Three Financial Technology Trends Community Banks Should Consider for 2023

Oct. 25, 2022

When I attended FinovateFall in September, I was struck by its palpable energy. Not only was it the most well attended Finovate to date with roughly 1,800 attendees and 64 participating companies, it was a widely collaborative conference, converting what had once felt like a competitive environment into one of enablement.

What I witnessed was a growing pool of early-stage startups and mid-stage scaleups looking to support community bank needs and that bodes well for how community banks approach innovation. Ultimately, such partnerships must support the regulatory environment under which community banks operate.

That’s why ICBA continues to advocate for a legal and regulatory framework, coupled with a supervisory process, that fosters innovative financial services while creating balanced and flexible policies and regulations that are universally applied to banks, fintechs and third-party providers.

As an onslaught of new companies enter the market, community banks will need to cut through the noise to determine those that can best support them, and at the same time, think differently about how these partnerships will impact strategy, product planning, staffing, and compliance considerations. In short, as they develop and finalize 2023 plans, community banks will need to take the following trends into account:

ICBA Accepting Applications for ThinkTECH Accelerator 2023

The application period for the 2023 ICBA ThinkTECH Accelerator program is now open. Selected companies will participate in an intensive bootcamp and receive critical feedback to help tailor their solutions to the unique needs of community banks and their customers.

Launched in 2018 and named Finovate’s 2020 Best Fintech Accelerator, ThinkTECH has connected innovative fintech companies with more than 1,000 community bankers and industry leaders.

Apply or nominate a fintech for consideration.

  1. Increasingly, fintech offerings are being designed to speak directly to community bank pain points. In fact, two of the six “Best in Show” winners at FinovateFall were ICBA ThinkTECH Accelerator alumni. LemonadeLXP, a digital growth platform that helps community banks and fintechs create training and support tools to grow their digital banking business and support digital banking customers, and Quilo, a digital lending platform for personal loans, earned top votes from the audience to garner the award.

    This news gives way to two important community bank considerations: 1. There’s a significant demand for solutions that serve community banks; and 2. As this interest increases, funding will go toward these solutions, launching even more start-ups.

    While having more options will create choice, narrowing the field to those most relevant to community bank needs will come with some challenge. Thankfully, programs like the ICBA ThinkTECH Accelerator and offerings like our soon-to-be-relaunched Solutions Directory will serve as a great starting point.

  2. New products — for example, FedNow — will require some support from fintech offerings. If we take our cues from core providers, fintechs will factor more prominently into future solutions. With an emphasis on open application programming interfaces or APIs and integration, core providers are sending a message that their philosophy has shifted from acquire to partner. The Fed seems to be speaking in the same tone, emphasizing the importance of providers through its service provider showcase and other offerings.

    “I think fintechs are uniquely positioned to work with the financial industry to bring forward the best customer experience through technology, and there’s a lot of opportunity in instant payments,” Bernadette Ksepka, assistant vice president and deputy head of product development, FedNow Service, at the Federal Reserve System, said.

  3. The community bank/fintech relationship is evolving from a customer/vendor dynamic into a collaborate and co-create partnership. As we’ve learned from the Accelerator experience, fintechs operate with an agile approach, one that lets them evolve and develop their offerings to respond to specific needs. That methodology itself means that community banks need to come into the relationship with a different mindset.

    No longer are they being tasked with accepting an out-of-the-box standard solution; they can shape the offering by partnering with the provider in a more inventive, collaborative way. While this is a huge win for community banks, it also has the potential to require more time from staff and perhaps a different skillset for those managing the fintech relationship.

Clearly, FinovateFall 2022 introduced a number of strategic insights and applicable lessons, and I expect these trends to gain momentum in the coming months. So, as we round out the year and look ahead, proactively integrating these new developments into plans will help ensure that community banks are able to take full advantage of the opportunities that await.