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.
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
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.
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 This can be accomplished by migrating from an outdated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.
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
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
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
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.
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 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.
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