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Grow Smart From the Start: Fuel Profitable Growth By Better Managing Technology
The rapidly changing financial services marketplace has grown increasingly dependent on technology, including such evolving areas as mobile banking, compliance and security. This presents a monumental challenge for community banks and credit unions as they try to stay in step with larger institutions. When you add a gaggle of innovative nonbanks from outside of the traditional financial industry, you have a strategic issue that will not go away. No wonder nine in 10 executives at community banks and credit unions worry about delivering the technologies that their customers want and their institution needs.
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Thought Leadership
Initiative Background
Grow Smart from the Start
Planning for Profitable Growth Through Better Management of Core & IT Services
For community banks and credit unions, it’s a whole new world. The economy is finally growing again, but so are the risks and challenges. Interest rates remain near historic lows, but for how long? Spreads are tight and squeezing profitability. Compliance is a bigger, more costly challenge than ever—especially for smaller institutions. Competition from larger financial services companies and even new players has forced community institutions to think and act differently, particularly about how they cost-effectively use technology to engage and retain customers. Economies of scale are ever more important, making mergers and acquisitions a hot topic of discussion for everyone in the industry.
Smarter growth needs to be the mantra for every institution. Rigorous control of non-interest expense, minimizing downstream risks and costs, becoming better positioned to optimize valuations and accretive value in any merger or acquisition—these are among the challenges bank and credit union executives and their boards must meet.
Grow Smart from the Start is a new thought leadership and research initiative by the Business Performance Innovation Network that examines critical issues and best practices in structuring relationships and contracts with core and IT services vendors to ensure more profitable and valued business outcomes for community financial institutions. Grow Smart from the Start builds on past BPI Network research, developed in partnership with Paladin fs. That research shows that community banks and credit unions have a major opportunity to reduce non-interest expense and improve the accretive value of mergers and acquisition by intelligently restructuring their contracts with core services and IT vendors.
Grow Smart from the Start will include new research into this topic and other issues related to managing contracts and relationships with vendors to increase profitable growth, reduce risks, and affordably advance the digital capabilities of community financial institutions.
Studies
The Core Way Forward
The Core Way Forward is the second annual report by the Business Performance Innovation (BPI) Network assessing the implications of core processing and IT services contracts on community banks and credit unions.Our new report reviews current challenges and priorities facing community financial institutions and how vendor contracts and services impact those issues in profound ways.Core and IT services contracts with critical vendors such as Fiserv, Fidelity (FIS) and Jack Henry represent one of the two or three largest areas of non-interest expense for most institutions.
Download »
The Core Way Forward is the second annual report by the Business Performance Innovation (BPI) Network assessing the implications of core processing and IT services contracts on community banks and credit unions.Our new report reviews current challenges and priorities facing community financial institutions and how vendor contracts and services impact those issues in profound ways.Core and IT services contracts with critical vendors such as Fiserv, Fidelity (FIS) and Jack Henry represent one of the two or three largest areas of non-interest expense for most institutions.
Download »
Less Burn, More Return
American community banks and credit unions are overpaying for core processing and IT services at a time when cutting non-interest expense is critical to survival and growth. Less Burn. More Return is a new study by the Business…
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American community banks and credit unions are overpaying for core processing and IT services at a time when cutting non-interest expense is critical to survival and growth. Less Burn. More Return is a new study by the Business…
Download »
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Media Coverage
August 6, 2023 – How Vendor Contracts Influence M&A; Discussions
Jackie Stewart, American Banker
Read more »
August 5, 2023 – Can You Get It For Me Wholesale?
Christina O’Neill, Banker & Tradesman
Study Finds Renegotiating Core Services Contracts Can Yield Huge Savings Read more »
August 27, 2023 – Banks Face Price Hikes as Tech Vendors Merge
Jackie Stewart, American Banker
Community banks brace for limited selection, but embrace one-stop shopping, as consolidation takes place among IT firms. Read more »
August 1, 2023 – Improving the Value of Any Merger or Acquisition How to Prepare for the Coming Consolidation in Comm
Aaron Silva, Western Independent Bankers
The financial and business pressures facing smaller banks represent a recipe for consolidation. However, as I see it, there’s at least one missing ingredient holding the industry back – willing sellers who are satisfied with current valuations. Read more »
July 30, 2023 – Banking Technology Connections: Vendor contract challenges
Sam Sexer, Wolf and Co.
Although it’s the responsibility of your lawyers to read a contract’s fine print and review it for key language, it’s important to consider their familiarity with the particular type of contract. Read more »
July 14, 2023 – Study: Banks, CUs Overpaying For Technology
Laura Alix, Banker & Tradesman
Think fast: When is the last time you paid more for a piece of technology than you would have five, even 10, years ago? Maybe a laptop? A camera? An MP3 player? Read more »
June 3, 2023 – Study: Restructuring Can Reduce Cost of Core Processing and IT Services
TriNovus
One of the definitions for “restructure” found on Dictinoary.com is “to effect a fundamental change in.” For community financial institutions that restructure their vendor contracts for one of their largest categories of non-interest expense that fundamental change is reduced costs, according to a new report from the Business Performance Innovation (BPI) Network. Read more »
May 27, 2023 – Newsletter
Thomas Wright, Credit Union News
According to a study by Business Performance Innovation Network in association with Paladin fs, credit unions are overpaying for their core systems by an average of about 24% over “fair market value.” Read more »
May 22, 2023 – Study: Credit Unions Dramatically Overpay for Core Systems
Robert McGarvey, Credit Union Times
Read more »
May 22, 2023 – Bankers Hiring Hagglers to Negotiate IT Contracts
Jackie Stewart, American Banker
Community banks are spending a little bit of money now in hopes of saving more on core processing and IT-service contracts. Read more »
May 20, 2023 – Credit Unions & Community Banks Overpay For Core Services
CUNA News Now, Credit Union Insight
Credit unions and community banks aren’t doing themselves any favors in negotiating information technology (IT) service provider contracts, according to a survey of executives about their top business concerns and management priorities. Read more »
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Facts & Stats
85% of the global population resides in emerging markets, experiencing rapid growth and industrialization. (Source)
Approximately 90% of people under 30, which account for 75% of the online transactions, reside within the emerging markets. (Source)
During Feburary, credit unions picked up 440,000 new members, and loan balances grew at a 10.9% annual pace. (Source)
Credit union loan delinquency rates fell to a 0.78% in February, down from 0.89% one year earlier. (Source)
Community Banking employs 700,000 Americans (Source)
Credit unions reported a 2.9 percent increase in memberships from June 2013 to June 2014. This is nearly a full percent higher than the same period from 2011 to 2012 where memberships grew at a 2.1 percent rate. (Source)
A poll surveying more 2,500 U.S. adults nationwide, revealed trust in credit unions has remained steady in recent years even as it has dwindled for larger banks. 40% of those serveyed reported their level of trust had grown or remained consistant over the past few years. (Source)
Credit Unions rank first in customer satisfaction among financial institutions according to a Novermeber, 2014 report from the American Customer Satisfaction Index. (Source)
The 85 customer satisfaction score is first among financial institutions, where the average bank score lags behind at 76. (Source)
Between 2007 and July 31, 2013, a total of 474 community banks have closed. (Source)
53% of small business are embracing change to survive. (Source)
From 1984 to 2011, more than 10,000 community banks have closed their doors.
Noninterest income averaged 2.05% of assets at noncommunity banks over the study period compared with only 0.8% at community banks. (Source)
In a study done by The Federal Reserve Bank of St. Louis, of 702 community banks, 95% of them, all but 36, were less than a $1 billion in total footings. (Source)
There are almost 7,000 community banks, including commercial banks, thrifts, stock and mutual savings institutions, with more than 50,000 locations throughout the United States. (Source)
FDIC study says community banks provide 46% of the banking industry’s small business loans despite their smaller size. (2011) (Source)
Community banks constitute 96.6% of all banks. (Source)
Community bank loans remain 10% below 2008 peak before the financial crisis. (Source)
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Articles
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February 17, 2023 – Robot Advisers And More Drive A Banking Revolution
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December 29, 2022 – Are Challenger Banks the Saviours of British Banking?
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December 21, 2022 – Mutually Assured Disruption
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November 5, 2022 – Is Small Business Banking Next in Line for Disruption?
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September 2, 2023 – How Credit Unions Can Win the War on Talent
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August 18, 2023 – Survey: Most Americans Pay Nothing for Bank Services
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August 18, 2023 – Big News, Bigger Opportunities for Small Credit Unions
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August 14, 2023 – E-Signature Adoption on the Rise in Credit Unions
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July 1, 2023 – Some Thoughts on Community Banking: A Conversation with Chair Janet Yellen
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June 30, 2023 – Credit Unions increase membership locally, Statewide
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June 26, 2023 – Small Banks Fight for Regulators’ Attention: Weekly Wrap
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March 24, 2023 – 13 Micro-Cap Bank Stocks That Could Add Big Profits to Your Portfolio
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January 15, 2023 – Bank or Credit Union? Which is Best for You?
iQuantifi
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January 1, 2023 – Using Credit Unions to Take Advantage of Community Banking Systems
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Los Angeles Times
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November 18, 2022 – Credit Unions Top in Customer Satisfaction Among Financial Institutions
Credit Union National Association
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January 27, 2023 – Small banks feel the pinch of Dodd-Frank
The Advertiser
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January 24, 2023 – As big banks stay stingy with mortgage money, small community banks fill in the gaps
The Morning Call
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January 24, 2023 – The Morning Risk Report: Community Banks Coming Under Closer Scrutiny
Wall Street Journal
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January 24, 2023 – How Mobile Photo Bill Pay Is Helping Community Banks Appeal to Mobile-Only Customers
Bank Systems & Technology
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December 30, 2022 – Regulators Have Jan 17 Deadline to Answer ABA’s Demands
Wall Street Journal
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November 22, 2022 – KPMG Predicts Community Bank Consolidation
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October 28, 2022 – Inside a Community Bank’s Aggressive Turnaround
American Banker
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September 3, 2023 – The Future of Regional and Community Banking
Huffington Post
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August 28, 2023 – Wells’ Stumpf: Community Banks Are Vital to Our Way of Life
American Banker
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July 23, 2023 – Cloud Helps Credit Unions, Community Banks Go Mano-a-Mano with Big Banks
Bank Systems & Technology
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June 30, 2023 – Top Community Bank Leaders in Social Media
ICBA
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May 7, 2023 – New Regulations Are Strangling Community Banks
Bloomberg
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April 29, 2023 – Rep. Luetkemeyer introduces regulatory relief bill for community banks
Bank Credit News
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April 27, 2023 – Community banking
Daily American
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April 26, 2023 – Free Small Business Checking at Local Community Banks
Nerd Wallet
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April 26, 2023 – Smaller Banks Lending More, Earning Less
American Banker
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April 26, 2023 – Community banks provide assistance to small-business owners
Bridge Bank
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April 19, 2023 – Small banks are key to helping small business
Herald Weekly
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April 17, 2023 – Small Banks Will Benefit From Big-Bank Breakup
American Banker
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The Hill
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March 27, 2023 – Small Banks Developing Ways to Compete Against Payday Lenders
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March 26, 2023 – Community Banks Are Falling Behind in Succession Planning
American Banker
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White Papers
The Fall (and Rise?) of Community Banking: The Continued Importance of Local Institutions
University of California, Irvine School of Law
Even before the banking crisis of 2008, the banking world was in the midst of a major transformation. Pushed by increasing competition and narrow profit margins, along with the need for more efficient and cost-effective back office operations, the industry adopted a bigger-is-better philosophy, and larger banks absorbed smaller institutions like sharks swimming through a school of fish. This consolidation has resulted in a banking system where products, especially at the lower end of the market, have become more standardized and, if not profitable in bulk, nonexistent, especially in smaller communities. Read more »
21 21 21st Century Power Partners: Community Banks + Mortgage Banks
Aurus Advisers, Inc.
From small towns and villages to suburbs and urban centers, say the phrase “Community Bank “ and it will draw a smile across the faces of most people. Community banks still engender public trust, and form the financial spine of America. Read more »
Regulations, Rates, and Recovery Dampen Optimism at Community Banks
Abound Resources
Each year we ask community and small regional bank CEOs about their outlook for the coming year. CEOs started 2012 with optimism but the mood has turned decidedly sour. Three main areas are causing the grief—the three Rs if you will: regulations, rates, and recovery. Read more »
An Incremental Approach to Financial Regulation
Conference of Bank State Supervisors
The Conference of State Bank Supervisors (CSBS) has issued a white paper discussing the importance of designing a regulatory framework that appropriately supervises and supports community banks. In the white paper, titled “An Incremental Approach to Financial Regulation,” CSBS outlines actionable recommendations federal banking regulators and Congress can use to improve the community banking sector’s ability to safely and soundly meet the needs of local communities. These actions are vital to ensure the community bank business model—which underpins many local economies—is allowed to flourish. Read more »
A Opportunity for Community Banks: Working Together Collaboratively
Office of the Comptroller of the Currency
The OCC recognizes that many community banks are looking to lower expenses in response to reduced profit margins and limited strategic opportunities. In addition, community banks have expressed concerns about mounting regulatory compliance requirements that have increased the need for specialized expertise. This paper examines the opportunities community banks have to collaborate as they seek ways to do more with less. Read more »
Financial Regulation: Community Banking & Credit Unions
Bloomberg Brief
Bloomber Brief creates a special edition on the impactof post-crisis reforms on credit unions and community banks in the U.S. Within this issue, a focus on risk management and regulations will be key highlights. Read more »
Credit Union Trends Report
CUNA Mutual Group
The Credit Union Trends Report summarizes the economic, competitive, and interest rate enviroment of credit union data collected in Feburary 2015. Read more »
