers and "unbundling" the core technology stack, banks can utilize an interconnected but not interconnected system. Banks can focus on creating a more user-friendly structure where individual platforms and solutions can be added or removed without disrupting the entire technology stack.
This infrastructure must include middleware on the main platforms and specific fintech offers. I've seen how the right middleware can provide elegant integration, multi-functionality, and flexibility for easy vendor switching, helping to future-proof your technology stack. It also strives to build these solutions with a no-code or low-code mindset, allowing community banks to build their technology stack quickly and efficiently with little to no coding experience needed to further customize and modify. the offer. .
The focus on technology infrastructure doesn't necessarily mean now is the right time to implement AI-powered solutions like ChatGPT or Google Vertex, even though the potential may seem appealing. Given the relative newness of AI as blockchain when it first hit the market, there's a lot to consider regarding specific use cases and best practices. I believe that adding these next-gen solutions to legacy platform solutions is only a temporary fix that distracts from more immediate opportunities and may even lead to long-term issues. Therefore, basic infrastructure technologies should be tackled first to better test the latest technologies and create protective barriers.
Find the right employees
Although these technologies have become more accessible and affordable, technology development still requires research and preliminary testing which can sometimes be overwhelming for small installations.
This is where strategic alliances can come in. Take the example of fintech associations. Partnering with fintech companies can allow community banks to take advantage of cutting-edge solutions without some of the largest up-front investments in their own development. In turn, these partnerships can enable community banks to offer next-generation services such as online account opening, automated underwriting, and streamlined loan origination, thereby increasing their competitive advantage and improving internal efficiency. .
Banks unsure where to start can consider technology pools as another partnership option. (Full disclosure: I am the CEO of a consortium.) Joining a consortium or other association can help you pool your resources, knowledge and experience with other banks and industry experts.
In addition to simplifying investments in advanced technologies, these associations can also increase bargaining power and influence, allowing member banks to negotiate better terms, see additional returns on their investments, and actively participate in the market. industry innovation. On average, bank syndicate members see a good return on their investment, expand their knowledge and attract salespeople at the same time.
Don't forget the B2B customer
While there's a lot more buzz around consumer-facing banking solutions, I see greater potential for fintech to improve the way banks serve businesses, especially small businesses, which is an important market. for small banks and private banks.
Keep this in mind when evaluating new solutions. In addition to traditional banking functions and transactions, community banks provide 70% of US agricultural loans and more than 35% of small business loans. best personalized customer service.
With this in mind, banks should also consider innovations in B2B payments, lines of credit and improvements in regulatory reporting. Efficiency in these areas can enable community banks to better serve their customers at scale.
Make updates where they matter
Public and private banks have a great opportunity to improve their technology and improve their competitive position. By combining your localized approach with flexible technology adoption, you can position yourself as a trusted partner in the digital age, meeting changing customer needs while maintaining a community-centric approach.
Embracing innovation and technological change can help ensure that community banks not only survive, but thrive in the face of continued industry disruption and the evolving digital financial ecosystem.
The Forbes Business Council is the premier networking and development organization for entrepreneurs and leaders. I am right?
Team I. Hidden cameras reveal the dark side of solar energy
