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Published by fmsdesign, 2017-11-20 17:12:24

FMS Research: Tech Takeover: The Technology Landscape for Community Institutions

FMS Research
Tech Takeover:
The Technology Landscape For Community Institutions
November 2017




FMS Research
Tech Takeover: The Technology Landscape For Community Institutions
T echnological innovation is rede ning how organizations across a wide array
of industries do business and interact with customers, and the banking and nancial arenas are already among the most fertile for this digital transformation and disruption.
It’s little wonder, then, that community institutions are feeling both the pressure and the potential of technology in almost every aspect of their business. From questions about their greatest challenges and growth opportunities
to channel delivery and the competitive environment, the outsized in uence of technology pervades the thoughts and opinions of community bank and credit union executives.
Tech Challenges and Opportunities
While technology did not rate as a top challenge overall from a list of ten options facing their institutions, more than half (51%) of survey
respondents had it among their top three concerns. As more of their customers migrate more of their lives to online platforms and mobile devices, banks and credit unions are
November 2017
COMMUNITY MINDSET:
Bank and Credit Union Leadership Viewpoints 2017
Earlier this year, FMS commissioned a
survey of 400 senior executives representing community-based banks and credit unions with asset sizes ranging from $200 million to $4.99 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 concerns surrounding CECL to the challenges and opportunities of emerging technologies, the research uncovered the pulse of the industry.
FIGURE 1: FACTORS IMPACTING GROWTH
These five growth factors had the highest percentage of respondents who rated them as either “very important” or “somewhat important.” Not only did technological innovation top the list outright, but technology also factors prominently in other growth opportunities among the top five, including cost containment and adding new products/services.
73 Growing the commercial loan portfolio 70
Adding new products / services 69
Technological innovation
Attracting and retaining talent Cost containment
68
68
0 10 20 30 40 50 60 70 80
FMSinc.org/Research Financial Managers Society / Tech Takeover: The Technology Landscape for Community Institutions 3


scrambling to make sure they’re in position
to be able to continue to serve them, with institutions in the $1-billion to $1.9-billion asset range feeling the most of that pressure – 66% of participants in this group had technology among their top three challenges.
While trying to keep up with their competitors’ increasing capabilities and their customers’ increasing demands represent two of the greatest technology challenges, community institutions are also grappling with how to manage the risks and threats of their increasingly virtual industry. Among other areas, technology emerged
as a concern in a question about regulatory concerns, with both data/cybersecurity and new technology making the list.
However, even as it presents a number of di cult decisions for institutions – from how best to fend off competition from a new wave of ntech upstarts to how to boost pro tability through better data analytics – technology likewise represents what most respondents (73%) see as their greatest opportunity for growth (Figure 1).
The Many Facets of Technology
One of the dominant themes to emerge from the responses of these leaders was the ever-widening reach of technology in community institutions. While many customers tend to see technology in a bank or credit union as largely just the online or mobile presence of the institution, there’s much more to it for the institutions themselves.
For example, 65% of respondents identi ed technological innovation as the best opportunity for cost management within their institutions, compared to those who saw better cost-cutting opportunities in tried-and-true areas such
as branch expenses (18%) or vendor contract negotiations (17%). In fact, improving e ciency within their institutions was the most signi cant technology priority among respondents, with 77% putting it at the top of their lists. Other IT priorities that rated highly included improving fraud/risk management, improving data management, adding new systems or capabilities and upgrading infrastructure (Figure 2).
Despite the noted challenge of increased competition, however, most respondents don’t
FIGURE 2: IMPORTANCE OF TECHNOLOGY PRIORITIES
Respondents were asked to indicate the importance of several technology priorities within their institutions. This graph represents the percentage who rated the priority in question as either “very important” or “somewhat important.”
Improve efficiency
Improve fraud/risk management
Get more value from existing technology and/or vendor relationships
Data management Add new systems/capabilities
Infastructure improvements/core upgrades Replace existing systems Pursue fintech partnerships
77 77
49
65 63
72 70
69
0 10 20 30 40 50 60 70 80
4 Financial Managers Society / Tech Takeover: The Technology Landscape for Community Institutions FMSinc.org/Research


necessarily see pursuing partnerships with ntech rms as a priority for their institutions right now. This could signal that these executives see the bank or credit union down the street
as a greater immediate competitive threat, or perhaps that they’re taking a more wait-and-
see approach to the evolution of ntech before throwing signi cant resources behind any possible alignment with one of these emerging players.
Where They Stand
Even as technological innovation impacts a wide swath of their critical behind-the-scenes operations, however, community institution leaders know that their customers are judging them largely on their experience with the public-facing outputs of their bank or credit union’s tech efforts. Based on customer usage, respondents see online banking (41%), mobile banking (23%) and online bill pay (17%) as their
most popular technology offerings.
Perhaps it should come as no surprise, then,
that when asked which types of technology
they planned on adding or improving in the coming year, respondents cited mobile banking, online banking and mobile bill pay as their top three areas, while more cutting-edge services such as digital account opening, online bill
pay and remote deposit capture garnered notable attention as well (Figure 3). In a world increasingly moving online, these leaders clearly see the value of investing time and resources into making their institutions available, secure and highly functional wherever their customers choose to meet them.
Whether the product or service in question
is customer-facing or operational in nature, however, one thing that stands out clearly across the board is that when these leaders see a technological area that is not up to par in their
51
42
FIGURE 3: TECHNOLOGY UPGRADES
Respondents were asked to list which technological capabilities they planned on adding or improving in the coming year.
50 ONLINE BANKING
38 ONLINE BILL PAY
MOBILE BANKING
44 MOBILE BILL PAY
36 REMOTE DEPOSIT CAPTURE
DIGITAL ACCOUNT OPENING
FMSinc.org/Research Financial Managers Society / Tech Takeover: The Technology Landscape for Community Institutions 5
BILL
PAID


institutions, getting it where it needs to be is a pressing concern.
Wherever respondents indicated they were not “very satis ed” with certain aspects of their technology offerings, they further noted how eager they were to correct the situation. Among the examples of areas where a less-than-ideal standing was deemed important to improve, 79% of those not very satis ed with their cybersecurity, 71% of those not very satis ed with their payment technology, 67% of those not very satis ed with their digital banking and 64% of those not very satis ed with their data analytics see bringing these areas up to the level
of “very satis ed” as a priority (Figure 4).
While many industries are certainly dealing with the effects of massive and fast-moving technological advancements, the nancial
world is arguably experiencing one of the most dramatic digital revolutions. As more and more of their customers’ business and personal lives are increasingly ltered through the lens of technology, community banks and credit unions have placed a clear priority on trying to improve their standing.
Research taken from “Community Mindset: Bank and Credit Union Leadership Viewpoints 2017.” Visit FMSinc.org/ Research for the full report and additional analysis.
FIGURE 4: SEEKING SATISFACTION
Respondents were asked to note how important it was to bring certain technology areas where they had indicated they were not “very satisfied” up to that high standard – these were their leading priorities.
80
70
60
50
40
30
20
10
79%
71%
67%
64%
0 Cybersecurity
Payment Technology
Digital Data
Banking
Analytics
Published by:
1 North LaSalle St., Ste. 3100 | Chicago, IL 60602 [email protected]
Mark Loehrke
Editor and Director, Publications and Research
Hilary Collins
Assistant, Publications and Research
©2017 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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