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April 2022

financial institutions are embracing innovation


Although the ability to chart a path to the future seems murky at best right now, there is optimism for the future of technology for financial institutions (FIs). Specific timing may be a moving target but plans for innovation remain key priorities, according to a recent Technology Capabilities Assessment by Jack Henry. 

Surveying nearly 175 bank and credit union representatives between mid-January and mid-April, the second annual Technology Capabilities Assessment provides a close look into future technology plans, highlighting which areas are influencing current and upcoming strategies. 

We already know that banks and credit unions operate in a very challenging environment with rapid advancements in technology, regulatory shifts, increased competition among non-financial institution rivals, and increased demand among digital-savvy consumers and businesses. 

One of the main points the Technology Capabilities Assessment brought to light is that in addition to the above-mentioned challenges, putting customers and members at the center of all digital experiences is paramount. In other words, meeting consumers and businesses at their moments of need in a personal, human way via digital platforms, while also improving efficiencies with technology, is crucial. 

The research focused on industry trends in six key strategic capability areas: 

  • Business Intelligence: Data is the greatest untapped resource for FIs. Even community FIs now have the ability to master new data sources and analytical technologies that were never possible before. Data allow FIs to move from being insight-driven to becoming action-driven in order to increase revenue and maintain relevance. Predictive analytics and machine learning represented the two biggest areas of interest in research and planning, with 79% of respondents planning to implement machine learning within the next two years. Data virtualization/dashboards were reported to be the largest area of development, early implementation, and testing. 
  • Digital: Digital banking is no longer an option, it’s a necessity. In these times of remote working and social distancing we’re seeing firsthand how banks and credit unions have stepped in with robust digital services combined with personalized service to guide and assist consumers and businesses in their greatest moments of need. Because of this, consumer financial guidance will be an important digital enhancement in the coming year, with 82% of respondents currently in the early implementation and testing phases. Digital-only brands targeting niche consumer audiences also reported high levels of interest, with many FIs in the planning phase. 
  • Lending: Digital lending platforms have come a long way since the days when consumers had to physically visit the branch to complete loan applications, calculate a payment, and print off copious loan documents. Single lending origination platforms now represent the biggest opportunity for growth for most FIs, while renewal management automation represents the largest jump in planned implementations. Yet underwriting using alternative data sources differs wildly among small vs. large financial institutions. A large number of FIs in the $10B+ asset size are already deploying this solution. 
  • Payments: The payments field continues to go through changes since The Clearing House (TCH) announced real-time payments (RTP) a few years ago, the first new payments rail in decades. Since then, many other vendors have gotten into the mix and spurred interest in both RTP and peer-to-peer (P2P) payments. Financial institutions are ready for change. More than four out of five respondents plan to implement real-time payments next year. P2P payments and mobile wallets show maturity as they lead in the developed/adopted category. 
  • Risk, Fraud, and Compliance: In today’s market, every FI wants to implement the latest tools and technology to ensure they can minimize risk and maximize safety and security for their customers and members. As account takeovers and anti-money laundering (AML) become more prevalent, FIs should continually assess risk, fraud, and compliance offerings to ensure they meet the modern requirements needed to combat all types of fraud. Technologies like artificial intelligence allow us to anticipate fraud rather than learn from it in hindsight. According to the assessment, enterprise fraud management stands out as an increasingly prevalent solution among larger FIs, with 73% of FIs between $5B – $10B in assets already deploying the solution. Predictive analytics for real-time fraud detection leads in types of early implementation and testing. 
  • Service and Support: The way FIs support their customers and members is changing significantly. That’s why it is more important than ever to include service and support at the top of our strategic planning. Digital tools and technology combined with human interaction, allow banks and credit unions to service their accountholders in the most personal ways at their moments of need. Deployment of text-enabled messaging/servicing is on the rise with 70% of financial institutions planning implementation within the next year. Virtual teller in branch/drive-up also leads in research and planning for many financial institutions. 

The current environment has impacted how we think about and interact with technology on a personal and a professional level. While timing remains unclear, you can be sure that this massive move toward digital solutions is only going to get more pervasive as we move beyond our current challenges. We will continue to keep a pulse on the industry and report back regularly. 

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