‘Digital transformation’ and ‘business transformation’ may be today’s big industry buzzwords. But given the significant challenges facing community banks, credit unions, and other small authorised deposit-taking institutions (ADIs), limiting transformation to IT or business systems isn’t enough.

In addition to competing against Australia’s big four, small banks must both meet consumers’ growing appetites for modern, digital experiences and fulfil a seemingly endless list of compliance and regulatory requirements.

Digital transformation is a part of solving this puzzle. But truly succeeding now and into the future requires thinking bigger—it requires reimagining what it looks like to become a fully transformed banking operation.

The challenges facing smaller banks

A full accounting of the challenges facing small banks would be too lengthy for a single article. Yet a few of the most pressing concerns affecting the sector include:

A shift in consumer expectations

Today’s customers expect both modern digital banking experiences and personal relationships from their community bank. Even as bigger banks are shuttering branches in some areas, smaller banks can’t afford to do the same, lest they risk jeopardising the customer relationships they rely on.

At the same time, delivering the technology-driven banking apps customers have grown accustomed to requires a significant IT investment that may be burdensome on smaller banks’ proportionately smaller budgets.

The burden of compliance and regulatory requirements

Regulation in Australia’s financial services sector provides an important layer of consumer protection. That said, staying compliant with APRA and other regulations comes at a cost to banks—both in terms of the effort needed to stay up-to-date with changes as they roll out and to make necessary improvements to comply with new rules and regulations.

Maintaining data security over member data

Protecting customer data is both a moral and practical imperative. The importance of trust in a banking relationship can’t be understated, nor can the potential for reputational damage if a breach were to occur.

Again, smaller banks are at a disadvantage. Though banks of all sizes are subject to the same data security standards, smaller institutions are more likely to employ in-house IT generalists—not data security experts. This can leave them at a disadvantage when implementing security best practices.

Limited IT resources

At a broad level, smaller banks tend to have access to fewer IT resources than their big four competitors. Besides the size of their IT functions and the skill sets they employ; smaller regional banks may find it difficult to compete for top IT talent—especially when compared to the compensation packages offered by larger competitors.

As a result, IT employees at small banks are likely to spend more of their time ‘fighting fires’ to maintain business operations than on executing strategic initiatives. This, in turn, compounds the difficulty small institutions face when deploying updates and delivering exceptional digital experiences.

Taken together, these and other issues contribute to higher operational and unit costs relative to the size of small banks’ organisations—not to mention, overburdened staff and delayed deployments.

What banking transformation looks like

With all of these challenges in mind, it’s no surprise that a number of small community banks see merging as their only path to sustainability. Banking transformation represents another path.

But what does it mean to become a ‘transformed’ bank? What does banking transformation look like, and how can its practices be used to elevate your bank in the years ahead?

Essentially, banking transformation means being able to deliver a better experience while operating in a more efficient, cost-effective manner. More specifically, a transformed bank enjoys:

• The consistent delivery of a positive, end-to-end experience for internal and external stakeholders.

• A scalable IT architecture that is secure, based on cloud services, and includes a limited number of best-in-class systems and technologies that are hand-selected to fulfil specific, required purposes (compared to legacy systems that are no longer fit-for-purpose).

• Solutions that can be easily integrated with existing systems and future technologies.

• The ability to make changes quickly and easily, including system patches, new deployments, and compliance updates.

• The collection and storage of data in modern systems, allowing for analysis that drives business insights (excluding franchises that may have limited access to data).

• Optimised costs, thanks to a savvy licensing approach, the removal of redundant apps, and an architecture that’s structured in order to minimise compute and storage costs.

• Processes and workflows that are digitised or automated to the greatest extent possible in order to minimise manual effort and human error.

The benefits of becoming a transformed bank

Within a transformed banking operation, compliance reporting becomes easier, as customer experiences become more positive and consistent.

Internal and external stakeholders gain confidence in the organisation’s data security posture, while lower operational costs mean capital can be reinvested into higher priority projects. Better data improves marketing and product development outcomes, and employee satisfaction improves through the reduction of manual, repetitive tasks.

Banking transformation is possible

The vision described above may feel too good to be true for smaller banks mired in challenging operating conditions. But the right IT professional services partner can make it a reality for your organisation by:

• Taking ongoing IT infrastructure management responsibilities off your plate, enabling your core team to spend more of its time on strategic projects.

• Reduce your operational costs compared to bringing similar skill sets in-house—especially in today’s challenging labour markets.

• Implementing business process automation to save time and labour costs, such as reducing the manual processing of claims or onboarding new customers.

• Delivering a better, digitally-led banking experience by leveraging their learnings from past projects in the financial services industry.

At Canon Business Services ANZ (CBS), we’ve helped more than 80+ financial services organisations on their banking transformation journey.

As an example, take Unity Bank. About a year ago, the credit union was struggling with software and operating systems that were reaching end-of-life. Together, we transitioned the bank to a hybrid cloud environment—utilising both CBS’ data centre and public cloud applications an infrastructure—to deliver security, productivity, and cost-saving benefits.

According to David Willcox, Unity Bank’s Chief Information Officer:

“Even as recently as 4-5 years ago, we only had three IT staff. After eight mergers in 10 years we had a lot of additional work. We’ve relied on CBS throughout to help us maintain our operations. We can then focus on other things internally that can’t be outsourced and look at how we can add more value.”

For more on how CBS’s IT consulting services support modern banking transformation, visit us at Booth at the upcoming COBA 2022 event from 25-27 September, or reach out to our team directly for a personalised consultation.