Community Banking & Technology

At this year’s LBA Annual Convention in May, a speaker presented the banking technology landscape and I was taken aback. Part of it was an impressive video of what a very large bank offers their customers through their mobile apps. Shortly after this, the Wall Street Journal had an article titled ‘Big Banks Are Bulking Up On Spending for Technology’. That also took me aback. Citigroup spent $8 billion in 2017 on technology, JPMorgan Chase said it would spend $10.8 billion on technology in 2018, and employs about 50,000 people in technology-related jobs. The article suggested that this investment by big banks is a wager on robotic processes, use of blockchain systems among other areas to reduce costs over time. We can guess that the technology investment also includes the mobile app experience by their customers I saw at our convention. All this is hard for me to understand exactly what it means for community banking and how they need to react. 

How does a community bank, with all the challenges throughout the organization requiring attention, also cope with the regulatory and customer demands of technology? And whatever that is, how can LBA help? In the market right now the speed of change in technology is rapidly accelerating and presents challenges and opportunities for community banking. For this article, I am focused on what the bank offers their customers. The assessment by bank management is about what your customers want or need and the cost to the bank to provide that, along with some awareness of what your competition is offering as background. Practically, how does a community bank assess and make informed decisions on what is necessary for them to do. We think we have a good idea of what is out there, but what applies to your bank? Further, community banks have the challenge of working with their core processor, which the large banks do not have. Some suggest that the frustrations community bankers experience with their core is what has motivated such a highly active and diverse fintech sector that is working to solve the problems that the core processors cannot or are taking too long to solve. ICBA told me they are researching alternatives to help community bankers but so far, no ideal solution has been found. 

And then while writing this I read an opinion piece on CNBC by Richard Bove, someone I have seen comment on banks previously, titled “Big Banks are Losing Lending Business to Small Competitors and Here’s Why”. One quote from this article sums it up: “The big banks may be losing touch with their customers due to the excessive use of "hi-tech" banking, while the smaller banks have continued to follow a policy of "hi-touch" service.” So, there you are. Maybe the community bank model of relationship banking trumps the tech piece to some extent. 

For us at LBA, we have a Technology Peer Group, a Technology Conference annually, this year’s will be held October 23 at the LBA, and other offerings and presentations throughout the year on tech-related issues. But I am not sure we are getting at what you need most. If you have any ideas on what we should pursue to help on this vast area, please email me at taylor@lba.org. On this or any other issue or concern, our job is to help you grow and prosper, and we are ready to jump in at your direction.