Winning the Race to Innovation in Banking Technology

Recently, technology in banking became a big topic. Banking software was immune to major technological advancements for a pretty long time, but we can decisively say - it’s over now! The need for innovation was so big, it spun an entirely new industry - FinTech - and a new type of banks - Challenger banks - digital-only entities aiming to take over the way people manage their personal finances. Europe took the lead in financial technology, and London became an epicenter of it.

To mimic the events across the pond, traditional banks in the U.S. started playing catch up, and while the bigger institutions, due to larger funds were able to tackle the issues fairly well, the smaller banks failed to act.

To paint the image of the “digital experience” with local banks imagine a situation, go to your bank’s website, log in to your personal account, all of a sudden you’re taken to a new window or tab of some random provider (that is most definitely not your bank). With every new operation, it takes you to some new website with your bank’s logo pasted to it. There is a learning curve with each of those tabs, some of them might even look like you went back to 1990s. The modern functionalities you’ve heard about in the media are not there and the entire experience is just a giant mess.

Missed chance in developing banking technology

The reason for this situation is that smaller banks didn’t get what the digital transformation was truly about. It looks like there was very little to no direction in what they were doing. That probably stems from the fact that they do not have technology specialists on payroll and digital transformation is done by a big consulting firm tends to be too expensive.

Many of them still don’t offer native mobile applications, while their web applications are usually crowded and lack a proper UI design. Instead of “let’s innovate, this will be amazing for our customers”, they went with “everyone else has it, we need it too”.

In reality, they missed a chance to differentiate themselves from everyone else on the market.

There are a few things that the small, local banks would benefit if done correctly:

1. Native Mobile Banking Technology

A no-brainer, people live on their smartphones and carry them everywhere they go. Mobile banking has been a confirmed trend for a few years now so If a local bank doesn’t have a native mobile app yet they are definitely missing out.

2. Modern, user-friendly web portal

Another no-brainer, this is a command center for the customer.

The UI should be beautiful, easy to use and the entire experience should feel like everything is one click away. Any external integrations should be carried out in the same design.

3. Voice technology for Banking

Due to the very high penetration of devices such as Amazon’s Echo into American households, local banks can use this to their advantage and create voice solutions for their customers. Imagine being able to transfer funds, pay bills and get information simply by asking while sitting on the couch. Many believe that, in the next five years, 50% of all banking interactions will be conducted via voice-first devices.

4. Using data and AI for personalization

Local banks should take full advantage of data to create solutions tailored to the individual needs of their communities. People want their bank to be able to offer new, interesting services that will innovate their experience and increase overall customer satisfaction. Customers want to see that they are being listened to and that they are heard.

Furthermore, with the rise of AI, local banks, due to their smaller size and agility, have a unique opportunity to get the new technology to work for them, before the big institutions fully hop on that train. This would be a great differentiator for the market and if done correctly, a great asset for the customer.

5. Open Banking

This is probably one of the more technically challenging propositions on this list. If you are running a local bank this is the one you probably should not try on your own. Nevertheless, it’s also the one that’s incredibly exciting. Having all of your financial activities (banking, health savings accounts, life insurance, car insurance, etc.) aggregated into one dashboard would be tremendously useful. Open API gives the local banks a chance to really take care of their communities finances, more than they could ever imagine before.

6. Protecting communities from Cybersecurity Threats

“There is no doubt that the increased use of technology has made the banking industry more susceptible to cyber threats that have forced banks and credit unions to be in the unenviable position of playing ‘catch up’. New open banking regulations that require banks to share customer information with third-party providers make the industry even more vulnerable.

Now more than ever, banks must become proactive in their handling of data protection and managing cybersecurity risks. Unfortunately, consumers want the best of both worlds — ease of use and increased protection of data and identity. This will require the banking industry to implement multi-factor authentication, secure applications, digital signatures and other forms of security such as biometrics.” - Jim Marous, Digital Banking Expert

Innovative banking software is not a nice-to-have anymore

Those points are not a mere suggestion, they are the technology trends that the local banks need to act on as soon as possible. Failure to do so will probably lead to a loss of customers and maybe even closing doors. Local banks have been a part of communities in the U.S. for decades. The unique connection they had with customers kept them safe from the big banks. Now, as the new banking technology redefines the community, local banks need to use technology to remain connected to their customers now and in the future.

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