Diversity of Deposits Key for Digital Banking Success
As we've noted in previous blog posts, digital banking is growing by leaps and bounds - good news for financial institutions, as digital banking availability and usage have been shown to boost customer loyalty and provide a host of other upsides.
However, as explained via a post at BAI.org by Danielle Kane, Director of Small Business Banking at Grasshopper Bank, the ongoing success of digital banks will rely on some basic goals that should be kept in mind, including:
- Maintaining diverse deposits from different business sectors
- Pursuing partnerships with fintech companies
- Offering hyper-personalized products and services for each customer
- Investing in banking-as-a-service (BaaS) to provide an integrated digital experience
These strategies are ways for digital banks to develop a well-rounded suite of products and services to meet the varied needs of small businesses.
Ms. Kane offers a case study of a bank that relied on narrow focus:
The collapse of Silicon Valley Bank (SVB) earlier this year was a stark example of what can happen to the most seemingly successful bank when deposits are too concentrated. Many experts attributed SVB’s failure, at least in part, to a lack of diversity. SVB was exposed entirely to one community—the technology sector. In the aftermath of the collapse, an article published on PBS read, “When this close-knit community of depositors talked to one another—using digital channels to do so quickly—the bank likely became more vulnerable to rumors and a run.”
The Importance of Partnerships
To build diverse product and service offerings, banks can't go it alone. They will need to find and maintain effective partnerships to build and maintain the technology required to stay ahead of rapidly growing and evolving competition.
The future of banking is married to technology, and fintech companies are providing the infrastructure and innovation that is revolutionizing the banking sector. Digital banks must establish a strong technology foundation—after all, this is a digital experience—by partnering with fintech companies. Fintech partnerships ensure that digital banks are prepared for future technology innovation and staying at the forefront of advancement.
When effectively planned and deployed, these partnerships create a vital resource for big and small businesses that will ensure a strong and lasting business-bank relationship.
Business owners need more than a bank account; they need a banking partner. To be a great partner, versatility provides the answer with a return to traditional relationship banking, ensuring that digital banks become a pillar of the financial market.
Staying Ahead of the Curve
As users -- business and private -- turn to a wider spectrum of solutions for their banking needs, financial institutions must bolster everything from user experience to back-end systems in order to reach maximum efficiency while meeting and exceeding expectations. This means deployment of AI and machine learning for everything from chatbots to assisting customers, as well as check payment automation and fraud detection.
Banks should pay particular attention to check fraud -- these losses impact both the bank and their customers. In Modernizing Omnichannel Check Fraud Detection, we detailed reasons for concern:
As banks navigate through their digital journey, checks will continue to be a major payment channel for investment. By automating processing and "beefing up" check fraud detection, banks can ensure safe and secure deposits for their customers.