For banks that were falling behind the curve, the pandemic was a catalyst to forcefully drag them into the digital era. Customers are now returning to branches to a degree, but there’s an overwhelming consensus that banking has crossed into a digital world from which it is unlikely to recede.
As financial institutions emerge from the disruption, they face the reality that consumer expectations around digital channels have heightened and will continue to rise, meaning institutions need to innovate quickly … and continuously.
A Forced, But Essential, Digital Evolution
If only out of survival, banks and credit unions made notable strides in operating digitally in 2020. By the end of the year, mobile and online banking became the primary channel through which businesses and consumers engaged with banks.
It’s a silver lining of the pandemic that banks drove their technology forward by nearly a year for every month of the crisis, writes Frank Sorrentino, CEO of New Jersey-based ConnectOne Bank, in Forbes. Financial institutions had to make immediate shifts to things like virtual deposits, remote meetings and mobile banking platforms. Consumers and businesses also radically changed how they interacted with financial institutions.
“While this acceleration replaced the gradual adoption we may have previously experienced, it resulted in a clearer picture of our future, allowing businesses to create a roadmap to implement digital change,” said Sorrentino. “Shifting to remote work, contactless solutions, and digital experiences forced us to realize how we had to evolve our business.”
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Continuing the Momentum
While banks acted quickly when they had to, now is the time to continue the innovation momentum, Paul Clarkson, EVP of U.S. Financial Institutions, nCino, tells The Financial Brand. Headquartered in Wilmington, N.C., with 1,200 employees, nCino itself is an example of the importance and potential of technology in banking. The company began in 2011 as a wholly owned subsidiary of Live Oak Bank, co-founded by the bank’s CEO, Chip Mahan, former CEO of bank technology company S1 Corp.
Live Oak, which eventually spun off nCino as a separate company, was seeking a more efficient way to handle loan origination and processing for its fast-growing SBA-lending business. nCino was one of the first companies to take banking to the cloud with a single platform that reduces many of the complexities and frustrations with manual processes and point solutions, says Clarkson. The nCino Bank Operating Systems now spans everything from customer onboarding and account opening to workflow and credit analysis.
One-Off Innovation Isn’t Enough
Many banks and credit unions still have disparate systems for things like deposit accounts and small business loans, requiring consumers and small businesses to jump through multiple hoops for each product. While financial institutions have often wanted interoperability between systems, it wasn’t always possible or a top priority.
A Different Take:
Real innovation isn’t about one-off pilots; it’s about developing an ecosystem and culture that supports continuous innovation.
ConnectOne Bank became an nCino customer in 2017 and used the cloud-based platform to speed up its loan process, enhance the client experience, eliminate manual processes, and improve transparency. In a previous article, Frank Sorrentino said that as fintechs stir the pot and make the industry think differently, they’re also creating opportunities.
“I’m constantly pushing and prodding my staff, asking, ‘What would the client think?’,” the banker states. “We provide the same products and services most other banks provide. The way in which we provide them and the experience are what set us apart.”
Under the Gun:
Pushed by the pandemic emergency, many banks and credit unions avoided overanalyzing what needed to change and did some of their best work.
The “wait until it’s perfect to release” development mindset many financial institutions had before March 2020 no longer works, Clarkson maintains. The rollout of the Paycheck Protection Program gave banks and credit unions only a few days to find digital channels to support their customers, he adds. At the time, nCino’s development team worked with customers to roll out deployments in a few days that would have traditionally taken months.
Many traditional institutions did their best work and could innovate faster and better when they were under pressure and didn’t have time to overthink everything, says Clarkson. “They had a once-in-a-lifetime event where they realized the time was now, and they needed to move faster and re-evaluate their business model,” he says. They need to keep that mind frame.
Growing while Reducing Expenses
As financial institutions continue to face tightening margins in the wake of the pandemic, it can be tempting just to cut expenses. Certainly there has been an eye on branches, with many large and regional banks cutting back their networks. Yet even as consumers flock to digital channels, banks and credit unions realize branches aren’t going away entirely.
If banks and credit unions want to cut expenses, they need to do so in a way that also enables them to grow revenues, Clarkson observes. The compound benefit of digital technologies is that they enable institutions to grow without adding more people, and to expand their footprint without increasing their physical presence.
As an example, Clarkson points to New Hampshire’s Mascoma Bank, which even before the pandemic grew its online account applications by 400% by revamping the online process. Moving away from paper and using nCino’s digital platform, it cut down the application time from 45 minutes to less than ten.
With Technology, Nothing Is Really Ever Done
Clarkson believes many banks remain constrained by the on-premise environments of decades ago, where things had to be buttoned up tight because they would otherwise be stuck in that first rollout or until the next on-premise solution was deployed. Whereas a cloud-based approach incorporates the thinking that products are never done and are constantly evolving.
“This has helped people get into that agile mindset that you are never really done and that you are always evolving,” says Clarkson.
He envisions more consolidation in the industry, with mergers and acquisitions driving further investment in technology and scale. The surviving institutions will grow more technologically sophisticated, using digital channels to drive the operations and using branches as consultative financial centers.
Winning banks and credit unions in this new digital-first environment will be those that can deliver products the fastest and offer the most transparency for their customers, Clarkson maintains. “Customers want to know, ‘Are we approved and can we get their money for what we need quickly?’ Speed and convenience are going to continue to be king in the banking space.”