It’s crunch time on digital for small and midsize banks—here’s how they can meet customers’ high expectations

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In Insider Intelligence’s recent Innovation Strategies at Small and Midsize Financial Institutions (FIs) report, we explore how small and midsize US banks and credit unions—those with assets of up to $100 billion—are fighting to ensure that their digital user experiences are up to scratch.

The pressure is ratcheting up as the pandemic pushes even longtime holdouts into digital banking channels, and as tech-savvy competitors like big techs, fintechs, and giant banks raise consumers’ expectations on digital and gain their trust.

However, small and midsize FIs can’t hope to compete directly with the quality of digital user experiences on offer at the largest US banks—they have to get more creative. Small and midsize FIs are hemmed in by smaller tech budgets and limited hiring incentives for tech talent, so they have to make digital work for them differently.

By identifying areas where they can add a digital layer on top of existing strengths unique to their asset tier—such as higher consumer trust and deeper customer relationships—these smaller players can maximize innovation.

Here are three best practices for small and midsize FIs seeking to digitally innovate, distilled from our exclusive interviews with FIs and vendors:

Ensure core infrastructure is capable of supporting new front-end solutions. Scalability and agility will be key to maintaining great customer experience, but only 32.5% of US community banks say they’re “satisfied” or “highly satisfied” with their ability to roll out new products and services using their current core processing services. Small and midsize FIs should therefore seek out vendors that can provide end-to-end solutions built on a cloud-powered back end that allows for rapid solution deployment and upgrades. In some cases, this will mean forgoing (or leaving) better-known vendors for newer names.
Go beyond generic digital solutions. While turnkey digital banking capabilities are a must to meet basic customer needs (and 94.1% of US community banks already offer basic capabilities like mobile banking), small FIs can leverage their granular customer knowledge to better personalize digital products and services to create value-added services. They should therefore invest in flexible digital platforms with modules and extensions that can be adapted to changing customer habits and expectations—which can help them capitalize on their deep knowledge of their customers.
Make customer input the core of product design. Small and midsize FIs should leverage the deep ties they have with their local communities to seek their input on what functionalities they’re currently lacking, and prioritize these as they build out new digital solutions. FIs can gather input through online surveys and community polls, as well as establish focus groups and engage in community-focused design thinking.

  CASE STUDY: How Goldman Sachs changed the retail banking game — by entering it (GS)

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Source:: Business Insider – Finance

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