For many of us, the time when we opened our first ever bank account at our local neighborhood bank is a moment we’ll always vividly remember.
So many defining moments, from receiving that little green book to getting a check book to balance your account to meeting with human tellers to get cash or deposit money. All of these moments — and countless others — made up the banking “experience.”
But over the last few decades (particularly the last few years), experience has come a long way especially as banks have to continue to navigate today’s macro environment. Today’s regional banks continually face a new set of challenges, from economic volatility to rising interest rates to increased fraud and financial crime to stringent regulatory demands… and that’s just the beginning of the pressures! The 2024 Banking Priorities report does a great job pulling back the curtain on the impact of these pressures.
Here are a few stats that are particularly interesting:
- AI and machine learning were named by bankers as 2024’s most impactful technologies, followed by banking as a Service and digital transformation
- Bankers remain focused on technological innovation, with 94% emphasizing the need for the latest technologies to satisfy customers
- Banks’ continued investment in digital stems from steady increases in digital banking usage, with an anticipated 216.8 million digital banking users by 2025
As the macro continues to evolve, what it takes for small regional banks to compete, maintain viability, and position for growth is also shifting considerably. But a competitive driver is emerging that enables banks to compete with the largest of institutions and that competitive driver is data.
Let’s dive into three ways data can help regional banks compete and keep apace in an ever-shifting macro.
Data Science to Unlock Hidden ROI
The advent of data science, predictive intelligence and data storytelling enables small regional banks to unlock hidden ROI potential simply by making a commitment to unearthing dark data.
More than 60% of technology leaders report that more than half of their organization’s data is considered dark — or not being used for purposes such as analytics, business relationships and direct monetizing. In thinking about banks, there is a sea of data being collected regularly that holds critical intel that could unearth fiscal opportunity around identifying new customer service offerings that would sell expediently, unearthing variables that most contribute to customer churn, building sophisticated models for credit scoring, fraud detection, and risk assessment… and so on.
Perhaps most importantly, banks can leverage data science to forecast what’s coming around the corner, from predicting market trends to customer behavior to economic conditions. Small regional banks need not have massive data, strategy and research teams to compete in this area. Rather, by investing in data science capability, they can hold their own to large institutions in terms of making important, informed decisions about pricing, investment strategies, and product development.
AI to Compete and Scale
While small regional banks might not have the size, investment options, and resources as larger institution counterparts, AI and automation enables them to level the playing field. Here are a few core ways as to the how…
When it comes to operations, AI can be a game-changer in terms of its ability to automate and optimize repetitive tasks such as data entry, transaction processing, and compliance reporting, among other areas. Not only does AI speed up critical operations, but it also reduces the likelihood of human error.
Taking it a step forward, AI-driven tools can be deployed to handle more complex functions like fraud detection and anti-money laundering activities, where they can quickly analyze patterns and flag unusual activities much faster than manual systems. In fact, banks that integrate AI can see productivity increases by 20-30% and revenue growth by up to 6% as a result of enhanced efficiency and service capabilities (Accenture). What’s more, AI can play a critical role in supporting the customer experience — from increasing customer care productivity to improving service delivery via chatbots and virtual assistants to predicting customer needs before they arise.
Data Wins Are Always There
There are so many ways to win with data these days, and because of that the ability for small regional banks to catch up, drive ahead, or even leapfrog ahead is always within reach. At SQA Group, we encourage all companies to consider the notion of identifying and driving towards your “next mile” of being truly data-driven.
Sometimes that mile is very specific, like standing up proper data management strategies, integrating sophisticated data analytics tools, and standing up self-service BI to empower all users. But other times, that mile can be a bit more advanced like identifying patterns and insights that can inform areas such as risk management, customer segmentation, and product development strategies; tapping into predictive analytics to determine how best to digitize your experience in alignment to customer wants; or advancing AI/ML integration and optimization to best personalize the experience.
That’s one of the many beauties of data. You can win with it over and over again meaning small regional banks can always “be in the game” when it comes to data maturity. A great place to start in order to pinpoint where to win next is to ask: “Which stakeholder group —customers, partners, our community — could most be impacted if we reach our next data mile?”
As small regional banks face the dual challenges of navigating a complex macroeconomic environment, data science, analytics, and AI are proving indispensable, particularly as competitive drivers. Data is the great equalizer, allowing smaller banks the chance to gain competitive advantage, stay ahead of macro trends, and wow customers, particularly as they navigate an ever-shifting banking landscape.
Looking for a quick win in the data and analytics space to better compete? Click here to book your time directly with our Data Solutions team to pinpoint some jump-start solutions.