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Survey Reveals Banks’ Increased Need for New Tech

Written by: 
Richard C. Fay, CPA

The wave of digital evolution has steadily pressed its way into the banking industry for years. However, the onslaught of the COVID-19 pandemic turned that wave into a tsunami—as institutions were forced to deploy new technologies to accommodate remote work, safely perform operations, and ensure business continuity.

Bank Director recently published their 2020 Technology Survey that analyzed bank executives’ and directors’ outlooks on the importance and necessity of technology integration in today’s environment. More and more banks are recognizing the need for alternative solutions to enhance processes, providing fintechs vast opportunities to offer banks their services and products for optimization.

Bank Director’s Tech Survey Results: Good News for Fintechs

1. Key to Bank Growth

50% of bank executives and directors indicated that their digital channels are the most important channel for bank growth. 46% placed equal value on both the digital and branch channels. Last year, those statistics were reversed—with 51% stating that the two channels were equally important, and only 38% prioritizing digital channels.

The coronavirus has shifted bank focus towards enhancing mobile and online applications, leaving some to reevaluate the value and function of a branch. Although traditional branch functions such as teller transactions and account maintenance can now be done online, banks still want to keep branch locations because they provide marketing and enable new customer relationships. Many customers still want to know that a branch is within their vicinity in case they want to solve a problem in person. But, in order to keep branches around, they need to remain profitable. Fintech companies could begin to invent ways to make branches more valuable even amidst the convenience of online banking.

By transitioning the function of a branch to one of personal finance assistance, whether that be through cash flow management, financing costs, or insurance needs, fintech companies can equip branch personnel to meet the ever-changing needs of customers.

2. A New Generation

97% of respondents stated that their bank increased adoption and use of digital channels due to COVID-19.

With statewide and national stay-at-home orders, as well as government-mandated social distancing, COVID-19 forced banks to utilize new (and more) technology to ensure service fulfillment and continued operations.

Prior to the pandemic, some customers preferred the traditional methods of banking (such as paper-statements and in-person teller transactions), and branches were catered more to those who may not be used to technological advancements. Coincidentally, this group tends to skew towards the older generation, who according to the Centers for Disease Control and Prevention (CDC), are one of the most vulnerable populations at-risk of contracting coronavirus—leading many to now seek out online options to avoid in-person transactions.

This means that more banks are looking for online solutions to help these customers. Fintechs could create or pitch solutions to help older generations have a smooth transition to online banking.

3. Vast Updates

65% of executives and directors said that their bank implemented or upgraded technology due to COVID-19, and 37% sought new technology providers as a result.

This highlights the extreme influx of demand for fintechs who provide digital banking solutions. Fintechs should capitalize on this demand by approaching more banks and offering solutions to a wider client base.

4. Seeking Alternatives

Fewer banks are relying on core providers to drive technological initiatives. This year, 41% stated that their banks rely on their core providers to implement inventive solutions (down 19% from last year’s statistics).

This means that 59% of banks are now looking to outside sources to fulfill their technological needs.

5. Begin to Upgrade

Only 13% stated that their small business lending process is fully digital, and 55% say commercial customers can’t apply for a loan digitally.

There’s still a wealth of opportunity in this industry for fintechs. With the help of innovative solutions, that 55% could steadily decrease as more solutions are implemented to help banks enlist online offerings.

6. Increased Spending

In fiscal year 2020, banks budgeted a median of $900,000 for technology spending (which increased from $750,000 reported last year). However, 64% of banks reported actually spending far beyond what they budgeted to meet the challenges spurred by COVID-19.

Right now, many banks are more than willing to pay for technological advancements—which is great news for fintechs. COVID-19 has forced them to move online and introduce new tech, making them more interested in investing in fintech solutions.

7. A Need for Digitization

74% of respondents want to enhance their online and mobile banking capabilities. About two-thirds of executives and directors said their bank plans to upgrade (or has already upgraded) existing technology, and 55% now prioritize the addition of new digital lending capabilities.

These statistics speak for themselves. Banks want new technology, and fintechs can provide solutions.

8. Remote Work Considerations

42% of respondents stated that their institution plans to permanently move more employees to remote work arrangements due to COVID-19.

More remote employees means more remote technology. Fintechs can capitalize on this need and invent more offerings that streamline everyday operations, maintain productivity, and boost morale outside of the workplace.

Conclusion

Fintechs shouldn’t let these opportunities pass by. Exemplified by Bank Director’s survey, now more than ever, banks want and need technological products and services to combat the negative effects of COVID-19 on their institutions. Now is the time for the fintech industry to promote ideas and initiate innovation.