Digital Transformation Strategy for Community Banks

Updated: Mar 25

Digital transformation strategy for community banks


Banks and FIs are a vital part of the ecosystem that determines how money changes hands. While regulatory authorities such as FDIC are making a distinctive point by encouraging innovation in banking functions, leading banks have hard-wired digital elements in their processes and systems for a bandwidth of services. Nowadays digital transformation is also becoming a vital part of the controlling world. Digital Transformation strategy is used to make the world easy with connecting.

Coincidentally, in the new normal exacerbated by the Covid pandemic, offering seamless banking operations may be the new overarching mandate as opposed to a random opportunity for testing waters. For community banks, galvanizing this change into reinventing as a digital juggernaut may require a refocus on the following strategies to create a digital transformation in the market.


Digital transformation strategy of banks

1. Prioritize IT investment and assets

Community banks have so far maintained their presence through their relationship-driven culture. However, they can make up for their budgetary constraints by integrating some of the top tech drivers to build a digital experience. For example, migrating the loan application process online and tracking remote deposits can be a game-changer in a system that has hitherto worked on multi-level approvals. Digitization is seen to favor small and medium business lending and community banks can gain in this area as it will enhance customer experience without impacting the relationship model. Digital transformation is helping banks and customers to get an easy and unstoppable banking experience.


Business continuity demands have induced banks to invest in analytics and cybersecurity. On average, banks spend 22 percent on IT capabilities and studies show that a community bank with the right mix of investment can retain and expand its customer base, as successfully as a prominent bank or a fintech would.


Digital transformation increasing customer engagement

2. Maximize customer engagement in niche areas through digital strategies

Community banks can leverage the real power of digitization in seeking out newer ways to onboard new customers and loan disbursement for personal and small-business customers. Digital transformation strategy can help them to get into every area to increase customer engagement. Deploying automated tools that offer self-servicing capabilities and streamlining loans and payment plans with saving options will enable banks to influence customers at other stages of their decision journey. Engaging with potential customers on social media platforms like Instagram, Facebook, Twitter, etc. can be another strategy to provide customers with additional know-how and answer questions and streamline the customer journey.

As per a recent survey data, digital customers look to bank with institutions that complement product offerings with ease of use of e-banking tools, reward points/cashback, and other such benefits. On the back of a slew of digital measures initiated by community bank OceanFirst, its mobile deposits rose by 134 percent over a span of two years and mobile use went up by 93 percent.


Digital transformation in banking

3. Integrate transformative culture within the organizational structure

Creating a more responsive and secure system and aligning people, processes, and technology to a transformational benchmarking culture with support from leadership can be the real McCoy in your arsenal of strategies. Digital transformation in banking is helping organizations to get better usability and a responsive customer experience.

A leading community bank has made great strides in training teams to help customers navigate and choose from the vast array of digital banking tools and third-party services like Apple Pay. As a step up response, it redesigned its account opening format to ensure compatibility with computer and mobile devices along with facial recognition authentication.


Digital transformation

4. Create an open banking framework for a collaborative effort

A recent trend shows community banks are warming up to collaboration and this creates a context for an open banking framework for a sustainable future. Open banking and API initiatives are at the core of innovation that increasingly support collaboration between banks and third-party providers to meet customer’s multiple needs. As the need for digitization increases, the digital world is also getting more digital transformation services to use a full digital transformation strategy.

A community bank successfully provided a digital platform that would enable customers to manage accounts from other financial institutions, such as mortgages, brokerage accounts, and credit cards with tracking options. Fintech Kabbage collaborated with a leading bank to leverage its interface and risk-management algorithms for real-time decisions on loan applications.


Digital transformation solutions

5. Create robust cybersecurity programs and compliance

As banks move towards digitally empowering their business and their customers, allaying information security concerns becomes a staple requirement for banks. Charting out a roadmap for creating a cybersecurity architecture will help in laying the foundation for a secure banking ecosystem. While this can exert pressure on cost and implementation, community banks can put their best foot forward with information security norms and customer-centric policies to protect customer information and sensitive data.

Community bank OceanFirst introduced a zero loss guarantee policy for any instance of suspected fraud to assure customers of their safety concerns on the basis of a robust cybersecurity program

Conclusion

Covid has changed the behavior of human beings and that is creating an opportunity for the community banks to make digital their key business strategy. An excellent place to start would be creating a Digital roadmap that aligns with the organizational goals. As opportunity community banks are using Digital transformation as their key business opportunity to create a digital impact.


For any other additional information:

E-mail: pritesh@pravaahconsulting.com