Thought Leadership

Technology, Data and Compliance – Oh My!

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October 15, 2018
Technology, Data and Compliance – Oh My!
By Bryan Adler

To be a successful service provider, I must keep up on the trends and what community bankers’ top interests and concerns are. The diversity of anxieties strikes me every time I hear something unusual or an approach to a perennial problem from a different angle.

As I’ve traveled the country and talked to community bankers recently, I’ve learned the most distressing issue for executives is keeping pace with technological advances. Executives around the country are particularly concerned about cybersecurity. New threats pop up every day. Every time you implement a counter measure, a criminal comes along and finds a workaround. It’s the ultimate financial services one-upmanship between the dark and the light.

In particular, community banks typically don’t have the expertise and resources in-house to create apps and other technologies, so they rely on third parties, in which they trade off a certain amount of control. While bankers try to keep member information secure, massive breaches can occur at third-party business partners, such as Equifax and others that have made headlines. The bank or credit union is then left holding the bag with the angry consumers who expect them to keep personal data safe.

Balancing cybersecurity with competitive and convenient customer service through digital delivery channels is the very definition of a double-edged sword, and that doesn’t even begin to touch the back-office technology that helps keep costs down and the institution running efficiently. A RSM survey found that nearly two-thirds of community bank CFOs ranked new technology at the top of their list of concerns, because the threat isn’t only cybersecurity but new, alternative market entrants like Venmo and SoFi. Given the skyrocketing number of cyberattacks, regulators are placing high priority on this area of examination – one more thing for community financial institution executives to lose sleep over.

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While all of the data community banks and credit unions collect can cause security headaches, it also presents a mountain of opportunity. Three of the top lending issues I hear from banking executives in my travels are 1) holding onto existing customers/members; 2) attracting new customers/members, especially millennials; and 3) credit migration. Each of these problems can be solved with help from your very own data lake.

Once you’ve identified the business problems you’re trying to solve, that’s when you begin pooling the appropriate data together. Identifying the problem first is crucial to an efficient data transformation. For example, financial institutions can track credit scores and direct deposits, identify those that are moving up or down and respond accordingly. Perhaps provide an improved rate for a credit card accountholder who has climbed up into a new credit score bucket but offer financial counseling to those whose credit scores are on a downward trajectory.
Delivering these types of services still can be difficult given everything else on the plates of community financial institutions, particularly regulatory pressures that have squeezed margins and resources to the max. CFPB, BSA/AML, TILA, CECL, Basel III and the whole alphabet soup on top of overly conservative oversight strain the nerves of community bankers from Atlanta to Boise, Idaho. Meanwhile, you’re trying to keep the community safe by offering cannabis banking, but to no avail.

And now economists are watching for the yield curve to invert and predicting a recession late next year or possibly early 2020. It’s not an easy time to run a community financial institution, that’s for sure. Opportunities spawn from challenges like these. Vetter can help. Contact us to learn more.

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