How to remain an independent bank or credit union during the M&A wave

September 02, 2021 Windstream Enterprise 5 min
How can small and medium banks and credit unions remain independent during the ongoing M&A wave? Learn how network and security technology plays an integral role in acquiring efficiencies and cost savings that can meet the demands of digital financial customers.

It’s projected that 2021 and 2022 will have the largest number of bank and credit union mergers since the 2008 recession. Mergers and acquisitions were largely on ice in 2020 due to the pandemic and ongoing recession, with 112 bank mergers announced in 2020, a number down 60% from 2019—the lowest number in nearly a decade.1 Today we are witnessing a comeback.

pondering man using a laptop in an business setting

Bank and credit union M&As are typically fueled by low-interest rates, a need to cut costs and a desire to invest in technology. One reason attributed to the current rise in M&As is due to many small and medium-sized financial institutions that are either unable or unwilling to spend the money on technology to meet the consumer demands of a digital experience, increased security requirements or migrating to the cloud.

For smaller banks and credit unions looking for ways to remain independent, technology plays a big part. Cost savings and efficiencies are more important than ever, and keeping up with the expansive technology spending of larger banks has always proved to be a challenging yet vital investment.

What does it take to remain independent?

How does a bank strategically remain independent in a consolidating environment? The answer starts with a solid commitment to independence. Deloitte’s 2021 “Banking and Capital Markets Outlook” found that 57% of small banks said their institutions could pursue M&A opportunities over the next 6–12 months.2 But if that’s not the path your institution is interested in, there are a few factors that can help maintain your independence.

  1. Enhance profitability and return for investors: While tech itself doesn’t generate revenue, it can assist with profitability by reducing costs, implementing systems and software that enable associates to sell more effectively, and helping to retain profitable customer or member relationships.
  2. Meet security and regulatory demands: Staying ahead of security threats and keeping up with ever-increasing regulatory demands is onerous. However, the cost of the consequences from not matching these threats and demands can be higher. Small and medium institutions may find partnering with a third-party security and regulatory provider is less expensive than finding and hiring the necessary in-house talent.
  3. Exceed customer expectations: Customers are more vocal than ever about how they want to conduct business with their bank or credit union. CIOs and other executives need to be proactive in hearing (not just listening to) what their customers are demanding. Leveraging what customers want will help drive technology priorities and implementation.

Can a CIO contribute to remaining independent?

A CIO plays a critical role in remaining independent. For one, roughly 65% of the U.S. population is taking advantage of digital banking today, so there is a dire need for financial institutions to strengthen their networks to stay ahead of security threats.3 One way of doing this is through consistent employee training. Rather than annual training, more frequent security courses will keep employees on their toes about how they can prevent security breaches.

Not surprisingly, an attack on a financial institution resulting in the loss of data can have a devastating effect, costing significant amounts of time and money to restore. A CIO can improve and enforce network security to provide a necessary line of defense to maintain an organization’s individuality.

CIOs are responsible for creating efficiencies and effectiveness. This can be accomplished by migrating from an outdated legacy network to a modern network architecture that can keep pace with the call for high-demand, high-bandwidth applications driving 24/7 business operations and productivity. A CIO can also simplify the management of network and security solutions to increase productivity, visibility and control through a centralized single pane of glass.

For example, when Navigant Credit Union upgraded to SD-WAN and high-bandwidth Ethernet, they saw a significant reduction in network outages. They also found increased redundancy to meet objectives, were able to rapidly expand and add new branches, and could now provide a superior experience to their members—all while maintaining their independence.

Prioritize Digital Platforms

61 percent of Millennials say they would switch their primary financial services organization in favor of one that offered a better digital banking experience, which means that customers are just an app away from leaving you—and you can expect the same goes for Gen Z.4

Digital banking facilitates virtual customer interactions and allows banks to offer a host of financial products online and on mobile devices. With it, banks can jumpstart the transition from brick and mortar to a multichannel institution that offers a more frictionless CX. Digital banking can also result in cost savings, with video and chat-enabled communications acting as the answer for reduced branch headcount.

Finding independence with cloud migration

Advocates of cloud technology are quick to list off benefits like better agility, scalability and flexibility. For banks and credit unions, this might look like the ability to deploy more efficient processes or data-intensive applications. For customers or members, it might look like speedy transaction processing times or a more personalized customer experience.

There are two categories of applications to consider when moving to the cloud: non-critical and critical applications.

Non-critical applications (e.g., HR and reporting software) are among the easiest to migrate to the cloud because they do not usually contain sensitive customer information. Moving even a few applications to the cloud can create efficiency for the IT team by reducing in-house server space and offload software updates.

Critical applications (e.g., core processing and other software that use customer data) can be a sticking point for banks and credit unions to consider moving to the cloud. Perhaps the two biggest reasons are the limited number of software options and the daunting task of migrating from one core to another. However, the efficiencies, agility and scalability cannot be matched by legacy banking systems.

Most environments wind up being a blend of these types of applications, resulting in a cost-effective architecture by allocating resources to critical apps while spending less on non-critical apps.

The road less traveled

The journey of independence isn’t always easy, but there are many strategies that CIOs of smaller banks and credit unions can explore if it’s the end goal. It’s becoming impossible to anticipate and thwart off business-disruptive security threats nowadays, but CIOs can play a critical role in helping their financial institution remain independent by guiding the executive team on how to prioritize these tactics, all while demonstrating reduced technology costs and enabling a better employee and customer experience.

There are managed providers that have network and security expertise who are ready to support your quest to maintain self-governance. They can educate you on what security services, network solutions (like SD-WAN), and unified communications tools will best work for your organization.


  1. Dobbs, Jim, “What will drive bank M&A in 2021.” American Banker, January 24, 2021.
  2. Shilling, Mark and Anne Celner, “2021 banking and capital markets outlook.” Deloitte Insights, December 3, 2020.
  3. “Share of population using digital banking in the United States from 2018 to 2022.” Statista, November 23, 2020.
  4. Dahlgren, Karl, “Think you know how the generations like to bank? Think again.” BAI. July 28, 2020.
Key Takeaway
Remaining independent requires a lot of dedication and investment, but it's more than possible. See how tech can help integrate banks you acquire efficiently and economically.

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