• Gene Collett
  • Published: 17 April 2019

What’s the state of community banking? What’s our future? How will automation affect me? Is my bank devoting too much attention to compliance risks – or not enough?

Those are a few questions that bankers from institutions of all shapes and sizes were seeking to gain insight on at the conference this year.  ICBA provides excellent opportunities for networking and learning with several very informative sessions on the docket.  Though I couldn’t participate in each one, there were learnings from each one attended at this year’s ICBA Live event in Nashville.  Here is my summary from some of the sessions I attended:

Artificial Intelligence

Artificial intelligence (AI) seemed to be the topic of greatest interest this year. Here are six key takeaways from the session:

  • Financial institutions are spending big on AI.  According to Ernie Bundy, VP of Product Strategy for FIS, firms are reportedly set to spend $31 billion in 2019.
  • The three pillars of AI are that it’s open and instant, intelligent and secure. Users assume it is secure, so don’t let security lapse.
  • AI must solve a business issue – don’t fall in love with AI for AIs sake.
  • Younger consumers value their time and will spend a bit more on ‘transactional convenience’ that enables more time with family and friends, and on other pursuits.
  • Set up your AI to learn from interactions with users.
  • The businesses that provide the best knowledge-based interactions and experiences – based on customer lifestyle – will win in the marketplace.

Your Web Presence

Here are four important things to keep in mind about your web presence: 

  • What is your website? First and foremost, it’s the busiest branch in your bank! Your site’s brand lives in the mind of your customers.
  • Characteristics of a strong brand are that the brand is defendable in the marketplace, deliverable (across products/functions/departments), and desirable, to your target audience. 
  • Presentation of your visuals (colors, fonts and imagery) and how you communicate is also important. You should use the same language and tone of voice that your employees would use when speaking to customers in-person. 
  • When planning a website, remember to use a diverse group of employees and to test the look/feel/vibe/tone early in the process – so that a second re-design isn’t necessary before rollout!

Financial Crime, Hacking and Cyber Threats

By far, this presents the most immediate threat to every institution’s bottom line. Here are some key points from industry expert Mark Eich of CliftonLarsonAllen:

  • You’re never too small to get hacked; all banks are at risk. 
  • Four high impact trends in financial and cybercrime are organized crime (wholesale theft of personal info), ransomware (holding data hostage), payment fraud (corporate account takeover - ‘CATO’, and online banking and credit card fraud), and credential harvesting. 
  • To help prevent security breaches never click on a link, use multi-factor authentication (MFA), when possible, and focus on recognizing logical and illogical behavior (i.e., “Hey Ms. CEO, should I wire $1 million to person ‘X’?”). 
  • If you suspect a breach take immediate action and know who to call both internally (e.g., corporate security) and externally (e.g. business partners, insurance providers).

Compliance/Risk Management

There’s never a shortage of worry or questions on this topic, and concerns about compliance risk remain high, with 55-63 percent of people surveyed being very concerned about various compliance risk topics. Evolving areas of emerging/higher risk include UDAAP, fair lending and fair banking, BSA/AML/ OFAC, privacy, cybersecurity and fraud, and Foreign Corrupt Practices Act (FCPA)

Regulators’ behavioral focus is on the following:

  • Compliance officers’ attentiveness to:
  • The marketing and product development processes
  • The oversight of FinTech providers – e.g., does a FinTech understand and execute regulatory guidance, boundaries and requirements?
  • Conduct risk – will key people adhere to internal guidance and regulatory requirements?
  • Board of Directors – are appropriate compliance and risk management conversations occurring at the board level?

The Consumer Financial Protections Bureau (CFPB) is working on regulatory relief in the areas of FCRA, HMDA, mortgage escrow exemptions, and Property Assessed Clean Energy (PACE) loans. Once the CFPB issues guidance for PACE loans, the ‘pace’ at which they’re coming to your state will increase.

What’s next? 

Where is community banking headed?  Down a path with more complexities than an hour’s drive in Los Angeles traffic – toward:

  • More competition, from larger institutions and new types of institutions
  • Faster processes, brought on by computing power that puts financial transactions where customers live and breathe
  • More complexity, though maybe with a bit of relief … if only every new law/reg included the removal of another
  • Greater financial peril, with the technology that enables customer engagement also enabling hackers and fraudsters.Capco’s Strategy, Digital, and Finance, Risk & Compliance (FRC) practices enable institutions to determine, focus upon and execute the priorities that will beat their competitors. Find out how by emailing us at gene.collett@capco.com.