Leadership Perspectives | 04.19.21
Survey: Digital Acceleration Stirs Optimism, Devours Agendas
The banking sector could be in for a rough stretch, considering rock-bottom interest rates. The post-pandemic recovery, meanwhile, is in stutter-step mode, despite increasing talk of an economic boom seen as being just around the corner.
If leaders of banks and credit unions are feeling optimistic–and some are–it could have less to do with how fast the population gets vaccinated and more to do with their "digital transformation.”
Surely, you’ve heard the term. Everyone is talking about it, across every facet of every company in every sector. The phrase is at risk of being worn out, but the trend is undeniably real.
"Many of the issues which 2020 presented have been worked out," said Kelly A. Montefiori, chief operating officer at Marquette Savings Bank. "We are working from home successfully. And customers are using digital services and drive-thru lanes without issue. We are living a new normal.”
Montefiori’s remarks appear in a brand new report from Cornerstone Advisors.
This past December, Cornerstone surveyed some 260 senior executives at U.S.-based mid-size financial institutions; 55% from banks and 45% from credit unions.
About one quarter of the executives held the title of CEO; the bulk of the rest are C-level execs or executive VPs.
Partnerships Become Passé
One of the top-level findings puts a spotlight on the rise of fintech partnerships, once seen as a silver bullet for banks trying to make an effort to start to digitally transform. But now, partnerships are looking woefully inadequate, given the scope and size of the task at hand.
"Bank and credit union directors often ask managers what their institutions are doing about fintech," the report says. "And the executive team often points to a partnership the institution has, often around digital account opening."
But 2021 will be different, according to Cornerstone's survey interviews.
"Boards will tire of not seeing results and realize that dedicating one or two people to fintech partnerships isn’t sufficient to get real results," the report states.
Some other highlights:
- For the fourth straight year, digital account opening is at the top of the list of technologies for which banks and credit unions will select a new or replacement system. It’s also at the top of the list of bank/fintech partnerships. "Hopefully," the report said, "this will be the last year financial institutions obsess over DAO and start focusing on other capabilities they’ve been ignoring."
- Weakness in the lending markets will expose the reality that the gains banks and credit unions saw pre-pandemic had little to do with their digital transformation initiatives and were just the result of a rising tide floating all boats.
"Banks will find out that if they don’t replace their core systems, there may be no digital transformation," Cornerstone said.
Long Way To Go
When it comes to new technology, ambitions often outpace implementation. Although digital transformation and IT infrastructure investments are a priority, a full 80% of respondents were less than one-fourth of the way finished in their ongoing, multi-year processes.
According to Cornerstone, less than 3% are near completion.
If the pace of picking up, as would be expected considering the dramatic shifts in customer behaviors amidst lockdowns, it can’t come fast enough.
Most respondents to the Cornerstone survey indicated that there are ongoing initiatives to increase investments in digital transformations, and to continue to pursue outside partnerships to augment technology. But, as Cornerstone researchers pointed out, the competition continues to pull ahead—and the competition is changing in nature.
Nearly half of the bank and credit union leaders canvassed by Cornerstone identified “big tech” as the primary competitive threat, when looking at the decade ahead.
“Last year was one of those years that sped up digital adoption,” said Tim Ryan, chief financial officer, Monona Bank.
“It will likely make us think about branches and branch strategy differently. Usually, when you survive something like 2020, you come away a bit more optimistic.”
That holds true at several firms that took part in the survey, even if some of that optimism is cautious.
“We quickly learned how to adapt in 2020 and are prepared to shift if there is another shutdown,” said Carol Minges, chief executive officer at Alltru Federal Credit Union. “We have also rolled out many new services and channels that allow our members to connect with us remotely. These have always been part of our ongoing eservices plan, but COVID-19 reinforced the importance of providing our members with options.”
is a link to the Cornerstone report.