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US Mid-Sized Banks: Digitally Transformed, What Next?
US Mid-Sized Banks: Digitally Transformed, What Next?

While we talk about Digital Transformation and its future scope in the US banking industry, we often see the US Mid-Sized banks struggling about it. Let’s understand why?

Nearly 38% of the Mid-Sized banks feel their legacy systems attribute to poor customer experience. A report states that almost 30% of bank customers jump to another bank if they are unhappy with their existing provider.

Common roadblocks for Mid-Sized banks are:

  • Lack of vision
  • Lack of budget
  • Shortage of skilled employees

If these challenges are not resolved, then Mid-Sized banks would be at a higher risk of losing their customers or may suffer a colossal failure!

  • Mid-Sized banks only have 6-8% of their budgets allocated for the Digital Transformation (DT) activities, which are tiny compared to large bank’s DT budget allocations.
  • Nearly 20% of banking organizations are unable to implement their DT objectives.

Some valuable statistics that Mid-Sized banks need to be aware of:

  • A survey by McKinsey states that nearly 15 to 20 percent of the surveyed bank customers in the US and Italy are expecting an increase in the use of the digital channel.
  • It is interesting to note that any new technology stays only for 12-18 months or even lesser than that.

Large/Giant banks, FinTech have made the Mid-sized bank’s sustainability even more challenging. These banking organizations have managed to crack and march ahead with their digital disruptions by providing innovative solutions for their customers’ digital banking demands.

Here are some tips (for Mid-sized banks) for a sustainable and effective digital transformation plan:

  • Finding Niche Services and Scouting Relevant Technologies:

    Mid-Sized banks, like most organizations, are often worried about how to digitalize their core processes. Such organizations can derive benefits by digitalizing their banking services. That would save a lot of resources and offer a compelling value proposition to retain existing customers and acquire new customers.

    These banking organizations must continuously research the latest technologies and validate if they are a fit for them. It is essential to evaluate these technologies and calculate the ROI before starting the transformation process.

    Often time, banking organizations will have Innovation teams. Their sole purpose is to identify the next big thing or the next disruption and figuring out a way to stay ahead during turbulent times.

  • Hiring the Right Talent or Collaborating with Technology Provider:

    study suggests that Mid-sized banks will require skilled developers, designers, testers, cyber analysts in the next five years. However, such candidates usually prefer large organizations due to their brand popularity, making it difficult for the Mid-sized banks to allure them. To attract such talents - Mid-sized banks can come up with:

    • Clear career development roadmap, including training and coaching.
    • Building a culture of innovation and saying ‘Yes’ to challenges.

    Alternatively, and in many ways a better option, the banks can explore collaborating and piggyback on their technical abilities.

  • Collaboration:

    It is beneficial for Mid-sized banks to partner with FinTech, which will help them keep up with the latest digital transformation trends.

Below are some popular ways for Mid-sized banks to stay ahead in the digital game:

  • Chatbots:

    Bank websites are often scattered and interlinked through hyperlinks, and it can become difficult to find information. Chatbots offer an intuitive and smooth journey for the customers and help with various online banking services. As per an article from Forbes, Chatbots are the next biggest thing in the coming years.

  • Artificial Intelligence and Machine Learning:

    Banks should judiciously leverage AI/ML processes for automating their tasks.

    Nearly 56% of AI users are from banking organizations and have seen extraordinary results in the following areas:

    • Risk Assessment
    • Cybersecurity
    • Fraud Detection
    • Compliance Management

    Here is a popular example of ML/AI usage in banking organizations:

    • Fraud Detection: AI can help detect unusual spending patterns, and the fraud detection team can pro-actively work towards ensuring the customer is not affected.
  • Cloud Technology:

    Cloud Technology plays a significant role in every industry. It helps the banking organizations with the following benefits:

    • Scalability and Reliability:

      Scalability is the biggest issue faced by any banking organization. As their customer/IT system base grows and infra requirements become complex, things could get out of hand. Cloud helps with such scalability issues by providing on-demand access to additional infra resources.

    • Cost Optimization:

      The ability to increase the resources as needed helps with the rationalization of your IT spend – this ensures you are not spending on hardware more than what is needed helping you optimize your costs.

    • Improved Performance:

      Cloud Service providers offer SLAs to guarantee uptime, and the ability to have your application deployed in multiple regions will ensure performance does not take a hit even if one region goes offline.

      Before investing in cloud technology, the banks need to investigate on:

      • Cloud service providers
      • Cloud deployment procedures
      • Security Protocols
      • SLAs
  • Customer Data Platform (CDP):

    A customer not only engages with your ecosystem through email/phone calls but also via multiple social media channels such as Facebook, Instagram, Twitter, and so on. CDP aims to bring all that information into a single platform, so the business managers have a 360⁰ overview. It will help them with data-led Cross-sell & Upsell strategies, which are more effective than traditional sales strategies.

  • Omni-Channel:

    It would mean ensuring the end-user experience remains the same across multiple channels (Web, Mobile, Tablet, etc). In addition to having an omnichannel presence, banks should invest in the Customer Experience capability right from when your prospective customer starts interacting with your ecosystem and even after they become your customer i.e., end-end user journey. A solid Customer Experience strategy coupled with omnichannel capability will go a long way to keep your customers engaged.

Integrating Security - US Mid-Sized Banks

According to a recent report published by Allied Market Research, the global online banking market size was valued at $11.43 billion in 2019 and is projected to reach $31.81 billion by 2027. Pandemic has forced customers to be heavily inclined towards online banking activities. This makes it imperative for Mid-sized banks to invest & provide highly secure and faster banking products.

DevOps mindset gives banks the freedom to accelerate their value stream delivery to retain the existing customers and acquire new ones. Almost 80% of banking organizations are investing in DevOps initiatives. Its Continuous Integration and Continuous Delivery practices are a boon to every industry. But the essential part is SecuritySecurity is of paramount interest as banks deal with confidential financial transactions and customer data every second.

Data breaches have been on the rise in the last 10 years and are becoming more and more common. 2020 witnessed a 273% increase in data breach incidents. The answer to this increasing problem is DevSecOps.

DevSecOps is a set of practices that bring your Software, Operations, and Security teams early on in your Value Stream delivery process with the goal of making security a mandatory step across every stage of SDLC. It is not a platform but a mindset.

Across industries, Organizations are investing heavily into DevSecOps, and a recent report states that this market is calculated to grow by a CAGR of 30% by 2028.

Some of the DevSecOps benefits (related to banking environment) are:

The digital transformation of a Mid-sized bank is not an easy task for many reasons but most commonly due to lack of vision and the right partner. On the other hand, they cannot neglect digitalization and cyberinfrastructure. Mid-Sized banks need to keep up with customer demands, digital threats and continuously innovate to add value.

Get in touch with our experts to know how Qentelli can help Mid-sized bank reach their digital goals.