The Risk of Doing Nothing 


Betting on emerging technology for the digital age.

By Michael Carter

It’s no secret that most bankers are logical people; our industry is full of methodical, meticulous thinkers. Such careful thinking tends to be accompanied by a higher level of risk aversion than is typical in many professions. That’s a good thing since this is the group of professionals that consumers trust to safeguard their money.  However, sometimes it is difficult to understand where the real risks lie, especially in areas such as digital banking.

Today, we live in a world where consumers no longer compare digital banking experiences between institutions, but rather judge all digital interactions by the same criteria. This means that financial services are also competing with the digital, personalized, convenient experiences of the Amazons of the world. In order to compete, banks must ask themselves if they should aggressively invest in digital innovation to transform the digital banking platform or stay where they are to “wait and see” what happens. Some bankers think the safer choice is most always to wait and see, and many times this is reasonable. However, an increasing number of financial institutions are realizing that staying put in digital banking is actually the riskiest option of all.

According to a recent JD Power survey, the large, national players are outperforming regional and mid-sized banks in terms of customer satisfaction. This is the first time larger players have gained this competitive edge since the survey began a decade ago. The shift is occurring because these larger institutions have a plan, and they’re willing to “put their money where their mouth is,” investing the time and necessary funds to make that plan work. Many of them are making significant investments and taking risks to win the competitive advantage. Most of them realize that this is, in fact, the less-risky course.

While national players have the budget and personnel to handle a large-scale innovation project internally, many of their regional and community institution counterparts do not. Instead, these banks must take a risk and partner with younger, more-agile fintech companies. Staying with a large legacy incumbent providing disparate online and mobile banking products may seem like the safer choice, but it’s actually the riskier option for the long term, as consumers grow increasingly less patient with inferior digital interactions. These emerging companies understand the increasingly digital nature of all services and can provide innovative features that the legacy providers simply do not have the flexibility to deploy.

This is not to suggest banks behave irresponsibly. Not all emerging tech companies are created equal. Financial institutions must carefully weigh their options and practice proper due diligence before selecting a partner, since this may be one of the most important projects a bank will undertake relative to its future ability to compete successfully. Vigilant planning, sufficient budgeting and an acute understanding of where the bank wants to be one, five or even 10 years down the road is imperative. If they successfully vet and decide to take a chance on a fintech partnership, the bank might just gain a significant competitive advantage.

One financial institution that has already realized the importance of a strategic plan for investing in its future is Memphis-based First Tennessee Bank. Kevin Karrels, senior vice president and digital channel strategy executive at the bank, explained that in 2015, they decided to research digital banking vendors in the United States hoping to find a partner to provide them with the foundation they needed to implement their digital strategy for the next decade.

After conducting an extensive review of the industry’s digital offerings, FTB determined that its business and technical strategies most closely aligned with one of the newer digital banking vendors that offered a complete set of banking services, architected for timely integration, accessible from any digital device and powered by a data analytics capacity that helps personalize interactions with customers. Because of this partnership and its commitment to digital innovation, FTB will be able to reduce costs and complexity while offering a consistent, personalized user experience for its 438,000 digital banking customers.

“Having a consistent user experience regardless of device and one that can be personalized was paramount,” Karrels said. “Our mission is to be the best at serving our customers, one opportunity at a time, and no channel is more vital to being able to deliver on that promise than digital.”

IBERIABANK, a regional Southeastern bank headquartered in Lafayette, La., with more than $19 billion in assets, also understood the value of strategically aligning with a younger innovative startup. The bank bases its reputation on providing customers with exceptional value-based service at every point of contact, so choosing a partner wasn’t something it took lightly. The bank went through an exhaustive evaluation of digital banking providers, ultimately selecting a solution that was highly configurable, offered a modern architecture and allowed the bank to offer customers a way to more easily access and manage their money.

According to Robert Kottler, executive vice president and director of retail and small business banking for IBERIABANK, “Our digital channels have increasingly become more important points of contact with our customers, and we wanted a solution that would help them manage their finances more efficiently and effectively. Our new solution not only offers a superior user experience, but it is also built on a platform that will allow us to respond to new trends and expand our digital services. This platform, hosted in a secure and easily scalable environment, will enable us to strengthen our competitive position in digital banking for years to come.”

IBERIABANK licensed the digital banking solutions offered by their vendor of choice for both consumer and small businesses, providing a comprehensive set of digital services that simplify the lives of families and provide businesses access to financial services they need to succeed.

“Digital banking must be consistent, efficient and innovative across all devices and channels, offering customers superior ways to move money, pay bills and check their balances,” Kottler added. “Our new digital banking solution will do just that.”

Banks don’t care for risk and that is understandable, given their responsibility for the livelihoods of consumers and businesses. Yet, with digital banking, the greatest risk is staying the current course, especially for community and regional banks. These institutions don’t have the resources of the large national players and must look to younger, more-nimble companies to help them better serve consumers by providing them a consistent, seamless platform, mirroring the experiences delivered by the Amazons and Googles of the world.

Taking a calculated chance on younger fintech players may be a bit uncomfortable for some bankers, since buying from the legacy providers in the industry has been a more common practice. However, to win the digital revolution in financial services will require that most institutions do just that.

Michael Carter is market whisperer at D3 Banking. For more information, visit

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