How financial institutions can choose the right digital banking technology

Posted on

May 2, 2022

by

Carrie Shunia

The accelerated pace of digital banking is forcing financial institutions of all shapes and sizes to rethink how they interact with account holders. But for some financial institutions, this shift can be a challenge. There are an overwhelming number of technology products available, and managing risks can be difficult.

Why financial institutions tend to be conservative

Banks and credit unions typically have a risk-averse approach towards new technology, especially when it comes to smaller financial institutions, and can be a bit shy about jumping in with something new. There are a few reasons for this.

The first obstacle is the financial technology (fintech) market itself. This industry is growing at a fast pace, and with approximately 10,000 fintech startups in the U.S., there is always a new product to discover. The result is a crowded marketplace with a dizzying number of options. And because a lot of these products are recent, there is limited data available to assess benefits, costs and risks.

A major financial institution can take risks, but smaller banks and credit unions can’t afford to make a bad tech purchase. On the other hand, developing their own solutions isn’t realistic either. It means small and medium organizations have to look for a third-party solution that meets their needs and budget. This often requires compromises and tough decisions.

Because choosing a tech product is such a major commitment, most banks and credit unions have a slow procurement process, which creates an additional barrier to innovation.

A customer-first approach to adopting technology

Financial institutions can gain the momentum they need to innovate by adopting a customer-first approach. Looking at how a product impacts and improves the customer experience can help banks and credit unions make the right decision.

While the fintech market remains crowded, the following strategies can help with finding the right product:

•          Some organizations could benefit from a cultural shift to change how they approach risk.

•          Support is important. Getting different teams involved in the tech buying process can help. It will also result in a better understanding of the needs that exist across the organization.

•          Financial institutions should prioritize tech that transforms the user experience. While most already have a banking app for mobile-first banking, think about how you can take that to the next level to drive engagement further. Banks and credit unions can also prepare for the future by investing in artificial intelligence (AI), voice banking, or the Internet of Things.

•          It’s important to adopt best practices for evaluating vendors. Start with examining compliance, security, support and cost.

Financial institutions can get more out of the technology they invest in by prioritizing the user experience. Products that improve satisfaction, engagement and loyalty can become a differentiator.

Security and privacy is another key area. Financial institutions need to build consumer trust by adopting the right technology solutions to protect data.

Innovation is easier if there is a process in place to assess needs, review tech products and implement new solutions. Once a bank or a credit union has a go-to framework in place for innovation, it becomes easier to bring in new products and get more out of tech investments.

For organizations that don’t have an innovation process in place yet, MSU Federal Credit Union has developed a framework to support technology adoption with the Lab at MSUFCU. The purpose of this platform is to help credit unions connect with fintech vendors. The idea is to mitigate risks through pilot programs to test different fintech solutions.

Start innovating with Larky nudge®

Larky nudge® is one of the solutions financial institutions can test through the Lab at MSUFCU. This engagement platform helps strengthen connections with customers and members through personalized mobile notifications. Larky nudge® has a proven track record of successful implementation with several financial institutions.

Contact us to learn more about how we work with the Lab at MSUFCU and start innovating!

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