Trent's Comments

The Distraction of Innovation for Community Banks

The word innovation has become popular in banking circles today.  Larger banks claim to have a lock on it, smaller banks seem to think they need it, but what is the real issue here?  Larger institutions have development staff that focus on new products and services, trying to be the first to bring out the next big thing.  Any such advantage from being first in market is going to be short lived.  Often, much of the so-called innovation is merely a variation on an existing capability.  Like using your finger to slide a bar in one direction or the other to transfer funds, instead of typing in an amount.  A good example of true innovation is the extension of so-called “warm carding” capability out to the customer.  Lost your card?  Need some time to look in all the usual places?  Just temporarily freeze it, using your mobile banking app, and have a look around.  If you find it, great!  Turn the card back on and keep spending.  But if it’s really lost, go ahead and report it and get a new one.  This has been a popular feature, rightfully so, and after some initial promotion by those who were early to market, it is largely available to everyone.

As I lead strategic planning sessions for community bankers, I hear a lot of discussion and
frustration about the need for innovation, how vendors are holding them back, and that large banks have an advantage.  I also see a lot of industry publications promoting an innovation mentality.  As a community financial institution, it will be very difficult for you to pioneer new banking products and services.  There, I’ve said it - you should be breathing a sigh of relief!  It should be very easy, however, for you to rapidly deploy new technologies as they become available.  This is where your focus should be.
In my experience, it is not a lack of availability that causes community banks a problem, it is delays in deploying products that customers want and need.  Today, many smaller banks are woefully behind with technologies like on-line account opening, mobile deposit, and on-line loan applications.  Internally, failing to make email and the bank’s core application available on remote devices hinders lenders and other calling officers when they attempt to be responsive and work in the field with customers and prospects. At a recent EFT conference, a panelist asked for a show of hands of those who had deployed biometric technology for digital account access.  Not only were there no banks among the 100 or so in attendance who had it, NONE of them reported they were even considering it.  In a day where security is an important concern, this is troubling, since such technology is readily available.

My recommendation is that you focus on your deployment cycles, so that your bank is as
competitive as it can be in the markets that you serve.  When combined with the personalized service that community banks are famous for, this creates a scenario for success.

Here are four steps to success:

> Ensure that your strategic plan is designed to identify your desired direction, and the products and services needed to support your goals.

> Evaluate your current situation and enumerate the gaps in products and services, relative to the first point, above.

> Engage with all key constituencies simultaneously to plan the acquisition, implementation, training, and deployment of these resources.  Include marketing, operations, finance, compliance, retail banking, and commercial business lines.  Often, I see compliance concerns overriding operations needs, or operational practices that ignore compliance issues.  Building a team that works together can help you overcome such typical obstacles.

> Ensure that your effort to roll out these new technologies starts with knowledgeable,
enthusiastic employees, and carries through to customer education and marketing efforts.  This is always a formula for success with new products and services.

As always, I am available to assist you in addressing these or other matters. 

trent@trentfleming.com