For the last 30 years, Bank Director has been one of the leading resources on technology for business banking leaders by providing research that focuses “on the strategic issues most fundamental to a bank’s CEO, senior leadership team, chairman, and independent directors.”
A part of this effort includes an annual technology survey that examines how financial institutions are thinking about technology strategies, budgets, investments, and more. This year, Bank Director surveyed 122 independent directors, chief executives, chief operating officers, and senior technology executives of U.S. banks below $100 billion in assets.
On Sept. 28, we welcomed back Bank Director VP of Research Emily McCormick to our Tuesday Insights Sessions for a discussion on their 2021 Technology Survey results.
During our 30-minute Insights Session, Emily underlined how banks remain focused on “The Drive to Efficiency,” and how increasing the investments in their technology budgets is helping them achieve that goal during a tumultuous year.
Here are some of the most important takeaways from our discussion.
Community banks are spending more on technology
Chief among the findings in the survey was that banks across the US have increased their technology spend by a median of 10 percent over the last year. Bank Director discovered that the top four strategic objectives of banks who are increasing their technology spend are as follows:
- 70% of banks are focused on creating a more efficient operation
- 68% of banks are focused on improving their customer experiences
- 34% of banks are focused on improving online and mobile offerings
- 27% of banks are focused on addressing the direct competition they are facing from other financial services providers
Competitive concerns led to this acceleration of bank tech adoption. When survey respondents were asked what they considered to be their greatest competitive concern, their responses were:
- 54% local banks/credit unions
- 45% big/super regional banks
- 36% digital payment providers
During this Insights session, we also polled our audience of business banking leaders and asked the exact same question. Here were their responses:
- 41% non-bank/fintechs
- 28% local bank/credit unions
- 24% big/super regional banks
“The takeaway here is these fintech players may feel like a small nibble of your business, but you have to look at what they're doing, because they could be taking on more and more as time goes on,” Emily said. “For most banks, it's important to look at what they're providing to customers and figure out how you need to evolve your own system, so you can retain your customers.”
Tech budgets are focused on core systems, staffing, and managed services
According to Emily, “78 percent of banks increased their budget for technology in fiscal year 2021 compared to last year.”
“We did see a 10 percent median budget increase, and a lot of that is dedicated to core systems technology,” she added.
The top stats underscoring where banks are investing their technology budgets include:
- 40% core systems technology
- 25% staffing
- 18% managed services/outsourcing
- 12.5% ancillary technology
When asked if they believe their bank is spending enough to appropriately support its strategy in terms of technology, 67 percent of bank directors and c-suite executives surveyed said yes.
“Those that invested more in technology before the pandemic reported stronger loan growth in 2020. They were better able to participate in [the Paycheck Protection Program], which drew a lot of that loan growth. And they also saw, which probably was no surprise, more deposit growth as well, and being able to attract more business overall,” Emily said. “You really need to make sure that you're spending aligns with strategy and that you're spending what you need to.”
The most consuming areas for strategic technology enhancements are digital deposit account opening, digital loan applications, and data analytics. However, staffing is listed as the second top priority for banks when looking at how to invest their technology budgets.
“The survey does shine a light on an expertise gap for the community banking sector. We were seeing very few banks employing chief digital officers, programmers, and developers, and very few having data scientists or chief data officers,” Emily said.
The biggest concerns for community banks that stem from having an expertise gap include:
- Not effectively using or aggregating data
- The reliance on outdated tech and missing out on emerging technologies
- Losing the ability to respond to competitive threats
- Not being able to effectively serve the incoming generations like Millennials and Gen Z in the way they prefer
“Further, we see that most banks view their technology provider as a vendor only, so not someone that they can necessarily collaborate with.” In Emily’s opinion, this is truly a “missed opportunity” to gain external expertise from a partner who cares about the success of your institution.
Get more takeaways from the 2021 Tech Survey to position your segment for success
As we wrapped our discussion with Emily, we took a moment to identify how financial institutions should be prioritizing technology to drive their strategic plans. Numerated Head of Marketing Cheryl Kardos provides three takeaways from the report specifically for business banking leaders, which include:
- Know your objectives
- Digital transformation focus is shifting from consumer to commercial
- Prioritizing digital delivery does not mean leaving the branch channel behind
“Align with your corporate objectives as you are pushing these solutions through in order to adopt these great customer experiences and gain from the internal efficiencies that you can gather from technology,” Cheryl said. “If you’re adopting technology, it’s not just for the branch, or just for online only. Both the branch and digital are equally important. You can leverage technology in many different channels and still have a consistent experience for your customers.”
The stats and takeaways above, while important, only highlight a portion of our conversation with Emily on the Bank Director’s 2021 Technology Survey. To get her full analysis, watch the full on-demand webinar above, or read Bank Director’s report here.