New innovations sparked by the Paycheck Protection Program will help lenders humanize their digital onboarding processes and apps.
The December launch of an open payments network built by community banks points to an industry investing in technology to keep local lenders competitive, industry observers say.
And some of these investments coming in the next year could include enhancements to digital onboarding, internal processes and artificial intelligence, with some of these enhancements coming out of bank collaborations.
“In the user experience – the front and center capability – community and regional banks are moving on par if not faster than the rest of the broad financial services industry to introduce these really innovative techniques,” said Sarah Biller, co-founder of FinTech Sandbox. “That’s a tremendous attribute to the banking industry that it is keeping pace with the expectations of its customers.”
For and By Community Banks
Collaborations to build technology have long been common with big banks – working together on solutions such as The Clearing House and Early Warning Services – and credit unions that share technology through credit union service organizations.
Community banks have started to collaborate as well, with a group of five banks, including Laconia-based Bank of New Hampshire, partnering with Massachusetts-based fintech ZSuite to develop an escrow banking product in May of last year.
A new open payments network called Chuck came out of Alloy Labs Alliance, a consortium of more than 50 U.S. community and regional banks, in December. About 10 of those community banks partnered with Payrailz, a Connecticut technology company, to create a payment system to compete with products like Zelle.
Biller expects that community banks in the coming year will also see back office and core technology enhancements. These will include another collaboration called JAM FINTOP Banktech, a $150 million investment fund that partners with more than 60 community and regional banks to help accelerate the adoption of technology.
“A lot of that innovation is happening in the plumbing of the banking sector,” Biller said.
Humanizing Digital Onboarding
The pandemic and the Paycheck Protection Program led to enhancements in the technology customers use to apply for accounts and loans online, and Biller expects community banks to continue to adopt innovative front-end technology.
Improvements to digital onboarding processes and apps will include a trend toward humanization, said Darryl Knopp, a senior director at predictive analytics company FICO. Beyond just personalizing the experience by acknowledging an applicant’s name or location, humanizing the process engages the user in a way that makes the application more intuitive, Knopp said.
While a service’s onboarding process does not need to provide complete transparency, he said, steps such as explaining why the applicant needs to provide a piece of information or identification could help reduce friction and the likelihood that a user will abandon the process. It could also give the customer more choices.
“Humanization is really creating this connection with people and engaging them, showing them that you care,” Knopp said. “A lot of what we’re seeing for trends in 2022 are investments to achieve some of this right, as well as still making sure that we’re using the right level of automation that people can get in and out of channels that they might want to get into – not everyone wants to go through a digital onboarding experience necessarily.”
With digital, rather than the branch, now at the center of banking, reducing digital friction has become key for improving the customer experience, Knopp said. He added that FICO research has shown a correlation between a positive customer experience and increased revenue.
Sometimes intuitive steps could lead to a longer process, Knopp said, but a conversational and compelling experience balances out the additional time.
Community banks and credit unions already have an advantage over other financial institutions in centering the customer and the customer’s experience, he added, and using this approach with digital banking apps and processes will bring value to the customer.
Another trend Knopp is watching for in 2022 is “responsible artificial intelligence.” With banks and other industries increasing their investments in AI and finding benefits for the data, Knopp said, institutions will be better able to explain the data and understand biases related to AI. He also pointed to growing opportunities in the coming years to combine human and artificial intelligence to add context to data.
