As previously published in the Puget Sound Business Journal.
Banking customers are increasingly expecting all interaction channels – whether that’s in a branch, over the phone, or online – to be seamlessly aligned and digitally enabled. In addition, growing regulatory obligations are creating burdensome workloads that demand digital solutions.
When it comes to digital transformation, mid-market banks can’t afford to resist adoption. Their ability to meet customer expectations, competitive challenges, and fulfill mounting regulatory burdens hangs in the balance – especially as FinTech startups continue to set a high bar for innovating traditionally cumbersome processes. Over the past few years, for instance, FinTechs have emerged to provide users with account opening procedures built around straight-through processing and reduced friction.
But for mid-market banks, digital adoption demands a unique strategy that considers the midmarket’s specific challenges – namely, limited budgets, reluctant leadership, and a dearth of internal readiness. Here are some steps midmarket banks can take to surmount those hurdles.
Get executive support: Without executive buy-in, no bank can make meaningful strides toward true digital adoption. But achieving that buy-in requires a mindset shift.
Typically, banking executives are hesitant to endorse a tech investment if they don’t see quick win potential in terms of ROI. The problem is that digital transformation doesn’t deliver a two-day payback. Instead, it should be viewed as a longer-term financial investment with a broad positive impact on risk mitigation (i.e. cybersecurity and enhanced underwriting results), brand enhancement and customer/employee retention – to name a few.
Mid-market banking executives would be well-served to look outside their organization to understand the changing consumer market both within and outside banking, the rate of technological change and innovation, and recent actions of non-traditional competitors.
Invest incrementally with strategic partnerships: Even with executive buy-in, mid-market banks don’t have the working budgets of their larger peers, and it’s not financially feasible nor always necessary for them to implement an immediate tech overhaul.
Instead, mid-market banks should look to identify technology partners that can work with them to outline a strategy for incremental tech adoption – one that innovates off the existing strengths of their organization while also considering their budgetary limitations and long-term implementation plan.
Prioritize top-down alignment: It isn’t enough for banks to only get executive buy-in; seamless digital adoption hinges on aligning the strategic imperatives of business leaders with the capabilities of line-of-business workers. Without this alignment, mid-market banks can anticipate a lack of internal preparedness – both in terms of skills and cultural readiness.
Implement change management functions to simplify processes: To address the need for top-down alignment, mid-market banks should develop change management functions that internally prepare them for technology adoption. This function should be formalized within the bank – through a project management office – and should center around simplifying the bulky tools and complex, people-intensive processes that hinder digital transformation as well as reskilling workers with the capabilities they’ll need to thrive in a digital-driven environment.
Run the bank – and change it – at the same time
In today’s very competitive market, mid-market financial institutions can prioritize digital transformation in order to meet evolving customer expectations and help alleviate regulatory workloads.
But the path to new technology adoption goes beyond simply adopting new technology. To see a big return on the investment, mid-market institutions need to realize that it’s not only the technology they adopt that makes the difference – it’s how they apply it.
By strategically preparing for digital transformation internally through change management that prioritizes top-down alignment, mid-market banks can put themselves in an advantageous position to maximize their investment. This investment will be pivotal to maintaining a competitive market position in the coming years.