As we move away from the initial shock to our economy caused by the global pandemic and continue to feel its ripple effects in the supply chain, the jobs market, and price increases in nearly every sector, 2022 reveals that time is of the essence for new leaders to emerge in mid-market banking with smart technology investments. Here are the Top 5 imperative tech predictions for mid-market financial institutions.
1. Digital Banking Demand Will Not Decrease as COVID Recedes
Mid-market banks and credit unions need to make the lessons learned during the pandemic part of their long-term business strategies: customers now demand digital banking experiences. This is not going away. Community banks and credit unions, traditionally known for excellence in personalized white-glove service, now must pivot to focus on how to better compete in a world where customers demand digital interactions. Creative solutions are needed for success. Unless mid-market financial institutions make personalized yet digital customer experiences a priority, they will be less competitive. Each institution needs to define its individual path to digital transformation.
2. Technology Will Continue to Lead Finance
Banking is being reinvented by technology. The success factors for financial institutions have changed dramatically due to technology. This has moved beyond the big banks and fintechs, into the mid-market. Without embracing a data-driven culture, institutions risk obsolescence.
Deloitte reports that banks should take account of the tectonic shifts reconfiguring the global financial system: phenomenal growth in digitization, convergence of industries, fusion of technologies, proliferation of increasingly intertwined ecosystems, and the blurring of product constructs.
The Financial Brand reported that with industry and economy still in a state of flux, organizations need to find ways to serve consumers faster, with less friction, and at a lower cost. More than ever, there will be a focus on data and analytics, modern technology, and the ability to deliver an improved customer experience.
Not only have markets shifted, but internal operations in financial institutions need to shift to deliver innovative products and personalized experiences targeting high-value customers. Efficiencies are achieved by using data analytics to inform marketing and operations to grow revenue and cut costs. Those who do not use analytics, but continue to rely solely upon intuition in decision-making, will lag behind their competitors.
3. Many Will Remain Stuck in The Technology Trap
According to Deloitte, digital transformation efforts in banking tend to be incremental, localized, and fragmented, resulting in a pervasive and pernicious “technology trap.” This is preventing many banks from realizing the full potential of their investments.
The “technology trap” is where you buy a tool but do not get value out of it. Too many tech companies measure client success by implementation goals instead of by the business value achieved by the customer in using the technology. And the reality is that most data tools are built for use by highly skilled technical users, such as data engineers, data scientists, analytics engineers, and the like.
It takes the right technologies, the right tools, and the right people for digital transformation success. This is especially true for data analytics.
Hence there is a need for banking institutions to have technical knowledge, skills, and know-how beyond basic IT department skills. Data analytics is becoming a “must-have” for financial institutions to compete. Yet data analytics requires data scientists, business analysts, and data engineers to build and implement analytics solutions.4.
4. The 2022 Talent War Will Put Most Mid-Market Financial Institutions Behind in Tech
In the current job market, it is not likely or feasible for mid-market banking institutions to hire highly skilled data scientists and engineers as in-house team members. Even tech companies are having trouble finding these scarce resources to fill positions.
The Centre for Finance, Technology and Entrepreneurship Fintech Job Report “Technology is Eating Finance,” highlights the gap between the ever-advancing technologies that will be needed to succeed in banking and the individuals financial institutions need to implement that tech. This means that mid-market banking institutions will need to partner with tech companies that allow access to these highly skilled people. Valuable partnerships are those with firms that focus not just on selling a tool, but a partner for long-term client success measured by milestones tied to the business value of revenue growth and operational efficiencies achieved via the use of the technology.
5. The Gap Will Only Get Bigger for Those Who Delay Technology Investments
If your financial institution does not have a data integration plan in motion to bring together siloed data sources for customer intelligence analytics, you are falling behind the curve. In regular banking operations, customer data is kept in many different places including line of business applications, your banking core, third party sources, CRM, ERP, accounting programs, mobile and online banking apps, and more.
As reported by the Association for Strategic Marketing, the number of data sources needed for customer intelligence is expected to increase by 40% in the next year. The continued reliance upon third-party systems housing customer data, such as credit card or mortgage account information, means that data sharing is needed in your ecosystem in order to get a complete picture of your customers. Cloud data sources make this easier, but a financial institution needs to have the ability to bring customer data together from many data sources to be able to analyze it and use analytics to find opportunities in its data for growing revenue and providing a data-driven personalized customer experience.
AI-enabled analytics provide insights-as-a-service to grow revenue from existing customers by identifying the right product to market to each customer as an individual at the right time. AI-enabled analytics mine transactional banking data daily to reveal patterns in customer actions. The best channels for reaching each customer individually based upon the customer’s behavior can be identified in minutes using analytics, instead of spending hours in operational cost with ineffective outreach. Insights that analytics gleans from mining a bank’s transactional data can include granular details such as lending terms for accounts that customers hold with competitors, positioning the bank to approach the customer with a more attractive offer. This is just the tip of the iceberg of the advantages that data analytics provides. Personalized white-glove service must be powered by actionable and timely insights for data-driven customer intelligence in the digital world. Financial institutions must start today to put in place data management and analytics solutions before time runs out and the competitive gap can no longer be bridged.
Katie Horvath is the Chief Marketing Officer of data platform company Aunalytics. The company offers midmarket financial institutions and credit unions advanced analytics and valuable business insights to improve customer relationships, strategically deliver new products and services through data-driven campaigns, and drive competitive advantage.