Technology and strategy must be aligned. Community banks and credit unions need to align technology with overall strategy to achieve success and maintain growth going forward. Institutions must develop a formal Technology Strategic Plan that supports the overall Strategic Plan. And it should include how the organization plans to incorporate technology in all its operations to increase efficiency organization wide. In this blog, we explore the five key areas of technology and how each area must align to the institution’s strategic plan.

Internal Technology – Network and tools for employees

Internal technology that is slow and unreliable frustrates employees, decreases efficiency, and ultimately impacts customer service. Financial institutions need to invest in modern network technology to secure its systems and customer sensitive information. The investment may include outsourcing the high-level IT network and user support to an IT managed services provider (MSP). Simultaneously, institutions must invest in quicker Internet connectivity and solutions that integrate to the core seamlessly. These solutions include everything from the Teller Module to Online Banking Platform, to internal processes such as loan workflows.

Core System & Auxiliary Modules

We facilitate strategic planning sessions around the nation for community financial institutions. During these meetings, we often discover that their core system is obsolete or simply old. This creates huge issues for the employees and customers. Starting with the unreliability of the system, the inflexibility, to the lack of integration capabilities that limit the institutions. These core providers are keeping them behind! Larger institutions have the resources to invest in developing their own core systems. Smaller institutions don’t have that luxury and therefore depend on core providers to offer modern products and services to customers. Additionally, community banks and credit unions are stuck doing processes manually. The main reason being that the core provider “doesn’t integrate well” with a new internal system like a CRM.

The easiest way to get through a core system renewal is to do nothing. Stay with the current provider to not upset the staff or customers. Often institutions extend their current contract for another 18 or 24 months and push the hard decision down the road. They just delayed improving their technology for two years and are now behind two more years! Going through a core conversion is painful. But staying with an old one will be more painful in the long run. Again, the technology and strategy must be aligned.

We also hear about core providers offer a “new modern” tool, but it doesn’t even integrate to its own core! How can that be? They sell these tools to their clients but don’t offer proper connectivity or integration. Therefore, now the institutions have new manual processes and go backwards instead of moving forward with technology. One strategy in the Technology Strategic Plan should always be to ensure flawless integration of new systems to the core.

Technology Products & Services

Business and consumer customers now require modern technologies for their banking experience. It all starts with your Online Banking Platform. Consumers want to see all their accounts under the same login. They want to see transaction history, make transfers, bank statements, images of checks and deposited items, and bill paying capabilities. These are considered “old services” and are expected as a minimum technology. Now consumers want more. They want to see ALL their banking relationships under the same umbrella or portal. This is “Open Banking” and it will be the norm soon.

And guess what? Businesses want the same. Small business owners want to see and access their personal and business accounts under the same login and platform. They want the ability to transfer between personal and business accounts as well as paying bills online. Larger businesses have different needs including using treasury management services.

Treasury Management: Business customers or members who use TM services want to access them all via the OLB platform. They want to use one login and not have to visit separate sites for each service – a single banking portal. Businesses want to upload ACH files, Remote Deposit Capture (RDC) deposits, or approve their Positive Pay exceptions in one site. Businesses are looking for unified, real-time reporting, easier cash flow forecasting tools, seamless ERP and accounting integration with various solutions. These are no longer wishes but a requirement.

Payments Technology

Stablecoins, Tokenized Deposits, FedNow, and RTP are here to stay. And business customers want the ability to choose which payment service they want to use. Therefore, institutions may have to offer them all. These capabilities will become what Bill Pay is now – a standard offer by all institutions. Below are the definitions of these important payment services:

Stablecoin (USA Stablecoin): A digital asset designed to maintain a stable value relative to a specific reference such as the U.S. dollar. Uses a blockchain platform and is backed by reserves such as United States Dollars, U.S. Treasuries and other financial instruments as defined by the Genius Act. The primary goal is to provide the benefits of digital currencies: speed, transparency, and programmability while avoiding price fluctuations.

Tokenized Deposit: A digital representation of a traditional deposit held at a regulated financial institution. Use a blockchain or distributed ledger technology platform. Each tokenized deposit corresponds to actual funds held in a bank account. Deposits are subject to the same regulatory protections and oversight as conventional deposits; therefore they are FDIC insured. They are fast and programmable and a secure way for transfers and settlement of funds.

Real Time Payment (RTP): Uses the ACH payment system, provides immediate availability of funds, only available to issue credits, and payments are irrevocable. Owned by a consortium of banks.

FedNow Service: Uses its own payment rails in a “closed loop” meaning both sending and receiving institutions most be in the network. Provides immediate availability of funds, transfers are irrevocable and settlement is instant in real time.

These payment solutions are technology based and are simultaneously receivable solutions as businesses can pay bills and also receive payments. They each bring risks as well as benefits. The Technology Strategic Plan must include the process to assess both the risks as well as the opportunities they bring.

Technology and strategy must be aligned with AI usage throughout the organization

Community banks and credit unions can no longer “wait and see” where AI is going. It’s here to stay and larger institutions are already using it and embracing it in full. Of course, the AI Policy must be clear as to what’s not allowed to do or use it for. However, the use cases list is growing by the minute. Employees are finding ways to incorporate AI in their daily work functions to make them more efficient.

The embrace of AI starts with the “tone at the top.” While understanding the risks, institutions must incorporate AI wherever possible to increase efficiency in every department and in every function. Once you identify the risks, implement the appropriate mitigating strategies and move forward. Technology and strategy must be aligned in order for the institution to embrace new technologies including AI.

Technology decisions should never exist in a vacuum. When technology, payments, treasury management, and AI are aligned with your institution’s strategic plan, they become drivers of efficiency, growth, and long-term relevance rather than ongoing pain points. If your organization has not taken a step back to evaluate whether your technology strategy truly supports where you are headed, now is the time. Start the conversation internally, involve the right stakeholders, and consider engaging an experienced partner to help assess gaps, priorities, and next steps. Alignment today prevents disruption tomorrow.

There are four common themes in Strategic Planning that often come up during the strategic planning discussions. Community banks strive to take care of customers as well as their employees. Most of the time, community banks are successful at delivering that special customer service to their customers. However, they are not always successful at achieving a great culture or environment for their employees. Therefore, they constantly search for ways to improve the “employee experience.” Banks conduct employee surveys with questions to hopefully reveal the reasons why some employees are not happy.

The results of these employee surveys typically show four common themes: Communication, Training, Accountability, and Culture. When we facilitate strategic planning sessions with clients, at least one or two of these topics come up in conversations. Sometimes all four themes rise to the top issues that need further discussion. And some topics are such big issues that they become one of the strategic objectives in the strategic plan! One wonders why this is happening and why so often.

The Four Common Themes in Strategic Planning

Let’s address each theme and pose questions that may help community banks identify the root causes and resolve these issues.

Communication

Employees may feel that leadership doesn’t communicate well or not at all. Communication must start from the top leadership, and it should include communicating that not everything can be shared. There are topics that leadership cannot or should not share with the entire staff until it’s appropriate. Examples are the potential of acquiring another institution or selling the bank. Other topics that need discretion as well are closing or opening a new branch. However, typically these are not topics employees complain about.

General complaints about communication:

• They want to know where the bank is going and what is the general direction everyone should be rowing together toward. They say, “lack of direction.”
• Lack of communication between employees and their direct managers.
• Not being informed about new products and services offered or organizational changes.

Questions to ask employees to further identify the root of the communication issue:

• What exactly would you like more communication on? Employees can now pinpoint the type of information they’re looking for where they feel out of the loop.
• How often do you meet with your direct manager? When managers don’t hold regular meetings with their employees almost always results in lack of or poor communication.
• Provide an example of lack of communication where the information not shared impacted your job directly. Employees complaining of lack of communication should be able to describe why they need to know specific information.

Training

During strategic planning sessions, the leadership shares that employees complain they don’t receive enough training. But leadership tells us that they do provide plenty of opportunities for employees to get training. The problem is that they don’t follow the instructions or procedures and continue to make mistakes. So, who is right? The answer must be somewhere in the middle. Institutions provide the training, but the procedures may not be clear or easy to follow. Some employees try to do things on their own without following the procedures and then make mistakes. And yet there may be other employees who, after repeated training, simply don’t get it. They’re in the wrong job.

General complaints about training:

• There are not enough training opportunities nor budget.
• The training is not clear and there are no written procedures.
• Training time was not sufficient and there was not enough time to practice.
• The function or task is only performed a few times per year and therefore, it doesn’t stick.

Questions to ask employees to further identify the root of the training issue:

• What specific task or function do you need training or additional training on? Let them tell you exactly what they need.
• How many times have you been trained on this task? Sometimes employees say they haven’t had enough training and because it’s not documented anywhere, you can’t hold them accountable. Therefore, document all training done at all levels.
• Based on your current job, do you feel you need a specific certification? Certain jobs such as Compliance or BSA Officer should have their certifications which will provide the additional training needed. Plus, examiners see these certifications as an extra positive for the bank.

Accountability

It’s difficult to hold employees accountable without the appropriate processes in place and when leaders don’t hold themselves accountable. This is an area where leaders must definitely lead by example. Not having processes to document conversations, training provided, and the fear of having crucial conversations results in lack of accountability.

General complaints about accountability:

• There is no accountability from the top to the bottom of the organization.
• Leadership does not confront the employees who are not doing their jobs and therefore, there is no accountability.
• Employees who have been here a long time can get away with anything and don’t want to learn new processes.

Questions to ask employees to further identify the root of the accountability issue:

• Can you provide examples of where you have seen lack of accountability in the organization? This question will help identify if there is a systemic issue or only certain areas display a lack of accountability.
• If you are in a leadership position, how are you holding your employees accountable? Asking managers what they are doing in their individual areas helps them focus on how they can solve the problem.
• In what ways can you improve in holding yourself accountable? Accountability starts with yourself.

Culture

Change is difficult for employees of any company to go through. And when change is not communicated appropriately employee morale suffers. Often, employee survey results show that the company has a culture of “no accountability,” or “poor culture.” It’s imperative for a bank, especially after a merger or acquisition is completed, to ensure the new “mixed culture” succeeds. One key factor is constant communication. But even when an institution is not merging, acquiring another, or being acquired, the culture can be negative. A negative culture is the result of the other three themes: lack of communication, lack of accountability, and poor or ineffective training.

General complaints about culture:

• Overall “negative culture,” or “poor culture.”
• Culture of low morale across the organization.
• There is no cohesiveness at the top leadership level and therefore, there is no cohesiveness amongst the staff.
• The company operates in silos and there is lack of teamwork.

Questions to ask employees to further identify the root of the culture issue:

• What does a “negative culture” mean to you? It is interesting to hear people’s different interpretation of what a negative culture in the workplace is.
• In what areas of the organization do you feel there is “low morale”? Asking this question may help determine if the low morale is systemic or only in certain departments.
• How do you propose the institution can break some of the silos? This question can bring new ideas on how the teams can work together better across the organization.

These four common themes in Strategic Planning are all interrelated. One could say that it all starts with communication, but it could also begin with a lack of accountability. Lack of communication or accountability results in a poor culture. Additionally, lack of or inefficient training combined with no accountability results in poor culture. Improving communication, enhancing training, and holding everyone accountable results in a positive culture. Your institution will be positioned for success now and in the future.