This week's post is a slightly different perspective than what we've covered as of late. The idea came from a question that one of our newer employees approached me with last week. As she was reading articles to stay up on the banking industry, she stumbled on opposing views, and, understanding the relevance for our clients, asked me which perspective I thought was correct.
The topic is whether community banks can survive without embracing technology. While it's a question in fewer and fewer folks' minds, there is still some ongoing debate on the subject.
"You Can Make it Without Tech"
The first article is by Kevin Tynan at American Banker: https://www.americanbanker.com/opinion/small-banks-can-make-it-without-a-tech-makeover. In the article, Mr. Tynan takes the position that community banks don't need to embrace technology, but instead can survive by focusing on highly-relational niches of the upper-age brackets, non-banked individuals, and the non-English speaking population. Tynan argues that technology does intimidate some folks and that there is an opportunity there.
"Digitize or Die"
The other article is by Joseph Cady at Banking Exchange: http://m.bankingexchange.com/news-feed/item/7119-we-ve-met-the-enemy-is-it-us?Itemid=639. Mr. Cady's article paints a much bleaker picture for those who choose not to embrace technology. He argues that the change in banking technology has been relatively slow to date and, as fast as things are going, will continue to increase in velocity. Those banks that take the approach of "business as usual" will soon be out of business. For that reason, Cady gives a few suggestions to be able to compete:
- Create a plan to transform physical processes to digital form to make them faster and easier
- Implement that plan with a cross-functional team (meaning not just IT)
- Work to continually lower your efficiency ratio to less than 50, 40, and even 30 by through technology and outsourcing partnerships
My Take
Without a doubt, my opinion is this: banks that don't utilize technology to enhance the customer experience and improve internal efficiency will have a tough time remaining relevant and in business. While Kevin Tynan makes some interesting points, none of them are viable, long-term strategies. For community banks in particular, I feel that there is a middle ground between fully automated services and human interaction that can be a "sweet spot". This could be niche focused products and/or markets with a technology-driven delivery. Either way, the innovative bankers that realize the industry is changing will win in the end.