Two community banks embrace the digitalization trend with new products, investments

Two local community banks are following the industry’s deeper push into digital banking that has accelerated since the start of the COVID-19 pandemic last year.

Independent bank launched a new app called ONE Wallet for consumers and corporate clients, while ChoiceOne Financial Services Inc. invested in the venture capital fund JAM FINTOP Banktech LP which invests in financial technology startups, or fintechs.

With the $ 250,000 pledge to JAM FINTOP Banktech, Sparta-based ChoiceOne seeks to stay abreast of emerging financial technologies as digital banking evolves, said Adom Greenland, COO of ChoiceOne .

JAM FINTOP Banktech, a $ 150 million investment fund, partners with community banks in the United States to invest in fintechs. The fund currently has 67 partner community banks nationwide who are sponsors.

As an investor, ChoiceOne can gain insight into the technologies supported by JAM FINTOP Banktech and get involved in reviewing early-stage innovations that fintechs develop for the market.

The investment represents a long-term game in ChoiceOne’s digital strategy that “puts us ahead of our competition and allows us to keep pace” with innovations, said Greenland, who sits on the Innovation Committee of JAM FINTOP Banktech.

“Something like this allows us to have another foot in the door with exciting fintech companies, and we’re connecting with other like-minded banks across the country,” he said. “We’re not necessarily looking for something specific, but we know it when we see it, and you have to open a lot of doors before you find the right solution for your bank and your customers. We would have a look that no one else would because of our relationship, and you can’t find these companies unless you look for them. You have to enter this space.

Greenland added that investing is a way for banks like ChoiceOne to “get exposure to companies across the country doing some really interesting things in the fintech space that we frankly wouldn’t have exposure to otherwise.” .

Venture capital-backed startup fintechs have generally passed the proof of concept stage, have innovations that are being used by a handful of banks and need help to “scale or refine their product”, Greenland said.

ChoiceOne has already partnered with early stage fintechs, including those based in Detroit Autobooks Inc. which provides small business invoicing, payments and an accounting platform for online banking. ChoiceOne added Autobooks when it upgraded its online and mobile banking platform in mid-2020.

“We had to do something”

As ChoiceOne searches for the next fintech company through its commitment last spring to JAM FINTOP Banktech, the Ionia-based independent bank launched a brand new digital banking platform in late May.

Independent Bank’s ONE Wallet app for online and mobile banking offers business customers more features than ever before, including faster bill payments and money transfers, real-time views for transactions debit and credit, and easier ways to open new accounts, apply for loans and access credit cards.

An enhanced version of the app, ONE Wallet +, offers a personal finance management and budgeting tool that allows users to track their spending and can link to apps for their credit cards, retirement accounts, and advisors. financial.

ONE Wallet + “allows our clients to monitor all of their finances in one place and provides budgeting and expense analysis tools,” President and CEO Brad Kessel said in a recent conference call with analysts to discuss quarterly results. ONE Wallet + has experienced a “very high adoption rate,” Kessel added.

“As we move forward into the second half of 2021, we will continue this journey of digital transformation by implementing many elements of day two,” he said.

Russ Daniel, independent bank executive vice president for retail banking, said the digital platform offers users the next generation of mobile and digital banking with more features, better functionality and “one stop shop. unique for their financial needs “.

Independent Bank previously had a legacy software system and digital banking platform “that we didn’t think was in sync with the industry,” Daniel said.

The bank switched to a brand new digital banking platform that it bought from a financial services technology company based in Brookfield, Wisconsin. Fiserv inc. which was personalized for Independent, he said.

The ONE Wallet platform provides the flexibility for continuous updates, making it easy for the bank to stay abreast of new digital banking technologies and capabilities to meet market and consumer demands.

“We want to be able to leverage the development of fintech and apply it faster to our customers to help us continue to be more relevant,” said Daniel. “We had to do something to be more competitive, but it was also about putting a platform in place so that we could be more agile and faster as we move forward and find the next solution for our customers. “

“Catalyst for digitization”

The timing of Independent Bank’s move to ONE Wallet and digital banking platform change was a coincidence and came before the COVID-19 pandemic, although “we were really happy to be on this path” when the pandemic has hit and generated an increase in mobile and online banking, said Daniel.

“We just wish we could have done it faster,” he said.

The actions taken by ChoiceOne and Independent Bank reflect a continued and broader industry-wide push to evolve digital banking products as consumers migrate to mobile and online platforms.

The COVID-19 pandemic accelerated the trend when bank offices were closed for extended periods of time last year, causing customers to turn to digital services for their banking operations.

December 2020 Deloitte The report noted that, until the pandemic, “the promise of digital banking was never fully realized, largely due to customer reluctance and / or a lack of compelling digital solutions. But the pandemic has accelerated digital adoption across all products and demographics. “

“It is now quite clear that COVID-19 has acted as a catalyst for digitization. In addition to accelerating digital adoption, the crisis has also served as a litmus test for banks’ digital infrastructure, ”according to Deloitte’s 2021 banking outlook. “While institutions that have made strategic investments in technology have come out stronger, laggards can still get ahead of their competition if they take swift action to accelerate technological modernization. “

Growing adoption

Nearly half of the 200 industry leaders Deloitte polled for the report said their bank plans to accelerate the digital transformation of business services.

An annual technological survey carried out by an online commercial publication Bank director found that half of executives responding in 2020 indicated that “the digital channel is the most important for the growth of their bank”.

Virtually all of the 157 independent directors and senior bank executives surveyed reported an increase in the adoption and use of digital services due to the pandemic. Almost three-quarters of those surveyed said their bank has improved or plans to improve its mobile and online banking capabilities.

As part of the shift to digital banking, however, only 13% of respondents to the Bank director A survey in June and July 2020 found that their small business lending process is fully digital. Fifty-five percent of those surveyed said business customers couldn’t apply for a loan digitally. Almost a third of those surveyed said their small business lending process was partially digital, according to the Bank director investigation.

Almost four in ten respondents said improving online and mobile offerings was among their top three goals for their bank’s technology strategy, and nearly two-thirds said modernizing digital banking apps was part of their strategy.

To this end, the West Michigan market leader Fifth Third Bancorp This month, the acquisition of Provide, a San Francisco-based financial technology company with a digital platform specializing in medical practices, was finalized. The acquisition “fits perfectly with our current strategic focus on digital activation,” said Greg Carmichael, chief executive officer of Fifth Third, during a phone call with analysts in July to discuss the results of the second. trimester.

Cincinnati-based Fifth Third had previously invested in Provide, which has made more than $ 1 billion in medical practice loans since its launch in 2013. Provide approves and closes loans “about 70% faster than ‘a typical lending process in this market,’ according to Fifth Third President Tim Spence.

TO PNC Bank, which is among the market leaders in West Michigan, Chairman and CEO Bill Demchak told investors in July that the bank is “80% of where we would like to be in terms of what I would call simply a modern platform across everything.

“I think what’s going on with technology later on is a lot more about customer-centric technology and the ability to compete effectively in the new fintech ecosystem and where the payments go and stuff,” said Demchak. “We’re going to invest hard in this. We have the core technology behind us to enable us to play in this space, but that’s where the fight is going to be. And I think this game is just getting started.

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