I’m a person who likes to make a positive difference in everything I do. This blog is no exception. Beginning with this first post, I’ll share honest perspectives, creative solutions—and even a few bold ideas—for middle market banks to achieve their strategic agendas and differentiate in the market.
For those who don’t know me, I lead Accenture’s financial services business in the Midwest. Over more than 25 years here, I’ve worked with some of the nation’s largest banks on everything from strategy development to back-office operations. Not only do I have deep experience with the majors, I know how to apply it to the middle market. I also know that you don’t need big bank resources to perform like one.
A David vs. Goliath moment
You don’t need me to tell you the last several months have been extraordinary for middle market banks. Facing the challenges of COVID-19, you were there for your customers when they needed you the most. You crushed it on the first round of Paycheck Protection Program (PPP) funding, where the majors struggled. Your success was a David vs. Goliath moment—a testament to the power of strong community ties and relationship-based banking. I haven’t seen anything like it in all my years in banking. And as difficult as this time is, you’re embracing it with a renewed sense of purpose.
The way I see it, this period is a defining moment for the middle market. By connecting with customers in crisis—from processing PPP loans to providing mortgage deferral programs—you generated goodwill and trust. It’s a 180-degree shift from where banks were after the Great Recession, when consumer trust in financial institutions hit an all-time low.
Now that you’ve had some time to reflect, here’s my question: What will you do next to deliver more positive outcomes for your customers—and for the business?
Three moves for middle market banks
Lately, a lot of our middle market clients have been asking: “What’s next?” Here’s what I tell them. You have an excellent foundation to deliver the outcomes you need to compete today and grow tomorrow. The trick is to balance your strengths—like relationships, locality and agility—with the right investments in new capabilities and ways of working. In this spirit, I recommend prioritizing three areas of investment.
1. Accelerate to cloud—now
Everyone working in the banking industry has heard the buzz around cloud. Banks of all sizes are talking about it. I couldn’t agree more that cloud is a critical business imperative. It’s a practical and cost-effective solution to help banks scale digital transformation, tap into advanced analytics capabilities and accelerate the modernization of data, infrastructure and applications. With cloud, the sky’s the limit.
Even so, misperceptions about cloud are preventing middle market banks from taking full advantage of its potential. I’ve heard them all. The cloud isn’t secure enough. The regulators don’t like it. Cloud is no cheaper than a mainframe. There’s no clear business case for cloud. When I hear these things, I respond with a reality check. Cloud is a critical enabler of everything that middle market banks want (and need) to do to compete today. Investing in it with a sense of urgency is not an option. It’s an act of survival.
2. Bring more humanity to digital
I’ve watched middle market banks invest heavily in digital in recent years—renewing core banking systems to create greater operational efficiency and deliver real-time digital customer experiences. But as important as these digital investments are, they mean little if they don’t work for customers and employees. In other words, whether it’s in the front office or the back office, digital has to be people-centered.
This perspective on digital transformation is often overlooked. It’s the human angle. The power of digital in the back office comes from human-machine harmony. Automation brings scale and agility while humans bring reasoning and empathy. It’s a one-plus-one-equals-three equation. And customers bristle at digital experiences that seem to lack humanity. Because as much as they value digital, they still crave the human touch.
3. Bend the cost curve
Middle market banks have always strongly emphasized cost and productivity interventions. The reality of the post-COVID-19 world simply raises the stakes. However, I warn banks against the knee-jerk reaction of cutting costs in a frenzy of slashing and burning. Not only can these approaches remove cost centers that banks need to compete and grow; what’s more, they rarely offer sustained savings.
Bending the cost curve is different. Banks that do this well substantially change the cost structure. This involves a strategic and surgical approach to taking costs out and reinvesting them in other areas. Think of it as spending money to make money. This virtuous loop of cost removal and reinvestment frees cash for key investments (think automation and cloud) and keeps costs low for when the economy rebounds.
I hope this blog has given you something to think about—and that it’s given you a sense of my passion for middle market banks. Over the next few months I’ll explore these areas in more detail. Please connect with me on LinkedIn to share any topics you’d like to read about in future blogs.