Break the bank mold

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As a former real estate developer and home builder, I have had the opportunity to build a variety of homes to suit different needs. In general, home builds fall into one of two categories – a cookie cutter rail home or a uniquely designed custom build. A track house is a standardized building plan – slight adjustments could be made, but ultimately most track houses share similar layouts and designs, with small adjustments that the homeowner could make like colors and finishes. A custom build, on the other hand, allows a builder to customize the design to fit the needs of their specific lifestyle. A large family can design a house that fits the needs of each family member, a car enthusiast can build a larger garage, and a chef can build a kitchen that fits their needs. While custom construction can be more expensive and requires a much longer time frame, the homeowner can get a home that perfectly suits their living needs.

When I look at the banking industry today and the way business models are changing, I see that our concept and our infrastructure must evolve with it.

If you’d looked under the hood of every bank in America five years ago, we would have seen the banking version of a track house – same kind of systems, same kind of skills, with the same kind of people working in it. This was particularly the case for community and regional banks – many relied on technology providers to standardize products and services to give thousands of smaller banks access to competitive technology. Fast forward to today, two years after a global pandemic catapulted us into a digitized future, it’s fair to say that there is no standardization in banking anymore.

A survey by McKinsey & Co. showed that the COVID-19 pandemic has accelerated the adoption of new technologies by several years – and changed business forever. Like many industries, banks and financial institutions have had to adapt and accelerate their digital transformation strategy in the face of pandemic-related disruptions.

Take geographic footprints for example – while banks used to be limited to their specific territory or region, digital capabilities have removed that boundary. Banks can now tap into broader markets and offer services digitally. And while there will always be a place for personal financial services, technology is making customer experiences even better in some cases.

Additionally, with the implementation of digitized systems and processes, banking is becoming a niche business and a specialized business model is becoming more evident across the industry. We are switching to custom-made products. The fact is that specialization allows banks to have fewer competitors and generate additional income.

Whether a bank is hyper-local, specifically for fintech, or geared towards small businesses like us, the idea that you can now choose your financial institution (FI) based on your needs, interests and lifestyle is far more appealing to the customer and can help banks to simultaneously focus on profitability in their specialty.

The world of technology in banking has also changed dramatically over the years. While there used to be three to five major technology providers offering products to banks of all sizes, that is no longer the case. There are now hundreds of technology providers for banks to choose from, all offering banks the opportunity to build solutions for their unique audiences. From end-to-end solutions and core technologies to mobile app development technologies and various types of remittance and lending services, the possibilities are truly endless.

Being able to choose who your partners are gives institutions the opportunity to create a kind of niche financial organization. Take BoeFly for example, they work with our bank and target a very focused segment of the market – accelerating growth for franchisors and franchisees. Similarly, Built is a fintech company and leading mortgage lending software provider that works with banks that have a large construction customer portfolio. They have developed technology that simplifies the lending and issuance process for the entire mortgage lending ecosystem. Both allow institutions to partner and offer specialized services to niche audiences.

Another example, larger cloud-based technology platforms like nCino offer an end-to-end solution by integrating with the core of the bank, allowing banks to create workflows and approval processes, replacing manual processes. Ultimately, banks and financial institutions should be able to serve their customers better.

risk mitigation

With innovation comes new, uncharted territory. So, while risk mitigation in banking is nothing new, there are different types of risk that banking institutions face today. There are risks associated with using different types of technology. Whether it’s opening platforms with various application programming interfaces (APIs), adopting blockchain, investing in crypto, or otherwise integrating with other financial firms to provide information, the risks involved continue to grow along with the opportunities banks can offer .

As the world of technology constantly develops new products and services, it is important for financial institutions to understand their own level of risk and be able to monitor it. Knowing when to turn to a fintech partner who can help banks mitigate the threat that comes with it is crucial. It’s also important to understand that a human reviewing an AI process to look for potential risks will never be parallel to a risk mitigation technology that achieves the same level of intelligence and speed.

The world is changing much faster than ever before, and technology is expected to grow 6.7% in 2022, according to a report by Forrester. It is clear that banks will compete in other ways and will continue to build unique business models to give them their competitive advantage. From risks to technological infrastructure and org charts, the banking industry’s wave of innovation will bring a new breed of custom builds…

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