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5 strategies for efficiency and growth in community banks

Institutions should view their technology strategy more holistically to identify ways to encourage innovation and create unique customer experiences.

Aug 29, 2022 / Consumer Banking

Over the past two years, community and regional banks who strived for operational excellence thrived in the market and they were able to promote a clean, simple experience to attract and retain customers. But they are facing stiff competition from non-traditional financial institutions that mainly operate in the digital space.

Banks that want to stand out against their rivals and enjoy future growth are the ones that prioritize operational efficiencies, offer excellent customer service and invest in modern technologies.

Companies lose 20% to 30% of their revenue to inefficiencies every year, according to IDC Market Research, which leads to customer and employee dissatisfaction. Efficiency ratios are used in analyzing a company’s ability to effectively employ its resources to produce income. The ratios essentially reflect what kind of return a company can make from the amount it spends to operate its business.

Here are five strategies to improve efficiency ratios while serving the evolving needs of accountholders.

Invest in a modern core: It is time community and regional banks embrace modern banking capabilities and technology that can be future-proofed. For example, a component-based, cloud-native core that integrates smoothly with the bank’s original system will allow the financial institution to scale at a speed that will support their own development efforts while avoiding disruptions for their clients.

Embrace the digital ecosystem: The emergence of new players, like challenger banks, has created an unprecedented level of fragmentation in the industry. It’s not uncommon for a consumer to have a relationship with 30 or more financial providers and apps, which makes it difficult to get a full financial picture. Digital is the new branch entry point into the bank. Banks that deploy modern technology can select the most suitable solutions for their organization and customers. This ensures the bank provides the best digital service in moments of need, sustaining their competitive advantage.

Automate business processes: Automation will help improve productivity and consistency across the organization. There is a myth that workflow is only for big banks; the truth is that  workflow can also help community and regional banks fully streamline standard procedures, improve staff productivity without adding resources, boost response and transaction times, reduce inaccuracies and break down silos for more frictionless operations. Workflow can also help a bank automate their procedures manual, freeing up staff to complete other tasks and safely have them audited, allowing the bank to increase acquisition activity and easily adapt new procedures. Modern automation tools can help community and regional banks innovate faster and compete with fewer liabilities and risk at a reduced cost.

Connect digital and physical experiences: Branches remain a critical touchpoint for customers to access personal financial advice and complex services. According to a PwC report, 80% of American consumers say speed and convenience are among the most important factors in customer experience, but due to complex regulations and processes, bankers haven’t always been able to deliver these services in branch. Within a long-term strategy, banks should consider offering customers an omnichannel experience that puts them in the driver’s seat to choose which route is best suited for their need. This includes a digital, self-service model with the option to go into the branch or call in to the call center for personal support.

Outsource where it makes sense: Outsourcing can help community and regional banks boost efficiencies and allow bankers to focus on building and nurturing client relationships. Outsourcing employee services, like contact center services and human resources, can eliminate the need for bank employees to wear multiple hats, helping increase productivity and allowing them to focus on better serving customers.

Continued inefficiencies can create poor customer experiences, damage brand reputation and reduce customer loyalty. This ultimately results in market share loss and impacts the bottom line, and can even lead to a bank being a seller instead of a buyer.

Community and regional banks should view their technology strategy more holistically. This involves identifying ways to encourage growth and innovation and create unique customer experiences that improve people’s financial health. The more efficiently an organization operates, the more likely it is to keep customers and employees happy and maximize profitability for its shareholders in the long term.

Stacey Zengel is president of bank solutions at Jack Henry & Associates