California Banker Issue 4 2024

FINTECH CORNER

By Lori Shao, CEO + Founder of Finli

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crucial strategies for banks. By implementing these tactics, banks can enhance liquidity, profitability, and competi tiveness, ultimately driving sustainable growth in business deposits. Addressing Competitive Dynamics The financial landscape is shifting rapidly, with traditional and new rivals challenging banks more intensely. As more customers become open to non-financial institutions, banks need to reassess their approach to deposits, espe cially considering the combination of higher deposit costs, lower policy rates, and constrained loan potential affecting To compensate for the shortfall in net interest income, banks should focus on non-interest income. Regular con versations with financial institutions reveal three primary goals: capturing and retaining sticky deposits, boosting non-interest income, and competing with fintechs and neobanks. Evaluating the true cost and longevity of new deposits is essential, as many solutions promising growth net interest margin (NIM) in 2024. Prioritizing Non-Interest Income 1. External Solutions: Integrate banking services into fi nancial platforms to create embedded banking experi ences. However, this approach comes with regulatory scrutiny and compliance challenges. 2. Partner Fintechs: Collaborate with fintechs like Finli to provide digital tools that support customers while minimizing regulatory risks. Finli enables banks to of fer comprehensive digital-first experiences, meeting evolving customer expectations without outsourcing core operations. Finli After my extensive experience in banking as a Certified Treasury Professional, responsible for growing core busi ness deposits and increasing non-interest income for banks, I have realized the critical role bankers play in supporting small and mid-sized businesses in every community. How ever, to effectively compete against neobanks and fintechs, we need more than just a friendly smile and strong rela tionships. We need advanced tools and resources to en may not offer lasting results. Types of Innovative Solutions

anks today are facing a perfect storm: competition from non-traditional players, rising deposit costs, and an aging clientele. This squeeze on profitability demands a strategic shift to capture a larger share of

business deposits.

Customers are increasingly comfortable using non-bank financial institutions, forcing banks to adapt. The tradi tional model of relying solely on interest margins is under pressure, with lower policy rates impacting earnings. To compensate, banks need to prioritize non-interest income sources like fees for financial services. But how can banks attract and retain customers in this new environment? The answer lies in a delicate balance: providing cutting-edge digital tools while maintaining the personalized service that businesses value. Customers want real-time access to financial data and user-friendly tools, but they also crave expert advice and a human touch. Small- and medium-sized businesses (SMBs) represent a massive untapped opportunity. While these businesses of ten seek financial guidance from banks, many are frustrat ed by outdated technology and a lack of digital offerings. This is particularly concerning as many current business owners are nearing retirement, and their tech-savvy suc cessors will expect a different banking experience. The key to success is leveraging data. By partnering with fintech companies, banks can gain valuable insights into customer needs and tailor solutions accordingly. This data can also strengthen customer relationships by enabling banks to provide targeted financial support and relevant financial products. In short, banks must embrace digital transformation and cater to the evolving needs of a tech-driven generation. The future of business deposits hinges on the ability to offer a seamless blend of personalized service and cutting edge digital tools.

Key Strategies for Banks to Enhance Business Deposits

Understanding market dynamics, tailoring product offer ings, building strong client relationships, leveraging digi tal transformation, and optimizing risk management are

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