Fintech partnerships help drive growth and banking changes
The strategy of community banks should take a new, innovative approach looking to the future in order to stay competitive against increasing technology demands of customers as well as newer fintech companies taking market share of the younger, more technology-savvy customer base. In order to penetrate and retain that younger customer base, community banks should focus their attention on the digital experience as it relates to the customer. This added emphasis on digital customer experience will be enhanced if community banks look outside of the traditional legacy core providers that most banks have been bound to for decades. It is becoming increasingly critical for banks to look outside of these legacy providers and shift focus on creating partnerships with the new fintech providers in the market. If a community bank strives to create a competitive advantage over competitors within their market, they should change their approach of how banking has been viewed for so many years.
At the “Fed Family” luncheon at the Federal Reserve Bank of San Francisco on April 11, 2019, Governor Michelle W. Bowman spoke on the importance of community banking in the age of innovation and noted that, “Indeed, fintech firms may complement the activities of community banks well. For example, while small businesses may value the relationships that local bankers offer, they don't like the lengthy process of filling out loan applications, waiting for credit decisions, and the time it takes small banks to make funds available. Those are precisely the types of issues that data-driven, smartphone-based fintech firms are good at addressing.” As she goes onto explain through her speech, there are so many fintech offerings in the market today that community banks can take advantage of to drive efficiencies and ultimately lower costs.
Additional partnerships with fintech providers puts added emphasis and importance on the bank’s vendor management program. In order to successfully bring to market a digital customer experience that will retain and add new customers, operations staff need to be more focused on vendor relationships than ever before. Management of third party relationships will be critical as banks look to fintech providers to better service their customers and strive to be cutting edge rather than being at the mercy of what and when legacy providers bring banking products to market.
Shifting the focus of bank staff to managing vendor relationships to satisfy customer needs is not a seamless change but will become necessary to retain and grow the bank’s customer base. Installing vendor owners at the bank to maintain partnerships will provide needed structure to the bank’s vendor management program. Having an individual manage the relationship with a vendor is critical for success of the implemented solution. As newer fintech providers are enlisted to drive customer experience and efficiencies, it is also important to track vendor health and perform proper due diligence reviews on an annual basis.
Here at RSM, we help banks and credit unions develop a roadmap through our digital assessment process to help guide institutions on strategy for the future as well vendor management services to help review and account for a growing number of vendor relationships.