While attention is diverted by the cost of cash at the Fed window, a truly existential threat remains closer to home. Peril is lurking at every institution’s door in the comfortable cloak of ‘pressing pause’ on strategy and digital innovation. The stakes are mounting by the day. The ultimate cost of deferring these plans will be deadly for local FIs. Corporate organizations and larger FIs already recognize the demise of traditional platforms as consumers rapidly adopt digital forms of money and banking.
The new world of ‘internet money’ has arrived.
This metamorphosis of money is only accelerating, and the nature of financial literacy, and the value of your products & services will naturally wilt if your FI retreats into the ‘great recession’ cocoon!! Your initial reaction may be, we are waiting to see what happens with the market. Or, perhaps you’re inclined to attempt to stick it out on that old core for however long this downturn lasts. Maybe there’s a mindset in your management team or your board that those ‘IT projects’ can wait until the economy stabilizes or your investment portfolio bounces back. Wouldn’t it be great if business was that simple?!
Our Next Gen CUSO partners with community-based financial institutions to define and protect modern strategy, optimize operations, and extend relevant experiences that will preserve local financial services, foster financial literacy, and advance local economies, digitally. Here's our take, and why we’re committed to providing bold, visionary, inspired consulting to our clients…
2008 to 2009 saw the outer wall of the digital storm strike the industry. The deceptive calm we experienced from 2010 to 2020 was nothing more than the eye the storm. (Yes, technology has dealt us a storm of unprecedented proportions!) Today, the “feeder bands” of the trailing storm wall are landing across the industry. The ultimate storm surge is only a planning cycle or two away. Once this storm clears, the landscape of financial services will be completely reshaped and the era of the electronic dollar will have washed away with it.
In our last blog post we highlighted the significance of preserving your institution and your community from what we called the ‘FFP22 comet’ with a map, increasingly efficient operations, and an inventory of the materials (likely already at your disposal) to connect to community and construct local, decentralized, financial products and services. Let’s elaborate on the innovation ‘shelters’ that your institution, and the communities your serve will urgently need in the internet money era.
We know you’re tracking the buzz around ‘rapidly decreasing’ fee income, increasing demands for ‘self-service banking’, products that support pay day advance and buy-now pay later (or “BNPL,” because we LOVE acronyms in our industry!), relationship-based rewards, services to support the evolving use cases for digital assets, and the importance of catalyzing local commerce. All of these “products and services” are novel forms of digital engagement, lasting connections between and among consumers and businesses. Because these capabilities are not readily available from trusted, local institutions, consumers are turning to anonymous or white label downloads! Of course, your institution should be on the receiving end of the consumer engagement and related fee income. Most critically, the digital communities formed by these interactions need to be catalyzed locally and integrated with your local, physical economic community.
But if you’re pulling back on operational transformation and digital innovation, where will your members look to get these services? How will you survive FFP22? The reactive, wait-and-see approach poses a significant risk to the future of local, community FIs.
Fact: Your members are not waiting (and neither are your competitors), they’re leading the way.
Another fact: While our industry remains tethered to legacy operational systems and thinking, pausing strategic innovations and waiting for a green light from the market, data tells us that your consumers are still banking; just differently.
Consumers are swapping their electronic US dollars to participate in the future of money; downloading digital wallets and financial services apps that don’t require minimum balances, high balance loans, long term membership, or ‘wallet share’ in exchange for loyalty or reward. They’re buying and selling digital currency, looking to get their paychecks two days early, applying for low-cost micro loans, and working on building good credit. Don’t believe us? This data is right at your fingertips. How much of your deposit dollars are leaving to names like Binance, Kraken, Coinbase, Robinhood? What about online only finance apps like Venmo, Chime, Affirm, PayPal, Dave?
Cash is cascading out of your local FI and the dollar universe to become part of the world of internet money. We understand that the uncertainty around these new financial realities can be scary, and that’s why our strategy and products lead you through this journey.
Your strategic planning season is quickly approaching, and we’re here to help you understand the tectonic shifts taking place in consumer expectations for digital experience and the specific operational transformations that will keep your institution at the nexus of community and commerce. DaLand is proud to make critical and complex change management elegant and efficient. Let’s converse and collaborate on your roadmap to real digital evolution, improved value, and sustainable connection to the future of commerce!
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