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Community Institutions: Evolving Your Niche in the Digital Age

by on March 22, 2019

Community banks and credit unions exist, and will continue to thrive, because they have long focused on personalized, locally-based services for consumers and small businesses who are often overlooked by other banking entities or simply disenchanted with big banks.

Rather than posing a challenge, digitalization and technical advances should make it easier than ever before to keep up with, and differentiate from, the bigger or “cooler” players.

As a longtime partner to community banks and credit unions, Mastercard understands the challenges faced by these institutions and the opportunities at hand. By doing what they’ve always done – building strong relationships with the customers they understand so well – community institutions can further strengthen their toehold in markets large and small, everywhere.

Here are just a few examples I have seen that have worked to show what these institutions can do to better compete in an era where digital is the new normal, and change is constant.

  • Innovate often. To remain relevant, community institutions must stay one step ahead of the industry goliaths by understanding and honing-in on the needs of the audiences that have always mattered to them.

In today’s gig economy, in which an estimated 57 million Americans earn all or part of their living as contractors or part-time workers,* community banks and credit unions must create and deliver the latest commercial solutions designed to serve these tech-reliant workers. Get out of the familiar and tap into the new people and ideas that are transforming the business of banking by creating services aligned with what consumers most value and need.

How? By adapting to the disruptive marketplace, rather than continuing to operate with an outdated approach to payments.  It’s estimated that in the next five years commerce is going to change more than it has in the previous 50 years. Community banks and credit unions need to jump on board or risk losing customers. But change is hard and knowing how best to implement new ideas is even harder.

Mastercard’s Labs as a Service Team — a cross-collaborative team of researchers, designers and consultants – can be tapped by small banks and credit unions to work directly with employees on a range of innovations. These agile, super-fast-moving teams help clients be more innovative, cultivate new ideas and move them from concept to market quickly. From hosting week-long innovation sprints to crowdsourcing implementable ideas from the employee base, this program can help community banks energize innovation.

  • Pursue game-changing partners. Community-based financial institutions would do well to partner with innovative companies to provide new, value-added services to their customers. Providing cutting-edge services that small- to mid-sized businesses need but don’t have the bandwidth or expertise to implement themselves is an untapped opportunity.

For example, Mastercard recently acquired an AI-focused company that can help community institutions build rules against check and deposit fraud. Mastercard is also incorporating biometric authentication to all solutions. This not only includes standard fingerprint and facial recognition, but behavioral biometrics to prove that you really are who you say you are.

From FinTech start-ups, to innovation-focused companies like Mastercard, numerous technology services and creative approaches are emerging that appeal to the new generation. For instance, many institutions are beginning to adopt tailored chatbots and artificial intelligence to provide customers and members with the information they need when they want it – without human intervention and at a reduced cost to service.

Others, like upstate New York-based credit union SEFCU, are aligning with start-up accelerators to gain access to FinTech solutions and providers that are changing the face and pace of banking. Mastercard Start Path has linked dozens of emerging tech companies with banks and credit unions that are eager to bring innovative solutions to their customers. The result? More nimble go-to-market offerings that are faster, cheaper, and that deliver the functionality that can lead the market.

  • Get inclusive. Community institutions can more authentically connect with their customers/members, including gig workers, by participating in initiatives that help them speed payment processing, better manage their finances and leverage “smart cities” for a more digitally inclusive future.

The convergence of digitization, globalization, and demographic change is redefining not just the job market but how people live, work and travel – especially in and around cities. As smart cities move to a less cash-based future, digital payments systems will become increasingly essential to access city services, such as transportation and government benefits. Community banks and credit unions, which are perfectly poised to increase banking inclusion among residents in the “smart cities” of the future, need to be prepared to offer people a choice of how they want to pay — by card, phone, watch or transfer account-to-account.

This content is for CU BUSINESS eMagazine + WEB ACESS and THE TEAM BUILDER (GROUP SUBSCRIPTION) members only.
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