As fintechs continue to disrupt the financial industry, incumbent financial institutions are looking for ways to stay ahead of the curve. One way these institutions do this is by partnering with fintech companies. While partnerships vary depending on the objectives and risk profile of the financial institution, they all have one goal: providing a better user experience by embracing digital transformation and a customer-first mindset.
By teaming up with fintechs, traditional financial institutions can leverage the latest technologies and tap into new customer segments. In addition, these partnerships allow financial institutions to learn from smaller and more agile startups.
However, do smaller and mid-market financial institutions reap similar benefits by integrating fintech partnerships into their strategy?
Kapitalwise recently caught up with Michael E. Gill from Flora Bank & Trust, a community bank dedicated to making meaningful technological investments to improve their customers’ banking experience.
Kapitalwise: What are the significant challenges Community Banks face regarding innovation?
Mike: While there is potential for the long-term value of some new technology related to community banking, the initial cost with little or no discernable immediate value to the bank or its customers makes investing in innovation difficult to justify.
Kapitalwise: Do you think Community Banks can leverage technologies like artificial intelligence or blockchain? If not, what’s the challenge?
Mike: Larger community banks in urban or metropolitan areas may be able to justify using AI for customer interaction and support or blockchain for some in-house initiative. Smaller community banks with assets under 1 billion or whose service areas are more rural communities may not have the budget for those kinds of technologies.
Kapitalwise: What advice do you have for other Community Bankers for working with fintechs based on your experience collaborating with fintechs at FB&T?
Mike: From my experience, most fintechs aren’t ready for production. They have an excellent idea and the beginning of a platform or framework, but they don’t have real-world application experience. It often takes months of trial and error and updates to get something that fits into a community bank’s workflow. So, try to see the bigger picture. Find a technology that you believe in, work through the growing pains, and trust that you’ll find value over time.
Kapitalwise: Can you mention a couple of fintech collaborations that FB&T is working on at this point?
Mike: FB&T is currently working with a few fintech companies to try to add value to our business. We have been working with Kaptialwise the longest. Therefore, that relationship has seen the most development. We’re a small bank in a rural community, so digital communication has been a struggle for us. Not many customers expect email newsletters or social media posts from their bank. However, we felt that connecting with our customers digitally was an important step to remaining viable in the digital age. Kaptialwise has worked hard to update its product offerings so as to accommodate our needs in that space. We are still gathering data on whether our digital engagements are accomplishing their goal.
To continue our quest for digital relevance, we have also started working with a company that has developed a fully digital lending platform. With this technology, a customer can go from request to funding in just a few minutes. We are still in the early stages of implementation but are excited to add this to our product offerings. We believe that, in the long term, it will be loved and readily adopted by our customers.
Kapitalwise: Please share your view on crypto and CBCD from a Community Banker’s point of view.
Mike: It’s too early for community banks to capitalize on cryptocurrency as we are still determining the risks/rewards. In my opinion, we’re years away from digital currencies as a viable daily tool.