When it comes to learning about the rapidly evolving banking and payments market, the Big Apple is the place to be! More specifically, the Datos Insights Commercial and Small Business Banking Forum, the premier event that brings together top leaders from across the banking industry to discuss how commercial banks can innovate and better serve customers. I joined our president, David Buffaloe, on this adventure north, alongside nearly 200 executives from 84 financial institutions to take part in the conversation and learn more about how banks should be bracing for the future. Here’s what we heard.
Build it or buy it?
It’s evident that the financial industry has been experiencing a shift in recent years. But as of late, financial institutions feel that the pace of change is only accelerating and catching some of them off guard. Institutions that are able to get ahead of any surprises will be the ones with a strategic and proactive competitive edge, but in 2024 and beyond, what is “the edge”?
Datos Insights survey data shows that 94% of businesses expect at least somewhat significant investment in payments technology in the next 24 to 36 months. Evolving technology and innovation remain key areas for financial institutions to seize market opportunities, but not without a cost.
In a session led by Datos’ Benjamin Nestor, the challenges behind advancement were discussed. First and foremost, limited resources and technical capacity of course make it difficult for today’s institutions to decide between upgrading their current systems or making the switch to the next up-and-coming solution. Sure, building in-house solutions is also an option, but that’s going to require a dedicated team, which brings us to the alternative option: the growing marketplace of fintech providers. With so many solutions out there, which one is the best pick for their institution?
All of these decisions require strategic planning and consideration, and the organization’s valuable time. Solution providers: This is where your attention should be laser-focused! We know that the need is there. Your job? Prove how your solution not only solves their problem now, but also five years from now. In a growing ecosystem, your one second in front of a decision-maker is everything. Understand their challenges, come in prepared, and make it count.
Start spreading the news
Frank Sinatra famously cooed, “I want to be a part of it,” and the next generation of small and medium-sized business (SMB) owners is singing the tune. Following the uncertainty of the Covid-19 pandemic, new business formation has been at an all time high. The millennial generation is hungry and eager for entrepreneurship, acting as an all-you-can-eat buffet for the institutions hoping to bank them.
But what do you know about this generation? What do they expect from their financial service providers? 79% of Gen Z and 69% of millennials use a large bank as their primary financial institution. Datos Insights also found that millennial-run small businesses are twice as likely to use a Big Four bank than a community institution.
The perception that larger banks are more innovative and faster to broaden their product offerings is the key attraction that draws this group to large banks rather than community banks. Rather than seeing this as a challenge, see this as an opportunity. I say this with love, but this is not your grandparents’ SMB banking. The younger generations’ expectations of today’s SMB bankers are only going to keep evolving. Fueling growth for your organization begins with acknowledging and embracing change.
What must banks do to better meet small business needs?
The number of small businesses stating that they are likely to switch financial institutions over the next two years has more than doubled since last year. We’ve talked about stepping up your institution’s tech, but what exactly could that look like?
Chances are that you’ve heard us talk about it before, but coupled with an intentional strategy, Generative AI could be the game-changer for your institution. As we’ve said before, slow and steady wins the race. When it comes to new technology and AI, take it slow and incorporate what makes sense.
For financial institutions, it can be a daunting unknown. Navigating data management, risk, and customer service challenges brought on by AI are at the top of leaderships’ minds, but the efficiency opportunities make it too tempting to ignore.
Ultimately, it’s important for organizations to remember their missions and values when it comes to making decisions that will impact their customers. When we talk about the concept of Sales Readiness, Michelle Carpenter, vice president and senior treasury management officer at Dart Bank, said something that has stuck with me: “It is a continuous process. Importantly, it also means making the conversation about the customer and their needs — not about your bank, products, or services. Always lead with the customer.”
As the landscape of commercial banking and payments shifts at an unprecedented pace, traditional institutions find themselves at a crossroads. With so many outside factors and solutions being dangled in front of stakeholders, teams need to take a step back and not only consider their current state, but consider five or 10 years down the road. The Datos Insights Forum challenged us to do just this. Navigating the complexities of modern finance will not be easy, but Vertical IQ will be there every step of the way.
Is your institution looking for “an edge”? Book some time with us to see for yourself how Industry Intelligence can help provide more value to your team and clients!