Community banks are increasingly becoming fintech investors. In 2023 they are expected to account for two-thirds to three-quarters of the total funding for the “enterprise fintechs” category – companies creating software and platforms for financial institutions that streamline and/or automate operational and business processes. Many banks are making these investments through firms specifically designed to help the institutions identify and vet potential investment candidates and to manage their investments. To be successful with these ventures, banks must have a clear strategic focus, defined investment parameters and operational responsibilities, and a realistic assessment of internal technology capabilities.
Banks can be leaders in ESG. To achieve this, bank management needs to assess the quality and achievability of their ESG initiatives, rather than just announcing plans that sound good. To support these initiatives banks need to integrate ESG data into both their customer experience and risk management strategies. This also involves understanding the importance of climate risk scenarios and stress tests. Offering green finance programs can demonstrate the bank’s commitment as well as generate profitable business opportunities. Finally, moving forward with cloud migration projects improves the sustainability profile of the company’s own operations.
Composable banking is an emerging trend mentioned by a group of four fintech leaders. Composable banking enables financial services providers to offer modular, API-driven products that can be combined and reconfigured in real-time to meet the evolving needs of their customers. Rather than being limited to offerings from a single, rigid banking platform, customers can choose the specific financial services they need, and have them delivered in a way that is tailored to their unique requirements. Related to this, other leaders mentioned adopting a hybrid cloud approach that incorporates industry-specific cloud-based information and moving toward a “coreless” cloud-based architecture.
Accenture anticipates that “radical personalization” will become common in the coming years. Banks will create dynamic packages of products and services tailored to an individual’s needs with pricing tied to the overall banking relationship. As competition for deposits heats up, institutions will begin to design Amazon-Prime-like offerings that will reward customers with a selection of benefits based on everything they do with the company. Product innovation will also factor into this as new uses for standard products are developed. One example is a feature offered by Chase Bank that allows customers to partition their overall credit card line into a series of lower-rate, fixed-term personal loans.
The authority to examine fintech vendors is an important goal for the NCUA with the new Congress, according to the agency’s Chairman. He views it as “mind-boggling” that the NCUA does not currently have that authority. He’s particularly concerned with vulnerabilities on the cybersecurity front. He also notes the ongoing consolidation within the industry and highlights the growth of minority credit unions, many of which are focused on specialized niches.
