Six Steps to Your Bank’s Digital Payments Transformation

Nov. 18, 2022

Digital transformation is the 2022 payments phrase of year. You can’t attend a meeting without hearing about its importance in the financial services landscape, and when you consider that nearly nine in ten Americans are now using some form of digital payments, you understand why it needs to be a top priority.  

To support community banks in establishing concrete next steps for their digital transformation efforts, ICBA Bancard has developed the report, “Digital Transformation: The Payments Business Model.” While the report provides a deeper analysis of the current landscape, the challenges community banks face, and how to align strategies to address them, at a high level, six key tasks emerge to guide the path forward:

  1. Determine where you fall on the digital transformation maturity spectrum. To understand how much of a foundation you have, start by assessing the existence, tracking, and monitoring against goals for your digital transformation roadmap; verifying the established allocation of resources; confirming capital investments in infrastructure for digital services; and evaluating staff training and communications plans for digital solutions. This appraisal will decide your next phase of digital transformation.
  2. Explore how you can eliminate information silos to improve the customer experience. Your customers expect personalized interactions, and if you don’t have a full picture of how they engage with you, it’s hard to provide that. Consider using application programming interfaces (APIs) to link disparate systems like mobile banking and your customer relationship management (CRM) system to inform a more detailed customer engagement profile.
  3. Use your customer journey as a guide. As an exercise, take one of your products, walk through the customer journey, and critique the experience with an eye towards digital improvement. Additionally, take one of your target customers, and spend time with them to better appreciate the full engagement lifecycle they have with your bank, and financial services providers more broadly. Pinpointing weaknesses and opportunities in this way can identify key needs for your digital transformation roadmap.
  4. Consider digital accelerators like cloud hosting and APIs to link internal and external demands. Using these accelerators simplifies connecting internal systems (i.e., core treasury management, risk management, CRM, and card program infrastructure) with customer-facing solutions (i.e., mobile and online banking) for a more integrated experience. While it may take a concerted effort to adopt these accelerator solutions, doing so will set the stage for continued digital transformation and prepare you for the future.
  5. Partner with fintechs. Many fintechs are built for collaboration with community banks, creating a mutually beneficial relationship for both entities (ICBA’s ThinkTECH Accelerator program and the ICBA Solutions Directory can be a great source for potential partnerships.) As you explore your options and enter into fintech agreements, keep in mind that your strategic plans should remain a primary focus. Think about time to market, your level of control, launch and maintenance costs, ease of integration, and the fintech’s due diligence practices as part of the potential partnership.
  6. Explore a “super app” strategy. Cloud technologies and APIs allow you to integrate products and services into a one-stop app for payments needs. For example, small businesses look for services that improve efficiencies through automation, quick access to key business metrics, accounts receivable and payable management, and even payroll and access to short-term credit. These offerings create potential criteria for a small business super app. Determine how to approach this and other concepts in deference to your customer base and your bank’s safety and security compliance requirements.  

While these tips can aid you as you build and refine your payments strategy, they only scratch the surface of the richer insights included in the report. Reviewing it closely will help you in applying these concepts to your community bank, and a companion workbook, which is set to launch in the first quarter of 2023 to provide tactical support for implementation.  

In the meantime, I encourage you to explore ways to level up your digital solutions. As customer expectations and demands climb, ensuring you are prepared will help you remain your customers’ bank—and payment provider—of choice.