Home Banks & Credit Cards Small Banks Join Forces To Bring Fintech To Customers

Small Banks Join Forces To Bring Fintech To Customers

61
0

“There is strength in numbers” couldn’t be more accurate when it comes to community and regional banks as they navigate the ever-increasing digital world. While the likes of JPMorgan Chase and Bank of America have the budgets and the staff to develop cutting-edge digital offerings for their customers, their smaller brethren are usually left to their own devices, which means scrambling to catch up.

Aiming to end that cycle and to prevent their banks from becoming irrelevant, a group of a dozen community and regional banks, with the help of consulting firm FinTech Forge, have created a consortium that will work with financial technology startups to develop products and services that meet the digital needs of their customers.

The move is driven in part by a desire to innovate and part survival. It comes as millennials are bypassing branches and traditional banking services for the fintech offerings at an increasing rate. Take Quicken Loans, the Detroit-based lender that operates Rocket Mortgage it’s completely digital platform, for one glaring example. In the fourth quarter of last year, it became the nation’s largest residential mortgage provider, surpassing Wells Fargo. “Some of the banks are doing it out of necessity,” said Marc Butterfield, SVP of digital & payment solutions at First National Bank of Omaha, of the new consortium dubbed Alloy Labs Alliance in which the bank is a founding member. “We don’t want to be in that position.” Butterfield began building the foundation to offer more digital products last summer and sees the consortium as a way to not only bounce ideas off of others in the banking industry but share in the risk of testing new innovations.  “When you are talking internally it makes people more comfortable if other banks are wanting to do it or have already done it,” said Butterfield. “It’s also going to be helpful when talking to fintechs to prove out their ideas when you say we have ten to 12 banks that are interested instead of one.”

Regional, Community Banks At  A Disadvantage 

As it stands now, many of the nation’s smaller regional and community banks are beholden to large vendors to manage their data and thus the innovative services they offer. Because the banks are small, they don’t have large research and development budgets to pour into trialling new services.  Many face roadblocks when aiming to adopt new digital services because they have to ensure the applications work with the systems of the big vendors. “We’re seeing great, bold new ideas being brought to the market and when you meet these new fintechs and introduce it to the core, the core is not engaging,” said Julieann Thurlow, president, and chief executive of Reading Cooperative Bank. “We’re just a small fish in a big pond. If you want something new and creative it’s very hard to do.”  In addition to the challenge of getting the big vendors to listen to these smaller banks, the fintechs are creating cutting edge technology but aren’t considering the regulatory requirements the banks have to adhere to when launching new products. “With the consortium, the banks become a bigger player and represent more dollars. We’ll have influence on the product as its developed,” she said.

 

Source: Forbes

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.