Accenture Banking Blog

Guest bloggers Alex, Devon, Eliza and Reagan—from Accenture’s Emerging Leaders Program—wrap up their two-part series on how a consortium model can help regional retail banks keep up with the tech acquisition capabilities of larger banks.

How regional banks can best get the innovation boost and growth value they need from participating in a consortium for fintech investment is two-fold: upgrade their core technology systems and empower their people and culture.

Evolve the tech stack

It’s no secret that current tech stacks at regional banks are outdated. Many still operate with core technology, running on mainframe systems that are often slow, unsophisticated and lack features from which banks can draw valuable insights. They are also costly to maintainupwards of 70 percent of their IT budgets per Accenture estimates, which detracts banks’ focus on next-generation technology. While the replacement of core technology enables banks to proactively prepare for the future, it is typically expensive and time consuming.

We see three smart strategies small banks can use in replacing—or at a minimum—finding a way to work around antiquated tech stacks:

  1. Start small
    To ensure success of a core replacement initiative, regional banks must start small in their efforts. An overarching program replacing the core system is unlikely to be successful, so the first phases of work should target small upgrades of key components. This could mean, for example, focusing first to improve the bank’s aggregator and online-origination capabilities.
  2. Define the roadmap
    In parallel to starting small, regional banks must develop a roadmap that outlines the full scope of work to make the change happen. A roadmap strategy might be to build targeted use cases while decoupling existing systems to reap incremental value that can help sustain the program for long-term success.
  3. Be selective
    Core replacement initiatives should look to draw on platforms that are cloud-based and have API technology. Doing so allows banks to facilitate partnerships with fintechs and other service providers. By evolving to an API-enabled tech stack, banks will be able to seamlessly integrate new technology and rapidly evolve their capabilities. In addition to facilitating the acquisition of technology, APIs also allow banks to white-label their own products and services to outside businesses.

Empower your people and culture

To successfully adopt new technology, banks need to support an agile culture and employ/retain top talent who reflect the intersection of banking and technology. It is just as crucial that executives understand and can defend tech initiatives, and that employees are properly trained and comfortable supporting multiple initiatives at one time.

To start the people and culture transformation, bank leaders should ask themselves three key questions—the answers to which will help them assess their readiness for change.

  • How agile is the bank’s organization? Previously, companies kept their IT department in a silo, isolated from the executive team and overall strategy. Today, IT is an integral component in carrying out a company’s increasingly digital vision to compete in the digital economy. It means, for example, that IT is part of product development conversations, helping to advance the way companies execute their technology enhancement plans.
  • What does the bank’s digital operating model look like? A bank’s IT team structure should be crucial layers that run horizontally to support and integrate into the larger organization. Banks need to consider the model that tech companies use to run their initiatives: in product teams with clearly defined leaders. These cross-functional teams need to collaborate throughout the entire product lifecycle. IT needs to be considered a partner of these product teams and be looped in from the start to be accountable and weigh-in throughout the process.
  • How high of a priority is the bank’s IT talent strategy? By aligning IT to actively partner with product teams, tech talent demand will increase. Management needs to prioritize hiring talent with technical skills or invest in re-skilling existing employees to support the bank’s tech initiatives. This will likely mean restructuring the bank to look more like tech companies to best suit target hires or implementing training incubators.

For all the right reasons—from consumer demands to the threat of new players, it’s time that regional banks put aside their differences and come together to embrace the consortium model for fintech investment. It is how they can drive digital change to expand their customer base and compete with their larger competitors.