How to build a winning team: Helping community financial institutions implement technology solutions to improve banking for consumer, commercial and mortgage lending

Written by Guy Poxon Global Program Lead, Lending
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How to build a winning team: Helping community financial institutions implement technology solutions to improve banking for consumer, commercial and mortgage lending

North American Community Markets (NACM) financial institutions play a critical role in the North American economy. They serve specific markets and regional communities, and they pride themselves on their close working relationships with customers, as well as their in-depth knowledge of businesses' ongoing credit and lending needs. However, from a technology adoption standpoint, they have not always kept pace with larger financial institutions and continue to manage many business processes manually.

Finastra, a leading financial software provider, partnered with East & Partners to survey 393 NACM financial institutions to assess their current progress and future plans. The survey found that NACM financial institutions have already invested in technology to help automate some of their processes. More than half (59%) have automated document management, and a quarter (24%) have automated customer relationship management (CRM). However, only 13% have automated client onboarding, and even fewer financial institutions (6%) are using technology to automate their loan servicing process.

There is a clear opportunity for NACM financial institutions to pick up the pace on their digitization programs by investing in open banking systems that enable smooth integration with third-party fintechs offering solutions for regulatory compliance or ESG reporting. The spread of the data shows that most financial institutions sit somewhere in the range of having automated only 29% of commercial and consumer lending digital workflows are automated, with the lesser-digitized financial institutions only achieving around 22% of automation. However, the digital leaders in the top quartile of the survey have automated over 60% of processes, demonstrating a wide range of approaches in the sector and some clear front-runners out ahead of the pack. It also shows that there is still a great deal of headroom for NACM financial institutions to extend their efforts into processes such as loan origination and onboarding.

The benefits of integrating fintechs with core systems are recognized by NACM financial institutions, despite the relatively low levels of digital process implementation. The main reasons for adopting apps from fintechs in general include the reduction in operational costs (cited by 27%), having access to broader tech experience than they have in-house (18%) and having a cost-effective/simpler way of deploying new technologies (16.5%). Other motivations include better adherence to current or future compliance, cited by 15% of financial institutions, suggesting that there could be a ready market for fintechs that provide Regtech solutions.

NACM financial institutions' unique position in the lending/credit market is likely to be driven by the need to continue providing a high-quality experience for their customers. When asked what the key factors are behind NACM financial institutions' reasons for choosing specific fintech partners, they reported that these included the impact on client retention and/or acquisition (73%) and that the adoption of a fintech's solutions would have the least disruption on operations and customers (65%). Four-in-10 NACM financial institutions said that they would select a fintech partner that could demonstrate a forward technology path of their products or services, while 37% would select a fintech partner that could provide ease of onboarding, and just over a quarter said they would look for previous implementations of a fintech's solution with similar-sized financial institutions.

Investment decisions are driven mainly by the CFO's office (63%) rather than IT (43%), the back-office (27%), and Lending Operations (8%). While IT and the business may be important influencers, it is most likely to be the CFO that makes the final decision on investment in new technologies. This highlights a clear way forward for fintechs to tailor the way they work to win.

Financial institutions need to work with fintechs in order to innovate quickly in corporate banking because fintechs have brought about significant changes in the financial services industry. Fintechs have introduced new business models and technologies that are more efficient, transparent, and customer-centric. These technologies are enabling financial institutions to streamline their processes, reduce costs, and offer innovative solutions to their corporate clients.

By partnering with fintechs, financial institutions can access the latest innovations and technologies, and leverage their expertise in specific areas such as data analytics, artificial intelligence, and blockchain. This collaboration between financial institutions and fintechs can lead to a more efficient and effective financial services industry, where customers have access to a wider range of services that are tailored to their specific needs.

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