Creating Strategic Value through Financial Technology

CHAPTER 4State of Community Banks Embracing FinTech Today

INTRODUCTION

FinTech is an increasingly important topic for bankers seeking to navigate complex and difficult market conditions. This chapter provides an overview of financial performance trends in the U.S. banking industry. Additionally, key FinTech trends that are developing and expected to impact the industry are discussed. At the end of this chapter, we provide two case studies on Simple and Banno, which are two FinTech companies that illustrate the ability to utilize technology as a growth strategy.

OVERVIEW OF U.S. COMMUNITY BANK INDUSTRY TRENDS

While the following discussion uses data and examples primarily for the U.S. banking industry, certain broad themes noted in the discussion are present in other markets. For example, banking is a relatively mature industry globally. Many banks around the world are experiencing market conditions similar to those impacting U.S. banks, such as competition from non‐bank providers and FinTech companies, margin pressure from historically low interest rates, and increasing regulatory complexity. Additionally, banks worldwide are searching for ways to remain relevant in a highly competitive and mature banking industry where enhanced efficiency and increased scale, along with strong customer service, are key factors in success.

In the United States, there are nearly 6,000 community banks with 52,000 locations (including commercial banks, thrifts, and savings institutions). Community ...