Guest blogger Tripp Gavin and Frank Martien examine the role technology investment has played in helping smaller banks grow faster than their larger counterparts.

In the past 12 months, U.S. regional credit card issuers have grown receivables by nearly nine percent, with the largest growth within this group being double digit. Over the same period, large national issuers averaged growth of five percent. How have these smaller banks been able to grow faster than their larger competitors? According to their executives, it can partially be attributed to their investments in technology.

Investments in digital and mobile capabilities have been a priority focus for many regional issuers, particularly in the areas of account origination, underwriting and self-service. Not long ago, the digital and mobile offerings among this group lagged that of their larger counterparts. Originations were largely handled in branch on a paper basis and mobile applications served as a portal to check balances and make payments, but little else. Today, leaders in this group have turned a corner. Those that have invested in innovative digital and mobile platforms are reporting increases in digital account originations—some achieving rates near 50 percent of all new credit card originations (and higher for other consumer banking products). Others have expressed a goal of being able to originate all consumer banking products digitally in the next two years.

The fastest-growing regional issuers are also setting themselves apart in their analytics capabilities. The adoption of data-driven customer segmentation allowed these issuers to more effectively direct their marketing dollars, increase their customer penetration rates and adopt better risk management procedures. It also allowed them to begin the transition from a product-centric to a customer-centric banking model.

Underpinning these developments is an increase in partnerships with fintechs. Often, fintechs are able to provide advanced digital capabilities in a cost-effective manner and on a shorter time frame than a traditional “build it yourself” approach. Such partnerships span the consumer lifecycle and can provide a level of differentiation for an increasingly commoditized product.

Looking forward, some executives have committed to continuing their technology investments as part of a broader digital-first strategy. Some are experimenting with new solution-center-style branches and are already reporting positive results, with commitments to open more in the future. Others are bringing new capabilities to their mobile applications. Investments will continue to take multiple forms, depending on a bank’s core offerings, expansion goals and customer demographics, among other considerations. A digital-first approach can bring many benefits to a bank, like providing differentiation, a more attractive consumer platform and a lower cost to serve. Ultimately, digital-first investments can serve both the top and bottom line of the P&L, as well as non-P&L metrics, such as customer satisfaction.


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