Why Banks and Credit Unions are Accelerating Tech Adoption During the Pandemic

Sal Trifilio

Sal Trifilio

August 18, 2020

capability of a digitally mature insitution
“Don’t waste a crisis.”

This quote is often misattributed to former Chicago Mayor Rahm Emanuel and thought to mean that crises are good opportunities to advance one’s political agenda. However, according to the authors of The Dictionary of Modern Proverbs, the quote actually goes all the way back to a 1976 medical journal entry entitled “Don’t Waste a Crisis—Your Patient’s or Your Own.”

The true meaning of the quote, you see, is “that a medical crisis can be used to improve aspects of personality, mental health, or lifestyle.” For example, consider the story of Rodney Vieira, a man who had a heart attack at 41 and used it as an inflection point on his way to running the Boston Marathon.

Similarly, banks and credit unions are using this pandemic as their own inflection point and many have come to the conclusion that the best way forward for the health of their customers and institutions is through rapid tech adoption.

4 Reasons Tech Adoption is Accelerating in Banking Because of COVID-19

For the most part, almost every financial institution has some sort of 5-10 year digital transformation strategy. However, in a pandemic that has forced the closure of branches through state-wide lockdowns and has disrupted business as usual in almost every industry, banks and credit unions needed to reevaluate their strategies and, most importantly, the timelines attached.

In times of crisis there’s an impulse to fall back to risk mitigation and an attitude of weathering the storm. But for a growing number of banks and credit unions there’s increasing evidence that a swift embrace of digital transformation is what will lead to greater resilience to crisis and sustained growth moving forward.

Here are four reasons institutions are accelerating their rate of tech adoption, even during this pandemic:

  • Because digitally mature banks and credit unions recovered and grew faster coming out of the Great Recession. A report released last year by Accenture—and broken down for you here—showed that banks that invested in technology during the Great Recession had far more success in the decade that followed than their more traditional counterparts. The report found that digitally mature institutions had higher market valuations, that those valuations were justified, and that they were ultimately more profitable. Further, the report said that investors are “not [confident] that there is future value in the traditional bank business model,” a note that seems rather prescient today.
  • Because digitally mature banks and credit unions were better prepared for the current crisis. The FinTech Era has given birth to a strong debate within the industry: How does technology, if at all, affect an institution’s financial stability? Until recently, strong arguments could and were made on both sides of the aisle. However, two economists at the International Monetary Fund published a report in April of this year that looked at the data and came to an important conclusion. The economists looked at the ratio of non-performing loans (NPLs), which are considered an important indicator of banking sector distress, to overall assets for a range of institutions with varying levels of technological adoption. What they found was that at the height of the crisis, institutions in the top 25 percent of technological adoption had about half as many NPLs as institutions in the bottom 25 percent. The researchers concluded that tech “adoption enhances banks’ resilience to a financial crisis” and that there’s no evidence to suggest the current crisis is any different.
  • Because consumer behavior has changed for good. Whether you consider yourself to be tech savvy or not, stop and consider all the ways in which you are “more digital” today than you were before the pandemic started. It’s fair to say that we all have anecdotes from our first Zoom meeting, first online grocery order, first curbside pickup from a retail store, or first time working from home. Looking back on our “firsts” can feel funny--all of these things now seem totally normal to us. And it’s not just anecdotal evidence. A recent survey from PYMNTS shows just how much more digital consumers have become. According to the survey, 36 percent of consumers now buy goods online compared to 29 percent doing so in mid-April, when many shutdowns took place. Online ordering from restaurants is also on the rise, increasing to 21 percent from 13 percent in mid-April. This data, coming in as restrictions are being lifted and some states reopened, showed that this behavior is sticking, according to PYMNTS.
  • Because businesses were already struggling to interact with their financial institutions before the pandemic. Banks and credit unions, unlike retail stores, don’t always have a robust digital presence that they can shift to when lockdowns occur. And this lack of digital maturity has made it more difficult to maintain business relationships during the pandemic. In fact, according to Voice of Customer data compiled by Barlow Research Associates on the Paycheck Protection Program, a full third of businesses felt that their interactions with their institution had been impacted by COVID-19, revealing problems that existed prior to the pandemic. Coping with this reality, business owners said, will require fewer branch visits, more remote interaction, and an increased usage of digital channels.

Rapid Digital Transformation Requires the Right Technology Partners

As financial institutions do the hard work of identifying their technology needs as they move into this new normal, it’s important that they consider partners that can help them make their vision a reality.

Numerated has been a key partner to more than 100 banks and credit unions in their rapid adoption of PPP lending technology—helping them implement our platform and begin serving PPP customers in a matter of days, rather than months or longer. These lenders then leveraged our technology to issue a full 5 percent of all funds in the Program, and are now expanding their use of our platform as a key piece of their accelerated digital transformation.

Institutions that are serious about investing in technology as they move forward should consider fintechs like us that have experience working in partnership with dozens of banks and credit unions, during critical moments, to help them accelerate their tech adoption.

To learn more about Numerated and how we can help you succeed in the new normal, join one of our upcoming Insights Sessions, by registering here.

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