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Community banks under $15B in assets are in a real dilemma with the Digital Banking subject, period. The Board hears mention of it and inquires. Most of the C- Suite has heard of Fintech but has no idea what it really is or how to pursue it. The banks IT department is compromised of infrastructure personnel keeping the lights on and servers spinning. The banks legacy core vendors are mostly silent regarding Digital strategy. If a legacy core vendor does have a modern Digital offering, the product is likely to be 10X more than they are paying today for mobile banking or online account opening.
Community banks have depended on the IT department to lead technology initiatives and it has become to large for small IT departments to manage. Personally, I believe IT is infrastructure. Servers, desktops, switches, routers, printers. My goal for IT is to simplify the compute landscape. Centralized servers and data storage in a managed data center with redundant utilities and ISP’s. Failover in a different managed data center either complete failover or disaster recovery as a service (DRaaS). Telephony in the cloud and SDWAN for location failover. Core Banking outsourced or banking as a service (BaaS). Once you remove all of the location servers and consolidate servers in data centers the compute landscape becomes simple and easier to manage. I also recommend print as a service (PaaS) to move printer service tickets to a third party. For me this is IT.
Cyber and Information Security belongs in Risk. This group requires independence from IT to adhere with FFIEC guidance and auditor/examiner recommendations. IT remediates the audit findings; Risk enforces the compliance. Network Security should be outsourced to a reputable third party whom stays abreast of the threats that change minute by minute.
This leaves the question “who in the bank is responsible for Digital Banking strategy”? Consumer Banks should look internally at who can move the bank past web and mobile banking and see the near-term strategy of online account opening and online Consumer/Small Business Lending. Fintechs are all over this space and now awarded charters for these purposes. Banking as a Service (Baas) has opened doors to Fintechs to white label their Consumer apps and utilize Community Banks for servicing. Online Consumer Deposit and Loan onboarding will be widespread in the next three years. Digital vendors have many implementations in their delivery queue and are months out for new implementations.
Commercial Banking from an online account opening and online lending perspective are moving at a slower pace. The legacy core vendors and Fintechs focused on Consumer apps and a few vendors are in the Commercial space. As we witnessed the PPP loans utilizing commercial and small business customer portals for document exchange, this enabled these channels to begin the Digital journey. By end of 2020 several other Fintechs will have commercial online account opening. The commercial lending Digital channel has been around for the past two to three years, however very few community banks have taken the step to take it online.
For me these are not technology strategies, these are banking strategies. We must allow our customers to onboard and borrow online. This is more about the customer experience and enabling self service in a very intuitive and easy environment. Like purchasing an airline ticket, groceries, making dinner reservations and now we can purchase a car online and it will be delivered to our home.
We must hire bankers who understand customer service and how to minimize friction with simple banking processes. Technology is the enabler and people make it happen. Community banks must make this a large part of their banking strategy and really get involved with these initiatives.