Accelerating the need for digital transformation, the past year brought on new hardships and worries. Through this, banks recognized the importance of innovation in driving business results, deepening client relationships and attracting new customers. Adapting to the changing environment, the industry stepped up to the challenge. By introducing new technology and solutions that alleviated long-standing struggles, banks improved the financial wellbeing of account holders and their businesses. Moving into 2021, banks are continuing to search for innovative and differentiated ways to best serve their customers’ needs.
However, when tasked with identifying the best products and solutions that will improve the banking experience, many bankers are unsure of where to begin. With so many products saturating the financial technology industry, it can be a time-consuming and intensive undertaking for staff to simply find the value-add products that will meet the bank’s goals.
To help streamline this process, many banks are enlisting the help of innovation officers and forming innovation committees to find the solutions that will best meet their business goals as well as the needs of their account holders. Often, these innovation officers and committees attend various conferences, read industry publications and research various financial technology companies to uncover the leading technology that will provide instant value to their customers.
Still, this kind of approach can occasionally result in officers or committee members selecting a solution that does not serve their specific business goals or needs as they are swayed by overall popularity or recognition. When that occurs, it brings on fairly random results in both the level of innovation and business impact. To avoid this, bankers should consider new ways to find their perfect match. In addition, many banks can unintentionally miss the mark by selecting technology that is not useful to their account holders, resulting in an unused solution that is not applicable to the market.
A responsive approach to innovation
Knowing this, banks should determine a more responsive approach to these innovation initiatives. By considering the pain points of existing clients and current prospects, banks can more accurately identify the solutions thatsolve real problems. For example, a bank’s existing customer base may include commercial clients that are failing to consistently meet industry-specific, financial aspects of their businesses, such as struggling to stay compliant with local laws governing security deposits. The bank canthen serve as a vital partner by implementing supporting technology that digitizes and streamlines the process, saving time and effort for the client.
And often, the issues that are the most obvious to executivesare not the core problem. For instance, those same commercial clients may not express their struggle with compliance without first being prompted. It is important that banks talk to these account holders and spend time with customers prior to determining these issues to avoid missed business opportunities.
This type of approach to innovation is purposeful, proven and has built-in business results as it is a problem looking for a solution, rather than a solution looking for a problem. In addition, by considering actual market demand, it eliminates the risk of acting on an internal idea that drives no true results.
Options to innovate
Once the responsive approach has identified actionable pain points, a bank has various options to innovate. The first option is to select a technology company with an already-built solution that can be licensed. By searching for asolutionthat is specific to the needs of their existing and prospective customer base, banks can expect to see a better return on investment.
If no solution is currently available that can solve the identified pain points, banks then can choose to develop a new product themselves. However, if a bank does not have the time or staff to develop an in-house solution, it can be a timely and costly endeavor. To overcome this lack of resources, banks can choose to partner with a financial technology company to help build their much-needed solution, guided by the expertise of the selected development partner.
Another option is to combine these approaches by identifying and partnering with other financial institutions that share the same pain points and market opportunity, forming a development group. Together, the group can enlist the help of afintech company, joining forces to solve a problem effectively and efficiently. This can be a powerful partnership that leads to great strides in the overall customer experience and satisfaction.
For example, ZEscrow, a completely digital commercial escrow solution now in beta testing, was developed in partnership with ZSuite Technologies and five community banks. Because the community banks identified the pain points resulting from conventional escrow and subaccounting processes, the development group partnered with ZSuite to build a more convenient, web-based application.
For most U.S.financial institutions,joining together is a much more economical way to accomplish this as the cost of a development project can be significant compared to the typical absorption of cost by an individual financial institution. Another benefit to these development groups is that most financial institutions do not have the type of resources needed to develop sophisticated software as a service (SaaS) technology.
The bottom line
It is crucial that innovation efforts be targeted to determine the best solutions for the bank and its customers. In addition, with a structured approach to innovative technology discovery, banks can save the time and efforts of their staff, without losing the effectiveness or validity of the technology. By identifying real, frustrating problems of current and future account holders, banks can locate the best means to innovate through partnerships with fintechs or development groups.
Nathan Baumeister is CEO of ZSuite Technologies, a financial technology company that aims to power community financial institutions with digital escrow products for specific commercial verticals that can be offered to their clients. ZSuite’s products, ZRent, ZDeposit and ZEscrow, streamline collection of recurring payments and automate the management and compliance around multi-use escrow subaccounting processes.