There are a staggering 10,000 community banks and credit unions in North America, which together spend $5.5 billion on technology every year. This technology spend is intended to power digital transformation, the retention and growth of accounts, resources for lending or mortgages and to drive revenue.
Vincent Pugliese, senior vice president & general manager, US retail & lending at Finastra believes that the next area that requires innovation is account opening. Previously, in order for banks to innovate, changes had to be made to their core system - a costly, time-consuming product - but today the financial institution can use an API and ensure that digital sits at the heart of their infrastructure.
The fundamental business of banking has changed and will continue to evolve. Pugliese highlights that “customers are faced with the challenge of business and delivery (branch and digital) transformation. This goes right from identifying their digital strategy, to delivery and innovation at the right cost base, and determining the right way to stitch together integrated services and connected user experiences across all channels.”
The age of partnership is well and truly here, and collaborating is the easiest way to carve out an innovative and transformative path forward, which can be done with the use of existing investments to reshape the engagement model and economics of business, as Pugliese explains.
But how are the technology needs of a community bank different to those of a credit union?
Pugliese explains that as recent as “a few years ago I would argue that there was a clear distinction. Credit unions specialised in bundled solutions that enabled focus on member services and loyalty, whereas banks were focused on best of breed technology that allowed for customisation.”
Today, the lines are a little blurred and with the move from system of record, or core centric solutions to the system of engagement - digital experiences - more commonality in technology is emerging.
This is increasingly being perceived as “both banks and credit unions start to migrate to the cloud, prioritise connected end-to-end digital solutions for both customers and employees, and demand open solutions. They want partners that are enablers and accelerators of innovation that can help them execute transformation strategies.”
Innovating account opening services is the next step and there are key banking business drivers for this. The first Pugliese mentions is growth and reach: “Getting new deposits and loans are more competitive than ever and financial institutions need to ‘meet-and-greet’ the customer on their terms.”
The second key driver is consumer engagement. “Customers/members expect the same experience that they get in non-financial services, and banks and credit unions must deliver.” Pugliese continues to say that there is a shift in focus from account opening to origination and onboarding.
“This allows for leveraging of data to better drive the top of the marketing funnel conversion and delivering tailored application experiences, all without increasing risk. The banks and credit unions are looking for solutions that can help remove friction from the front and the back end. We achieve that by reducing the ‘manual touch,’ which not only creates operational efficiencies and savings, but also a much-improved customer experience.
“Again, all of this can be done within the risk appetite of the financial institution. There is also a need to be able to ‘total onboard,’ which includes providing access to funds and loans immediately, automatic setup of auto-pay and digital banking, and even issuing a digital debit/credit card.”