“Digital transformation” — yes, it’s a buzzword. No really, we even included it in a list of common FinTech buzzwords. But it’s also a very real revolution taking place in the finance industry, and something to be taken seriously.
There is this image of digital transformation being an expensive process. And often enough, it really is. It’s not hard to envision a suit-clad VP at a Tier 1 bank with the budget of a small country’s GDP leading a digital overhaul. For big banks, digital transformation means augmenting legacy technology to keep agile and compete with the rising threat of Big Tech and challenger banks. But what about smaller banks with smaller budgets?
While digital transformation can be an expensive process, it doesn’t have to be. And with the potential to increase profitability by leaps and bounds, an investment in it can also provide a boon to smaller, community-focused banks.
Here’s what you need to consider if you’re a community banker looking to tap into the digital transformation movement:
What is Digital Transformation?
Digital transformation describes the process by which banks update their legacy (often outmoded) technology to provide a more modern experience, both on the backend for bank employees and out front for customers. As every industry is being disrupted by an influx of technology, customers are expecting updated, technology driven experiences. This extends to their banks.
This is especially important with the rise of Open Banking, which is making it easier than ever before to switch financial institutions. With branchless, digital-only banks offering absurdly good interest rates with low (or no) fees, even customers loyal to your institution are going to at least consider switching their primary accounts.
To keep these customers, it is important to develop a customer-centric experience driven by technology. The question remains: how does a small, community bank afford the requisite technology to complete a transformation like this?
Lower Barriers For Entry Courtesy of FinTech
When technology implementation involves massive, on-prem deployments with intensive IT oversight, it makes sense that community banks would focus their attention elsewhere. While such solutions still exist, more and more financial technology is offered as Software-as-a-service (SaaS) and billed on an operational expense model.
The benefit here is a shorter implementation time, and lower upfront costs. Even highly expensive SaaS solutions rarely require an enormous chunk of change upfront, preferring the more sustainable recurring revenue model. This is a symbiotic relationship between FinTechs and community banks — the technology providers can count on reliable cash flow and smaller financial institutions can access solutions without — pun intended — breaking the bank.
What this means is that digital transformation is now very much on the table for community banks. This not only makes them competitive in their own niche, it allows for real growth potential. While previously acquiring competitors might have been the easiest way to accomplish this, now driving a great digital customer experience can facilitate organic growth.
What Does Digital Transformation Mean for Community Banks?
It’s right in their name — community banks are focused on their “community.” The reason people opt to bank with smaller institutions is because they perhaps feel like less of a statistic on a spreadsheet than they would at a massive international financial institution. These banks have traditionally provided a more personalized customer experience — at the branch level, at least.
What if that personalized experience could be applied to their digital experience as well? With FinTech solutions like Zafin, you can create promotions and campaigns that target individual demographics and customer segments, personalizing digital banking, and taking the community bank experience online.
There’s so much more that can be accomplished within the framework of “digital transformation.” The first step is believing in its value and finding a way it can work for your bank. And the easiest way is to chat with us. Reach out today and we’ll explore how we can empower your community bank with the digital tools the big banks are clamouring for.
Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
Cam is the Product Marketing Strategist at Zafin. With a background in journalism and a passion for blogging, Cam strives to tell compelling digital stories. At Zafin he will share the latest trends and news in the FinTech world, and share Zafin’s role as leader in the industry. Follow him on Twitter @CamSmoth