2019 Community Banking Trends and 2020 Predictions

Teslar Software Shares Insight on 2019 Community Banking Trends, 2020 Predictions

Fintech comments on AI, battle for deposits, open banking and the branch

The battle for deposits remains competitive.

The fight for deposits has become increasingly challenging for community financial institutions. They are now not only competing with large national institutions, but also with fintechs, major retailers and tech companies. Money that used to be stored in deposit accounts is now scattered across a variety of accounts and channels, many of which are not secured by the FDIC.

While many began the year assuming 2019 would bring a rate increase, it has actually been a year of three rate cuts, causing a dramatic swing in interest rates. This shift has prompted community financial institutions to reevaluate their deposit and rate strategy. However, it’s a delicate balance – institutions want to maintain competitive rates, but they also must be careful not to overextend themselves, as the future is uncertain. Savvy institutions are continuing to prepare and strengthen their deposit strategy by focusing on their core differentiators – maintaining good relationships with strong trust and focusing on better serving small businesses.

The role of the branch continues to evolve.

Community financial institutions’ branches are becoming more full-service. The look, feel and even purpose of the branch is changing; they’re increasingly becoming more of event destinations, meeting places, centers for community outreach and starting points for lenders and CRMs. Institutions are hiring more universal bankers instead of designating specific roles such as lenders, FSRs or tellers.

A trend that will only continue is that bankers are spending more time in the field instead of at their desks or in a branch. Bankers are meeting customers where they are, allowing for better, more convenient customer service. This has become an especially important aspect of small business and commercial lending, as these borrowers are notoriously busy and on the go.

Community financial institutions continue to face the pressure to be more ‘open.’

Open banking became a trending buzzword in 2019, but there remains a lot of chaos around the concept. There are various definitions for what it means to open, and the open philosophy is seen through different lenses for core providers, vendors and consumers with unique impacts for each segment. Over the next couple of years, we’ll continue to see community financial institutions fight for tools that will allow them to more seamlessly integrate technology from multiple vendors and to provide customers with greater options. Banking is no longer a commodity; with openness comes more competition, so financial institutions must ensure they’re delivering an optimal customer experience.

Institutions are attempting to strike the right balance of AI and humans.

Community financial institutions are continuing to experiment with how to best balance humans and automation. As large national institutions have implemented AI and machine learning across the board at their banks, community institutions have a big opportunity around small business lending. When small business owners apply for their first loans, something that directly impacts their families’ livelihoods, they will typically prefer and be reassured by human interaction. Humans can say yes in instances machines and automation would otherwise say no to riskier businesses.

While AI and machine learning certainly have their role and can significantly boost efficiencies by automating previously manual and cumbersome tasks, institutions must be careful not to over automate and remove the human element. Community financial institutions stand apart because they are relationship driven, and too much automation risks eroding that differentiator.

Joe Ehrhardt, CEO and founder of Teslar, commented, “It’s been a busy year for community financial institutions; innovation continues to occur at a rapid pace and the ways institutions serve their customers are evolving. As community financial institutions prepare for 2020 and the challenges it might bring, they must focus on boosting efficiencies and streamlining process in order to scale. If community banks can minimize time spent on manual tasks and focus more resources on what really matters – making customer interactions more meaningful – such a dedication will allow them to better compete.”