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Community Banks: Investing in Tech & Branches

By Tim Sloane
February 8, 2018
in Analysts Coverage
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The results of the survey presented in this Banking Exchange article is illuminating and suggests that community banks are confident regarding the economies stability and the potential for market expansion. While this article suggests that increased investment in technology combined with new branches is a contradiction, it is more likely a sign of plans to expand geographically:

“Data from the recently released survey report, Future Forces in Banking 2018, illustrate this point. The report was produced by CenterState Bank Correspondent Division, CS Consulting Group, and Banking Exchange.

Branches still being opened

A series of questions in the survey of community bankers asked about their plans for changes to branch networks in the next two years, and about changes to technology budgets in the year ahead.

The responses, taken as a whole, indicate something of a contradiction.

As the chart below shows, just over a third of the respondents anticipate growing their branch network over the next 24 months. That figure is up from 26% who expected to increase branches in 2015, the first year of the Future Forces survey.

Further, 53% plan no change to their number of branches.

View chart here

Source: Future Forces in Banking 2018

Here’s the apparent contradiction: Respondents were also asked to compare their institution’s technology budget for 2018 versus 2017. As the bar chart below shows, 89% report tech spending will be higher—about one third of that expected to be “significantly” higher (greater than 6%). Banks above $1 billion in assets were more likely to significantly increase their tech budget for 2018.

View chart here

Source: Future Forces in Banking 2018

The picture overall is that of a large segment of the industry for which branches remain an important delivery channel, yet which also recognizes the need to stay current with rapidly changing technology—some of which works to reduce the need for branch visits.”

This article is valuable and should be read by anyone interested in where community banks intend to invest in technology. For example, core conversion, cloud computing and machine learning are all technologies that most community banks will look at in the future, while cybersecurity, Onboarding/digital account opening, and Lending platform/loan processing along with data warehousing are project areas that are receiving attention this year.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

Read the quoted story here

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