Community banks are facing a unique set of challenges when determining business strategy. High interest rates have led to reduced loan demand, and while this has caused bankers to reconsider their priorities and budgets, long withstanding issues of talent shortages and industry disruptors vying for market share still demand attention.

Although it’s tempting to overlook these concerns during high-demand periods, this slowdown presents an opportunity to evaluate and optimize processes.

It’s a lot of pressure to solve existing industry challenges and stay competitive with economic uncertainty and shifting consumer habits. Ensuring banking operations and processes are running as efficiently and seamlessly as possible can help community institutions emerge from a downturn stronger than ever. Here are some recommendations on where to start.

Reinforce Your Foundation

In a volatile market, business strategies usually take a “defense” approach--lowering credit risk in underwriting, reevaluating new product offerings, and optimizing staff. Before jumping into defense mode, institutions should instead start by evaluating their lending foundation and whether they are ready to build on top of it.

During a NASCAR race, maintenance is necessary to win, but drivers don’t try to change their tires and refuel while driving at full speed. They have to take a pit stop. This period of slowed loan growth is an opportune time for that pit stop--prioritize building a solid foundation, optimizing structural processes, and getting operations, credit admin, and loan ops teams running smoothly. Only then will it be effective to start layering technology where needed.

Institutions are often purchasing technology to fix a symptom and not the root cause. Gaining a clear pulse on processes and operations at the foundational level will help determine where the biggest pain points lie and which solutions to prioritize.

Think Holistically When Looking into Tech

When exploring new technology and partnerships, it’s easy to get dazzled by flashy new tools and lose focus on long-term goals. It’s crucial to evaluate how a tool will impact both front-end and back-end processes and if your foundation is solid enough to get the tool up and running smoothly. 

Any solution you choose should integrate smoothly into existing processes and systems. If an institution purchases a new LOS, for example, that streamlines front-end processes like onboarding and loan origination, but they haven’t built the back-end foundation that can handle this type of tool or the volume it will generate, the bank could unintentionally create new challenges and inefficiencies. It’s like buying a new Ferrari but keeping the engine from your ’95 Corolla in it--the user experience is now clunky and inconsistent.

It’s also key that banks identify the right partner. How the vendor works with the bank is as important as the technology itself. While institutions often have a checklist for desired features and capabilities, few inquire about the vendor’s implementation support and rollout plans. In a good partnership fit, the vendor understands your bank, change management, and collaborative efforts to effectively launch new technology. 

Community banks have proven their resiliency time and again. By taking advantage of the opportunity this slowed loan growth affords, community institutions can ensure their foundation and structural processes are optimized for success in all market conditions.

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