Community financial institutions in North America play a crucial role in the economy, and are starting to take steps to adopt banking technologies, eliminating reliance on manual processes. Finastra, a leading financial software provider, conducted a survey in partnership with East & Partners to assess progress towards process automation and future adoption plans of these institutions. The survey revealed that while some automation efforts have gained traction, there is still room for improvement.
Currently, 59% of community financial institutions have automated document management, and (24%) have automated customer relationship management. Across the board, there is a clear opportunity for these institutions to invest in open banking systems that accelerate client onboarding and facilitate integration with third-party fintechs offering solutions for regulatory compliance.
The survey highlighted that digitalization levels vary widely among North American community financial institutions. On average, only 29% of commercial and consumer lending digital workflows are automated, with the least digitized institutions achieving around 22% automation. However, the top quartile of institutions surveyed have automated over 60% of their processes, demonstrating the importance and value of technology enhancements to frontrunners in the sector.
Community financial institutions are truly realizing the benefits of teaming with financial technology (“fintech”) organizations for solutions that optimize their core systems. These institutions see the potential for operational cost reduction (cited by 27%), access to broader tech expertise (18%), and a cost-effective and simpler way of deploying new technologies (16%). Improved compliance adherence (15%) also emerges as a motivating factor, suggesting a market for fintechs specializing in regulatory technology.
Customer experience remains a key priority for community financial institutions in the lending and credit market. When selecting fintech partners, institutions prioritize factors such as the impact on client retention and acquisition (73%) and the least disruption to operations and customers (65%). Other considerations include the fintech's forward technology path (40%), ease of onboarding (37%), and previous implementations with similar-sized institutions (26%).
The survey found that investment decisions in technology are primarily driven by the CFO's office (63%), followed by IT (43%), the back-office (27%), and Lending Operations (8%). While IT and the business play influential roles, the final decision on technology investments typically rests with the CFO.
Collaboration between financial institutions and fintechs is crucial for innovation. Fintechs have brought about significant changes in the industry through new business models and efficient, transparent, and customer-centric technologies. By teaming with fintechs, financial institutions can access the latest innovations and expertise in areas such as data analytics, artificial intelligence, and blockchain. This collaboration can lead to an efficient and effective financial services industry, offering customers a wider range of tailored services, along with a bump to revenues and net earnings.