Top 4 New Year's Resolutions for Banking

The New Year provides us with an opportunity to consider where we are in our lives and where we want to go. Organizations undergo similar exercises this time of year, determining strategies, creating plans, and building budgets.

Our recent work with leading community banks and credit unions has provided insights into what’s on their list of resolutions for 2023. Instead of a long list of tactical issues, we want to share what underlying principles these organizations have determined will guide their actions in the coming year.

Play to win, not to avoid losing

We have all witnessed it. The underdog is leading the heavy favorite. As the game or match advances, the underdog shifts from playing to win and starts playing not to lose. This switch from a more aggressive style of play to a reactive, passive stance results in the underdog losing. In 2023, leading community financial institutions will continue to shift their mindset away from playing not to lose toward playing to win. This change in thinking will be a non-trivial exercise. These bankers face a challenge when deciding to play to win. The level of regulation in the banking industry creates an atmosphere of risk avoidance (playing not to lose) but is being disrupted (playing to win) by non-regulated entities. The community banks and credit unions that will successfully meet this challenge in the coming year will be those who partner with start-ups and emerging companies that offer technology that changes the game. These companies will not be as low risk as the legacy technology providers in the financial services industry. More institutions will find a way to mitigate that difference in risk and license technology that gives them a competitive advantage.

Create stretch goals for digital

According to the Oxford Dictionary, a “stretch goal” is “a deliberately challenging or ambitious aim or objective.” Community banks and credit unions likely would identify improving their digital experience as a stretch goal. However, a recent report surveying the digital experience of some of the largest community financial institutions indicates that not to be the case. Most institutions across the industry spend the majority (>75%) of their time and money maintaining the status quo. Add to this percentage new projects involving upgrading or replacing an aging legacy system, and a remarkably small amount of time and money are left to improve their digital experience. Triaging all these competing priorities often leads to an organization having to be satisfied with a digital experience near to or as good as the banks or credit unions they consider competitors. In 2023, some community financial institutions are breaking free of these restraints, creating stretch goals for digital that are tied to compensation and bonuses. Some also are revamping their org chart and how they budget to support these goals. The result will be digital experiences that stand out from the herd to satisfy end users and even wow them.

Spend to differentiate

Bankers often say, “We all sell the same thing,” and lament their inability to differentiate themselves from others. Yet in 2023, the most successful community banks and credit unions will differentiate themselves through segment-of-one digital interactions as unique as the individual using that channel at that moment in time. Three credit unions will have already achieved this by the close of 2022, utilizing big data and artificial intelligence to push dynamic content hyper-personalized for each individual member in real time. Attributions such as geography, age, gender, products used, products not used, and external relationships with other institutions are being used by these credit unions to go beyond the transactional to the relational. Other community financial institutions are already considering similar project implementations in the first half of next year.

Pursue “X as a Service” value adds

Whatever the latest buzzwords in banking tech, the sure bet is that they will find their way to the websites of vendors who serve community financial institutions. One of the clearest, most disingenuous examples of this phenomenon is the use of the word “FinTech” to describe a multi-billion dollar software provider in our industry. Cloud computing, AI, big data, digital wallet, SaaS and many others have made the rounds. In the coming year, banking winners will shift their focus from product bundles offered by core providers and digital banking platform companies. They will be looking instead for emerging companies with state-of-the-art SaaS-based platforms that allow banks and credit unions to plug and play new technology in a matter of weeks, not months. These providers will have quantifiable offerings that move the needle on the top and bottom lines in the short term.  But institutions pursuing this route will need to beware the buzz words designed to distract them on the journey.

Individuals are not particularly good at making good on their New Year’s resolutions.  Within organizations, however, the battle to maintain them can be aided by teamwork and the right balance of processes and freedom to create.  For community financial institutions, it is imperative that they utilize these organizational elements in 2023 to make good on these four 2023 resolution.