Florida Banking May 2022

BANCSERV ENDORSED PARTNER: NCONTRACTS

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HOW COMMUNITY BANKS CAN MAXIMIZE FINTECH PARTNERSHIPS

BY MICHAEL BERMAN, FOUNDER AND CEO OF NCONTRACTS

F intech isn’t just about finding new ways to innovate new products and services. In many cases, its goal is improving and automating internal processes and technologies. The result is a more efficient and effective process. Just consider the areas of risk management and compliance, often called RiskTech and RegTech. Automating risk management and compliance can introduce huge advancements in efficiency at financial institutions. These result in greater insights into risk and compliance, improved collaboration, access to expertise unavailable in-house, and a more responsive, proactive program — often with substantial cost and resource savings. Don’t just take my word for it. The Federal Reserve’s 2021 Consumer Compliance Outlook ’s top story addresses how technology and innovation are critical to keeping community banks — and by extension other community financial institutions — competitive. It says fintech partnerships can be highly beneficial in reaching this goal. “The fintech partnership model is particularly important for smaller banks, which may have limited resources to develop or implement technology solutions on their own. By obtaining needed technology resources from a third party, community banks can meet their innovation needs and continue to focus on relationships with their customers and communities,” the Fed’s Outlook says. While many of these technologies are customer facing, the Fed makes a point of highlighting “operational technology partnerships that improve a bank’s back-end operations, including partnerships that enhance the efficiency and effectiveness of the

challenges. The key to success is developing partnerships where contributions to the effectiveness and efficiency of an institution aren’t thwarted by the accompanying challenges. 1. Set a fintech strategy that aligns with your overall strategic plan. It’s important to begin at the beginning. When it comes to your financial institution, that means your strategic plan (which is informed by your mission, vision, and values). Does your institution value efficiency? Speed? Innovation? Constant improvement? Staying the course? Simplicity? When considering operational technology partnerships, make sure they align with the goals set for the institution. An institution that values innovation will have a different approach than one that values steady improvement. Consider the risks of entering a fintech partnership — and how much effort it will take to mitigate them. If an activity poses a significant risk, mitigating that risk may wipe out any efficiency gains. Assessing these risks and regularly updating them is an ongoing effort, making risk management one area that can be made more efficient through fintech partnerships. 2. Find the right technology partner. There are many fintech partners out there, but not every fintech partner will be right for your financial institution. When seeking out a fintech partner to improve operational efficiency, make sure you have a clearly defined vision of what efficiency means. Does it mean being able to accomplish the same amount of work with fewer employees? More work? Improved communication and collaboration? Spending less? Making it easier to employ remote employees? Reducing the number of meetings? Eliminating unneeded products or processes? Your FI should also have a solid grasp of the products and services it currently uses to help determine whether a vendor’s technology will be compatible with those you rely on now (or plan to use in the future). It’s a

compliance and regulatory functions.” Maximizing fintech efficiency

Operational technology partnerships with fintechs bring many benefits, they also bring numerous

14 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING