Breaking From The Pack

1 in 100 financial institutions do tech right. Will you join the elite?

As technology evolves rapidly, many financial institutions mistake keeping up with change for being innovative. However, pacing the field is not enough. Innovation is a tall order, requiring financial institutions to have a clear vision and execute it. Banks and credit unions that understand the difference and act boldly have a bright digital future.

     Throughout my career, I have had the good fortune to work alongside hundreds of banks and credit unions. My role always focused on product technologies, and how to stay ahead of the competition and avoid the seemingly unavoidable: technology obsolescence.

     Surprisingly in that time, I have concluded that only 1 out of every 100 banks and credit unions are doing what is required to keep up with technology. The remaining 99 need to change or will likely face an existential threat. That means the 99% need to implement a plan to integrate true innovation into their business.

     “Wait a minute!” you respond. “We already innovate at our bank or credit union!” Unfortunately, this is seldom the case. I have been in discussions with C-level banking executives where they refer to their bank as innovative. In reality, upgrading technology is a painful RFP process which typically results in a periodic swap of third-party vendor platforms. This is NOT innovation. Innovation is about outpacing your competition with differentiated service offerings that continually improve and evolve with the market. Innovation is about seeing an opportunity others miss and having the vision and wherewithal to execute on it.

     Innovation is doing something new that has never been done before or solving a problem in a significantly new way. Introducing new methods, ideas, and products that are unique to the financial institution is true innovation.

 Introducing new methods,
ideas, and products that
are unique to the financial
institution is true innovation.    

     Swapping third-party technology has its place in banking, but one-size-fits-all is a recipe for mediocrity. Cookie-cutter technology becomes a competitive disadvantage when every institution has a unique culture, processes, market dynamics, and customer relationships.

     Three years ago, I left a regional bank to dive into the “low-code” programming and development world because it was obvious to me that this technology is going to play a significant role in helping financial institutions stay relevant over the next decade.

     If terms like "low-code" and "Mendix" are unfamiliar, you are not alone, but it is symptomatic of the challenge; regional banks and credit unions are 10 to 15 years behind the tech adoption curve. However, these “modern” technologies hold immense potential for reshaping the industry. Low-code without a doubt will be the No. 1 difference maker for regional banks and credit unions over the next decade.

     For example, every bank or credit union should have as a key digital strategy component the goal by 2030 to provide their customers with a uniquely exceptional digital experience for their customers — one that is truly unique to their institution and their customers.

     Right now, 99% of banks and credit unions have the same homogeneous digital experience within business unit silos as other institutions. At the same time, they have an inconsistent digital experience across each of their own business units. That may sound paradoxical, but a little analysis underscores the problem.

     A financial institution consists of numerous business units that each typically use an off-the-shelf product package from a third-party vendor. As a rule, numerous other financial institutions use the same third-party vendor platform. These business units are retail, commercial, lending, wealth management, etc. Where it gets messy is that each business unit will have a completely different vendor that provides a completely different experience for their customers. Experience inconsistencies are compounded when each
platform has a different experience for desktop and native mobile.

     In digital banking, a helpful analogy is that a smashed bumper on a nice new car represents inconsistencies within the customer experience. Just as a damaged bumper undercuts the “wow” factor on a brand-new vehicle, inconsistencies in digital offerings can dent customer satisfaction and erode trust. By identifying and addressing these inconsistencies, financial institutions can ensure a smoother and more seamless journey for customers, enhancing their overall banking experience. Let's fix the smashed bumper of digital experience for a smoother ride.

     Modern technology allows banks and credit unions to have a uniquely exceptional experience for their customers and across all business units,  but 99% do not know about technologies such as “low-code,” nor do they have the resources to monitor new technology developments. In this tech-oriented world, financial institutions are either staying ahead or falling behind. There is no middle ground. A majority of regional banks and credit unions are already at least 10 years behind the tech adoption curve and falling further behind each year. That may be harsh, but I believe my assessment is conservative and in reality, most banks and credit unions are 15 to 20 years behind the technology adoption curve.

If a financial institution
is looking to just survive
technology, it will not
succeed. Technology
evolves too fast. 

     To stay ahead of technology, a financial institution must innovate, which means solving problems in new and different ways. That translates to strategically using modern technologies to stay ahead. Not only to stay ahead of the competition but to stay ahead of an even bigger enemy, which is the rapidly evolving pace of technology. The root cause for banks and credit unions to continuously struggle with technology is by not having a defined program dedicated to true innovation. This innovation team’s only job should
be to look for new ways “for our bank” to solve the challenges customers face. Not just in business unit silos, but across the entire enterprise. Outsourcing innovation to third-party vendors will relegate a financial institution to run with the rest of the herd of thousands of banks and credit unions, which will find the market passing them by in the next decade.

     Don’t imagine for a second that new entrants to banking services, such as Google, Facebook, Amazon, and Apple to name just a few, will have the slightest hesitation in using transformative technology.

     To be a true innovator, financial institutions must not be bound by the “we have always done it that way” culture. Innovation is not endless RFP cycles and vendor platform swaps. It also can not be “We will start that innovation initiative next year”. It is a “right now” problem. Doing things how they have always been done will simply not work anymore because it cannot - and has not - kept up with the rapidly changing world of technology and expectations around it. Regional banks and credit unions must start
to dedicate team members whose only mission is to seek out modern technologies and deploy new solutions in a methodical and disciplined innovation practice. The objective is to maximize efficiencies while minimizing risk and expenses. I estimate that fewer than 100 banks and credit unions of the close to 10,000 in the U.S. currently have people
dedicated to advancing their financial institutions into new technologies in a substantive way.

     To CEOs of financial institutions, if leadership is only introducing new technology solutions through the core provider or “Vendor X” or “Vendor Y” then they will only have a view from the middle of the herd at best. Leaders should have a well-defined sustainable plan on how they are enabling team members to accomplish more each year.

     When it comes to technology which is your financial institution? An Innovator who leads the way with a plan or a survivor who just wants to hide in the herd?