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Published by fmsdesign, 2018-08-24 14:04:11

FMS Research: Technology Touchpoints

August 2018 Community Mindset: Bank and Credit Union Leadership Viewpoints 2018
TECHNOLOGY TOUCHPOINTS
Technology has become such an outsized piece of business strategy in almost every industry that it’s no surprise financial institutions see it as the source of both their most promising opportunities and their biggest challenges.
For the second year in a row, a solid majority (75%) among 400 leaders at community banks and credit unions across the country said they saw technological innovation as the most important factor for growing their businesses. While it’s clear, then, that technology is a crucial driver of growth for these community institutions, the question of how they plan to channel that technology is far less settled.
THE BIG INVESTMENT
When it comes to investing resources into technology, the big question is what banks and credit unions hope to get out of it.
Cost management stands out as one of the primary end goals for technology spending, with 69% of survey respondents saying they see tech-enabled efficiency improvements as the best way to manage costs, up slightly from 65% in 2017 (Figure 1).
Community Mindset:
Bank and Credit Union Leadership Viewpoints 2018
For the second consecutive year, FMS commissioned a survey of 400 senior executives representing community-based banks and credit unions with asset sizes ranging from $200 million to $9.9
billion – including CEOs, CFOs, compliance officers and VPs of finance and accounting – about the challenges facing their institutions and their thoughts on the state of the industry. From competitive challenges to technological opportunities, the research once again uncovered the changing pulse of the industry.
FIGURE 1: COST MANAGEMENT OPPORTUNITIES
18% 18%
Cut branch expenses
69%
2017 2018
17%
13%
65%
Improve efficiency through technology
Renegotiate vendor contracts
Financial Managers Society | Community Mindset: Technology Touchpoints 2018 | FMSinc.org
1
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$


Breaking down respondents’ IT priorities reveals a diverse spread of options, with 80% tabbing better fraud and risk management as their top priority for
IT in 2018, up from 77% in 2017. This is no doubt a reaction to concerns about the increasing prevalence of hackers and data security issues that have plagued a variety of industries of late. However, several
other IT priorities had almost as strong a hold on the respondents in our survey, as improving efficiency (79%), adding new systems and capabilities (79%) and data management (78%) all closely trailed fraud and risk management.
While a number of factors can affect an institution’s
IT priorities, the survey data showed just how much asset size plays into these decisions. For example, though replacing existing systems was considered important by 70% of all respondents, only 56% of the respondents from the smallest institutions ($200-499 million) considered it an important tech priority. On the other end of the asset size spectrum, while 76% of all respondents saw infrastructure improvements and core upgrades as an important priority, a whopping 91% of respondents from the largest institutions ($5- 9.99 billion) deemed these a top tech priority.
PROMISING PARTNERSHIPS
One of the biggest shifts from the survey results between 2017 and 2018 was the way in which bank and credit union leaders viewed fintech companies. In 2017, less than half of all respondents (49%) saw pursuing fintech partnerships as a top technological priority, while in 2018 67% said they thought it was important to do so.
This more open view of fintech may be inspired by
the fact that as they learn more about what fintech
can accomplish, the more likely institutions are to see them as potential partners rather than just competitors. Almost half of all respondents (48%) in this year’s survey see fintech players both as competitors and
as potential partners and 32% view them mostly as potential partners, while 20% still see them mostly as competitors (Figure 2).
However, when asked about challenges, more than half of all respondents saw competition from fintech and other non-traditional competitors as a significant concern, with institutions in the largest asset category ($5-9.99 billion) most likely to consider fintech a competitive challenge (65%).
FIGURE 2: INSTITUTIONS’ ATTITUDES TOWARD FINTECH PLAYERS
2
Financial Managers Society | Community Mindset: Technology Touchpoints 2018 | FMSinc.org
32% Potential partners
20% 48% Competitors Both competitors and
potential partners


FACING THE COMPETITION
While competing with fintech companies is certainly part of the picture for community banks and credit unions, growing competitive pressures overall continue to be an enormous challenge as yield curves flatten, interest rates rise and consumer expectations shift. Technology is a huge part of most institutions’ plans to excel in this competitive environment, holding as it does the twin promises of customer- pleasing convenience and cost-cutting efficiency.
Customer-facing technology saw an interesting shift in this year’s survey, as leaders noted that customers had moved away from computers to spend more time on their phones. When asked what technology their customers used the most, 29% of respondents said online banking, down from 41% in 2017. At the same time, mobile banking saw a rise to 30% in 2018, up from 23% in 2017. Online bill pay saw a similarly (though less extreme) downward trend, while mobile bill pay rose slightly.
When it comes to competing with their peers, respondents feel they’re doing a good job overall in terms of technological offerings, with cybersecurity, digital banking and payment technology topping the list of areas where leaders felt their institutions were most competitive (Figure 3). Overall, the majority of respondents viewed their banks and credit unions as competitive in all six areas laid out in the survey, but are clearly more confident about their cyber defenses, for example, than they are about their data analytics programs.
Small institutions, however, are not as convinced
of their competitiveness as their larger peers.
The smallest institutions in our survey ($200-499 million) had the lowest percentage of respondents considering themselves competitive in digital banking, cybersecurity, payment technology and data analytics. Along similar lines, credit unions rated themselves
as less competitive than community banks in these technological areas as well.
Cybersecurity Digital banking Payment technology Appeal to younger customers Branch delivery Data analytics
78% 75%
74% 73%
72% 70%
0 10 20 30 40 50 60 70 80
FIGURE 3: PERCEIVED COMPETITIVENESS IN KEY AREAS
Financial Managers Society | Community Mindset: Technology Touchpoints 2018 | FMSinc.org 3
©2018
All rights reserved. No part of this report may be reprinted or reproduced in any form or used for any purpose other than educational without the express written consent of FMS.


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