Trends to Watch in 2022: Growth and Tech Lead the Way in Banking

Banking Industry Trends

I recently attended Bank Director’s Acquire or be Acquired conference in Phoenix, Arizona.  Not a bad place to travel to this time of year even for a guy that lives in North Carolina. This was the first conference I have attended in person since early 2019. The weather was beautiful, and the conference was outstanding.

Acquire or Be Acquired focuses on the key business issues for banks and credit unions along with drivers in banking including merger considerations, growth initiatives, risk assessment, technology transformation, managing capital and other industry trends. While there were many great takeaways from, the three areas that stood out for me included a focus on growth, the investment in technology, and the power of being able to collaborate in person.

Growth Initiatives

Growth is an obvious objective in most any business and loan origination isn’t an exception. Based on the sessions I attended there were a couple areas that stood out for me in terms of priorities to drive targeted growth:

Small Business Lending – I heard in a couple of sessions that small business is the new retail.  More and more institutions seem to be organizing around small business as a separate channel versus an add-on to retail or commercial. As a separate growth channel, it requires a specific business owner, resources, and organizational structure as well as specific loan origination technology to enable efficient and effective growth strategies.  The rewards can be significant; small business relationships can equal four times the deposits of a retail account, however, costs the roughly the same as consumer to service. Foundational capabilities are needed to drive profitable small business relationships including new account opening and auto decisioning on the lending side of the equation.

Culture and Staffing- Having the right culture, leadership and staffing is another obvious requirement for growth. The challenges to attract and retain talent was not a new topic of discussion however there a couple of takeaways for me:

  • One very interesting perspective I heard related to organizational structure and staffing related to growth was the idea of a “perform” and “transform” team. One of the speakers spoke about the need and benefits of delineating resources between those “maintaining and fixing” vs those focused on “transforming and growing”. Perhaps easier said than done and potentially carries additional operational costs, however you would expect greater success rates of key projects and ability to deliver faster and reap the rewards of key initiatives.
  • Geography is playing less of a role when it comes to recruiting and hiring talent. The pandemic taught us out of necessity how to better equip ourselves to work in a remote environment. Discussions centered around more than simply advancements in video meeting technology but also technology that improved and enabled remote collaboration and work efforts. This has opened the market for many that have been traditional bound by geographies and helped to curb the challenges of a tight labor force.
  • Culture has taken on new meaning in most organizations. Companies that practiced and were successful creating a highly engaged workforce were challenged to find new and creative ways to maintain culture and engagement. Leadership commitment and creativity was even more critical that it had been in the past. This will continue to be an important area of focus and opportunity for companies to differentiate themselves in the labor market. Recruits are more focused than ever on a company’s culture and are looking for proof points and testimonials as part of their decision to join an organization, or not.

Technology Investments

Almost every session touched on this topic in one way or another; whether the role technology played as referenced earlier in running a business in a remote environment, or the hard lessons learned due to lack of technology in key areas of the business reliant on a centralized processes and the associated manual work effort as well as lack of digital solutions for customers and prospects. Those that were ill prepared for the challenges of the pandemic have prioritized strategic initiatives to address risks and opportunities. There were a couple of discussions that raised some important considerations as organizations follow through and begin to execute on strategic initiatives as part of their overall operating plans.

Technology can be a powerful enabler of strategic plans and initiatives; however, you have to honestly assess your organization’s ability to absorb technology solutions and the various options/models available in the market. As an example, If you don’t have a team that is equipped to work with a solution that is customizable you need to really think about how that would work for your organization. If a solution requires a consulting firm to deploy, how will you manage the ongoing growth and maintenance of the platform? Most financial institutions will require a configurable solution versus customizable to ensure they can maintain and grow on the platform with optimal total cost of ownership. At Baker Hill, we designed our third-generation loan origination solution called Baker Hill NextGen® with that premise in mind. We deliver a modern, configurable solution on a common platform to optimize investment dollars with a focus on digitizing information and providing intuitive workflows to automate manual processes.

There was also a lot of discussion on the importance of setting up KPI’s at the beginning of a project and to closely monitor milestones and results not only during the project, but also the ongoing expected benefits. Many organizations fail to do this and discover far too late that a technology investment is not delivering the expected benefits.

Finally, I learned a new term at the conference known as “shadow banking”. I concluded it was simply a new reference to both a challenge and opportunity in our industry associated with third party intermediaries, or fintech companies that have a direct-to-consumer focus. Lots of discussion around if these companies are friend or foe. I think the jury is still out regarding how financial institutions can potentially partner with and/or invest in these organizations. Either takes significant focus, attention, resources, and investment. I think for the foreseeable future most organizations will look to procure services to align with their strategic initiatives from fintech B2B providers in the market.

The Power of In Person

Perhaps the biggest takeaway for me was seeing and experiencing the value of being back together in person with clients, industry leaders and colleagues. It has been so long since we have had the opportunity to network and simply take the time to have unplanned and unstructured conversations about the industry we serve. Virtual events served an important purpose over the past couple years, but clearly the need for, and importance of being in person was reinforced for me and I am certain also for most that attended this valuable event. The opportunity to simply walk out of a session and sit with a fellow attendee and discuss what you heard and learned has been missed and the value is irreplaceable. I am looking forward to our own conference we call Prosper that occurs at the end of April and the opportunity to provide the same in person experience for our incredible clients.

To learn more about how Baker Hill NextGen® can meet your loan origination, risk management, or analytics needs, we invite you to join us at Prosper 2022. We'll explore how investment in technology can help you not only achieve your growth goals for this year, but also drive growth and profitability for years to come.

You might also like:

Resource Guide: Digital Lending Resources and Strategy

Whitepaper: Are Banks and Credit Unions Really Making the Most of Technology?

Blog: Is It the Right Time to Upgrade Your Commercial Loan Origination System?

Blog: Four Key Areas of Innovation That You Cannot Do Without

Topics: industry trends