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25Jul
BY Laurie DeSalvo IN Uncategorized Satisfaction score: community banks 80%, online lenders 46%

It is no doubt true that bank customers still value the relationship-based banking model. The survey resulted in the heading above.  However, it should not be misconstrued as an argument against digitization.

Digitization is much more than just mobile devices and IT. According to technology consultant Gartner,

“Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.”

In other words: offering your services with a human touch and a digitized business model are no contradiction in terms. Instead, digitization enables you to succeed at relationship banking!

At a time when people don’t come into bank branches as much as they used to, personal interaction may happen through different channels. And the funny thing is, if you´re a small community bank you may be particularly well positioned to nail the digital aspects of this.

 

Smaller and nimbler

In its 2016 Banking Industry Outlook Survey entitled The Need for Speed KPMG makes the point that:

“Banks need to accept it’s no longer a race the big and strong are guaranteed to win. Speed and agility count just as much… if not more. And the time to accelerate is now.”

Alas, it is also true that bankers by tradition are risk-averse. Their long-time strategic approach is a far cry from the startup mentality embraced by fintech players.

However, most of the observations made by KPMG for banks of an asset size between $20 and $250 billion or more are in fact confirmed by the experiences of small community banks with $1 billion in assets or less.

And not only that. As it turns out, the smaller guys may even be in a position of strength compared to the clunky tankers.

Take for example 1.2 billion asset Avidia Bank. As big players like J.P. Morgan Chase and Bank of America are still in the announcement phase of rolling out their versions of cardless ATM networks, Avidia of Hudson, Massachusetts is already there with its Cardless Cash offering. As a result, it has seen a 13% increase in mobile app enrollments.

Likewise, Bank of Prairie Village in Kansas demonstrates that names can be deceiving. 55-year-old chairman Dan Bolen has been thinking about how to hand the bank over to his boys. As a result, he decided to invest in a new core system and picked FIS™ as a partner, the self-proclaimed largest global provider dedicated to financial technology solutions.

Bolen´s initial worry that because of his bank’s $106 million asset size he might not be taken seriously turned out to be quite mistaken. Says Bolen: “I thought they were going to expect horse hitches. But they send a senior guy who told us, `With your size and new technology you could have a lot of fun.´”

 

Who´s afraid of APIs?

$97 million Surety Bank in DeLand, Florida displays a similar mindset. Their CEO Ryan James realized that with their legacy systems and current IT partners they could not meet customer expectations.

“By the time you got a product it was already outdated,” James says. “But our customers want banking technology to be simple, efficient and easily accessible at any time, through any device.”

So, after convincing his board of directors, James embraced APIs – application programming interfaces. Partnering with fintech startup Nymbus gives Surety an open banking platform that allows the small Florida community bank to offer new digital consumer lending products in the shortest of times.

And not only that. With its new core, Surety also widens its geographic reach beyond the community to the regional or even national level. “There is no reason why we can’t expand without having a physical footprint out there,” says James and adds that with digital “we are able to take our same community bank feel out there to reach new customers.”

I think this is an excellent example that demonstrates the opportunities available to those who do not dread digitization, but act. In my next newsletter, I will talk about some of the skills you should look for in employees to get you going in this direction.

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