The Covid-19 pandemic forced community banks to adapt faster than ever before and implement digital solutions to serve customers while maintaining social distancing requirements. Experts estimate the pandemic expedited the trajectory of digital banking solutions anywhere from three to ten years. Post-pandemic, the ball is in community bankers’ court.
Every business that survived the pandemic is eager to relax, regardless of industry. But community banks need to step on the gas and take initiative when it comes to pursuing digital transformation. Many consumers tried digital banking tools for the first time because of social distancing. They may have been reluctant to abandon the branch initially, but recent statistics reveal that only one in five consumers would rather visit brick-and-mortar branches than bank via digital channels (The Financial Brand).
In years to come, the winning combination will likely be digital solutions that make it easy for customers to self-serve while also customizing experiences that can easily be transferred into the branch if necessary. Unfortunately, many community banks are still reluctant to invest in digital banking solutions, possibly because of a few common myths.
Myth 1: Digital platforms are too complex and expensive
Many community banks worry about the cost and learning curve associated with implementing new digital technology, especially with a small team. However, there are solutions on the market designed with community banks in mind that are cost-effective, easy to implement, and don’t require a dedicated in-house IT team.
The truth is, innovations like application programming interfaces (APIs) and cloud-based platforms have made limited resources a concern of the past. Digital solutions can operate on top of your existing legacy system, meaning a complete technology overhaul won’t be necessary. Additionally, many digital banking providers offer managed services. A dedicated team will help you with implementation and ongoing concerns, making a large IT team of your own unnecessary.
Many community banks overestimate the cost of investing in digital solutions and underestimate the potential ROI of doing so. In fact, in a study on banks pursuing digital transformation, almost two-thirds said they anticipate revenue gains of 10% or greater within three years, if they take appropriate steps now (BDO).
Myth 2: Digital platforms are more suited for national and global banks
Digital transformation is all about improving relationships and creating efficiencies, both for the bank and its customers. Community banks have built a rich history on close-knit relationships that often stretch across multiple generations. Unfortunately, it’s becoming increasingly difficult to compete without a digital offering, especially as younger generations come into wealth.
Community banks may be handling fewer accounts and applications than national or global banks, but each customer is just as important and deserves an excellent experience. Digital banking platforms are scalable, meaning they lower overall costs and improve experience no matter how big or small your bank is. This also gives your bank unlimited room for growth, even if that means offering services to customers across the United States.
Myth 3: Digital platforms increase a consumer’s chance of fraud
While data breaches have become increasingly common, it simply isn’t true that digital solutions present a higher fraud risk than paper applications. In reality, modern technology has safeguards in place to detect fraud attempts that could be missed by humans. Additionally, they leave paper trails that make it easier to catch issues, resolve them quickly, and demonstrate compliance. Many digital solutions can even integrate with fraud detection platforms to automatically check an extensive database for potential fraud in seconds, ensuring your customers (and business) are actually safer than ever.
Myth 4: Digital transformation means replacing my employees with technology
This myth is widespread across all industries and may be a valid concern for some, but the goal of digital banking solutions isn’t to replace human touch. Customers still want advice from financial experts for big events, like applying for a loan. The goal of digital transformation for banks is to redirect employees from time-consuming tasks, like manual information entry, so they can dedicate more time to building relationships and growing their book of business, assets under management, and wallet share. As long as customers have complex questions about their finances (which is highly unlikely to change), banks will need humans to run them!
Myth 5: I can’t keep my bank open while updating technology
There’s a common misconception that when you’re rolling out new software or services, your current technology must be completely offline. Fortunately, modern technology has made that unnecessary. Digital products can be implemented gradually in the background with little disruption to daily operations.
Banks rarely update everything at once, which allows the core system to continue operating uninterrupted. Instead, a team of technology experts works behind the scenes and “turns on” the updates once the changes are completed. Thanks to cloud computing, employees can still access the files and systems they need while better technology is implemented.
Simply offering a mobile application and/or an online banking platform is no longer enough to deliver the experience customers expect. Community banks will have to look past the misinformation surrounding digital transformation and focus on adding efficiency and value in order to remain competitive.
If you’d like to learn more about the five myths holding community banks back from post-pandemic digital transformation and why digital transformation is so important for survival, please download our eBook below.