The pandemic undoubtedly accelerated the longstanding trend of digital adoption in all industries, especially banking. Socially distant workplaces and rapidly evolving customer expectations have driven banks and credit unions to adopt and maintain cutting-edge technology at unparalleled speed. As financial institutions continue to expand their high-tech capabilities into 2021, the pandemic will be considered a major turning point in banking’s digital transformation.
Under an extremely tight and externally driven timeline, banks and credit unions were forced to implement and manage two of the largest projects ever undertaken, the transition to a completely remote workforce and the Paycheck Protection Program. Through this challenge, financial institutions that were successful realized they were more capable of rapid change than previously thought. Implementing year-long projects in a few months, the speed at which changes were made was a testament to the flexibility of their workforce.
As we look toward 2021, it’s likely that banks and credit unions will hold their partners and vendors to a higher standard. With many banks and credit unions implementing digital technology in record time and seeing their employees adjust to exclusively remote work, financial institutions will begin to expect partners to meet their increased expectations regarding speed and support.
Technology vendors have often desired for financial institutions to make decisions faster and be more agile. However, since the pandemic, financial institutions have broken down barriers and realized the speed at which they can move. Due to this, technology vendors could be caught flat-footed with the increase of client expectations.
In 2020, especially before and during the COVID-19 pandemic, banking as a service (BaaS) was positioned as one of the banking industry’s future strategic paths. The goal of many financial institutions was to become a banking platform that technology companies could use to package up banking services because of their charter and technology within the core; however, this trend will continue to deliver great strategic advantages for some banks in 2021.
Serving as a banking platform for sophisticated, tech-centric companies can be a difficult endeavor for many community financial institutions based on the high level company standards. Community banks and credit unions may be overlooked by larger platform providers due to the nature of their size and scope. In addition, it is likely that there will be a limited number of banks that successfully make the transition. In this case and many others, financial institutions will instead look toward vendors for software as a service (SaaS) technology that the financial institution can offer to their clients as a value-add service. Community banking providers already have exceptional customer relationships, and service partners can add value to that. By supplying value-add products to financial institutions directly, SaaS solutions can help strengthen existing relationships and attract new prospects.
With SaaS providers that serve specific customer needs, financial institutions will be able to stand out and compete in the future. Differentiated offerings allow banks and credit unions to dive deeper into specific trends in the technology landscape rather than relying on one-size-fits-all general offerings. These niche solutions can solve real problems for consumers that they never were able to fix alone, making them feel empowered and more likely to remain with a financial institution that proactively meets their needs. It also allows providers to unlock new potential and serve as much more than a CRM system.
Looking ahead to next year, financial institutions will continue to move toward all-digital capabilities and utilize SaaS-based solutions more frequently. With growing expectations and needs, fintech providers must continue to develop innovative offerings that distinguish banks and credit unions from their competitors and help them best serve their consumers.