Community banks are unlike any other financial institution. They truly understand the individual needs of small businesses and the community members they serve, and make personalized lending decisions based on that knowledge. But to support such a hyper-localized system, they have to focus on the community bank technology trends that will have the most meaningful impact on their customers.
It’s not about upgrading to a state-of-the-art system that can handle millions of accounts and loans; it’s about leveraging technology to provide the best possible loans and services for clients who depend on you. To help, we’ve created this quick guide to the top community bank technology trends of 2020.
5 Community Bank Technology Trends You Need to Know
Many state-of-the-art, out-of-the-box banking systems aren’t a great fit for community banks. They are either too costly or contain features that a community bank will likely never use. This is why it’s important for community banks to consider which community bank technology trends they want to embrace.
A dedicated loan origination software (LOS) or other personalized banking system is the best choice for community banks. You can select exactly which features you want and configure the platform based on your staff’s workflow. This is also a more cost-effective option, since you’ll only pay for what you use.
Which must-have technology features should you include in this software? There are five community bank technology trends that are essential for 2020:
- Automated decisioning
- Big data analytics
- Artificial intelligence (AI) and machine learning
- Cloud banking compliance
- End-to-end loan origination software
With all of these features, you’ll streamline your lending process, provide better customer support, and significantly reduce the risk of defaults and delinquencies. Here’s what each trend does for you and your customers:
#1: Automated Decisioning
If you’re still structuring all of your loans manually, you are falling way behind your competitors. One of the most important community bank technology trends is the transition from manual decisioning to automated systems.
Using historical data, advanced algorithms, and configurable rules, a modern LOS can automatically approve or deny a loan application within minutes. This is a task that would normally take a loan officer a few hours to complete. In some cases a customer may not hear a decision on a loan until a few work days have passed.
When you automate these tasks, you:
- Reduce human error
- Get your customers a decision as fast as possible
- Attract customers who need emergency loans right away
- Improve operational efficiency
- Free up your loan officers’ time so they can focus on personalized customer care
As a customer-first banking institution, community branches should delegate as much work as possible to computers so that they can spend more time with the people who use their services.
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#2: Big Data Analytics
Big data isn’t just for large banks anymore. Community lenders are also collecting more data to compete against federal banks and offer customers personalized loans.
However, big data analytics come with challenges. You need a system that cancollect and store large amounts of data securely. This data also has to be normalized and connected to the LOS before you can perform any in-depth analysis.
Thankfully, some of the most advanced custom LOS systems include big data governance and analytics as part of the package. These systems automatically collect both traditional and alternative credit data, as well as any other pertinent information about each customer. From here, the system normalizes the data and keeps it stored securely in the cloud. Community banks can then decide what to do with the data. They can:
- Make a decision on a loan application
- Calculate risk to structure a new loan
- Keep track of delinquency and default rates
- Create visualizations of the data to drive future decisions, and more
#3: Artificial Intelligence and Machine Learning
AI and machine learning take big data analysis to the next level. One of the fastest-growing community bank technology trends of 2020 is the use of machine learning algorithms to predict the outcome of different loans and lending strategies.
Machine learning and AI find historical data patterns that may apply to future scenarios. This is a more advanced form of predictive modeling because it actually learns from each prediction. If the algorithm predicted a certain outcome that turned out to be slightly off, the system will take this error into account when it makes its next prediction. It is constantly evolving and improving.
This is particularly important for community banks because they can dive deep into the data and offer customers loans that other financial services providers might avoid. With more reliable predictions about customer behavior and loan outcomes, you can become a hero to the community by being a better lender to everyone.
#4: Cloud Banking Compliance
Nearly all banks, including community banks, have transitioned to digital lending to some extent. Customers expect to have access to information about their loans available online. More customers also demand instant answers to loan inquiries via an online application portal.
To provide your customers with this convenience, you need to improve your cloud security. The best way to do this is to hire an LOS provider that takes data security seriously and that follows all state and federal compliance regulations. The benefit of hiring a provider to handle this for you is that you don’t have to continually check that your system is compliant. The provider will ensure that you get all of the necessary security patches and avoid expensive non-compliance fines.
#5: End-to-End Loan Origination Software
Our last community bank technology trend for 2020 is end-to-end lending and banking platforms that include all of the features above, as well as call center, auto loan and lease care, collections management and remarketing services. Rather than having multiple systems or vendors for each task, which is costly and complicated), seek out a provider that will provide each of these services for you. These services are especially valuable for smaller and mid-size community banks that might not be able to afford them on their own.
This also ensures that each piece of the puzzle fits together perfectly. You won’t deal with issues like incompatible files or security vulnerabilities. With an end-to-end system, everything works in harmony and all data is encrypted in the cloud. You also know exactly who to contact if you have any troubleshooting questions.
Focus on These Important Goals in 2020
Ultimately, following these five community bank technology trends isn’t about looking tech-savvy or modern (although this is a great way to attract customers). The true goal of these upgrades is to improve the services you offer. Each of these trends will:
- Make your customers feel more supported
- Reduce your institution’s financial risk
- Streamline your workflow and operations
- Protect your institution from banking fraud
- Predict where the banking industry is headed
Your customers deserve the utmost care. With these tools, you’ll help your community grow stronger.
defi SOLUTIONS is a state-of-the-art LOS provider that offers configurable lending services and outsourced services to community banks. We understand how important customer service and security is, which is why our system is specifically designed to protect your institution and customers from risk. If you’re ready to update your LOS or banking system, contact our team today or register for a demo.
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