Organizations in every industry are talking about digital transformation. But if you want transformation to be more than a buzzword, you need a strategy based on a keen understanding of what your customers want.
That’s exactly how Encore Bank became one of the fastest-growing privately held commercial banks in the United States.
Under the guidance of Allan Rayson, chief innovation officer and chief technology officer, Encore achieved unprecedented growth in 2021: 95% asset growth, 119% loan growth and 107% deposit growth.
Why is Encore so successful? According to Rayson, it all comes down to getting specific about goals and outcomes.
“Early on, Encore Bank identified three big rocks that we wanted to move: driving commercial loan volume, driving core deposits and driving noninterest revenue,” he says. “Gaining clarity on our business outcomes helped us set a clear technology and innovation strategy.”
High-performing financial institutions such as Encore have one thing in common: They tend to be clear about their goals and what success looks like. They define their objectives and identify tangible pain points to solve for, and then they select the right tools and tactics to help them reach those goals.
With upfront clarity on the desired outcome, the digital transformation conversation shifts from “We need tech” to something more substantial—and measurable. For example: “We need the right technology to reduce our labor and marketing costs by X, increase our profit margins and new-account openings by Y, and boost our operational efficiency by Z.”
As you identify the right metrics for measuring the success of your digital strategy, the efficiency ratio—that is, your operating costs divided by your total income—should always be top of mind.
While front-of-house staff tend to scale with revenue, operational staff are the main driver of the efficiency ratio. If you can empower operational staff to be more efficient on the back end, your institution will be well positioned for smart, sustainable growth.
As you navigate this complex ecosystem, consider these three tips from Rayson and his team:
Legacy is not always better: Legacy infrastructure can be a competitive liability that may be putting your institution at a critical disadvantage in a crowded marketplace.
Steer clear of RFPs: Many FIs rely on RFPs to vet technology partners. While this process can be helpful in identifying tech requirements and business objectives, RFPs often involve a lengthy process and a detailed checklist that may fail to capture some of your most important considerations. Instead, make sure the fintech’s long-term strategic vision aligns with your strategic vision, and that the partnership will serve your future banking needs.
One code base is better than custom code: Creating custom code carries risks. It’s time-intensive and difficult to update. It won’t scale or innovate at the speed that you might require. And it leaves little room for adapting as you go. Modern software-as-a-service platforms are built on a single code base, so every customer benefits from economies of scale. This is a major competitive differentiator that will help your institution keep up with the speed of innovation.
“Building technology is expensive, time-consuming and risky,” says Rayson, adding that Encore was able to achieve immediate return on investment on a product that was engineered “the right way to start driving deposits on day one while creating efficiencies on the back end.”
In the battle for new business, the future belongs to the agile. You’ve listened to your customers. You’ve prioritized your digital offerings. And you’ve created a road map for digital transformation. Now it’s just a matter of choosing the right partner.
“We’re an organization that’s only three years old, and we’ve grown from $120 million in assets to almost $3 billion during that short time,” Rayson says. “I think we all feel incredibly proud of that—and want to use this moment of recognition to keep that momentum.”
Nathaniel Harley is co-founder and CEO of MANTL
For more on the trends we see playing out this year, we encourage you to download the BAI Executive Report, Addressing banking’s key business challenges in 2023.
