5 Ways Automation Can Help Community Banks Succeed in Times of Stress

The recent crisis in banking has spotlighted the unique and significant challenges that community and regional banking institutions are facing today.

The failures of Silicon Valley Bank and Signature Bank in the U.S., along with Credit Suisse in Switzerland, has called attention to structural weakness in the global banking system. And the government’s subsequent seizure and sale of First Republic Bank shows that the crisis is not over yet.

Several factors have led us to this point, headlined by rising interest rates and declining trust, which together are resulting in a flight of deposits. In turn, deposit erosion is putting the income statements and balance sheets of many community banks at risk.

As costs of funds increase and profit margins decline, banks must safeguard their financial positions by identifying ways to reduce costs and improve operational effectiveness. Workload automation is key to helping community banks remain competitive during this time of disruption.

Shocked but not surprised

Though alarming, the recent crisis is hardly a surprise to those close to the banking industry.

According to the latest Community Bank Sentiment Index survey, 96% of respondents believed the U.S. economy was already in a recession. The overall sentiment reading was 85, well below the “neutral” rating of 100, indicating a high degree of pessimism from within the banking sector. Top challenges cited by community banks included inflation, government regulation, rising interest rates, and the cost and availability of talent.

Similar worries were noted in a recent RMA survey of community bank executives, in which respondents named cybersecurity risk, credit risk, operational risk, and IT risk among the top risk priorities for the coming year. Specifically, “the combined demands of technology costs, managing third-party vendors, reputational risk, and increasing regulatory pressures are pushing cybersecurity and technology risk to the top of the list,” according to the survey’s creators.

“Over the years that RMA has conducted the Community Bank Survey, community bankers have registered increasing interest in cybersecurity and its relationship with other risks. In this year's survey, another operational risk—IT risk—is frequently cited as important, as community banks work to enable remote workforces and improve effectiveness through automation, in addition to managing data security and erecting defenses against cyberattacks.”

The tech talent gap is another frequently cited concern, as it’s become abundantly clear that for many community financial institutions, the capabilities of in-house tech departments are not sufficient to meet the increasing challenges of stretched resources, expanding workloads, and overworked employees. With tech staff stretched thin just doing the basic job of running the bank, it leaves precious little time for projects related to growth and innovation.

But the tech talent gap isn’t the only challenge faced by financial institutions. Many are dependent on an increasingly complex technology stack, even as they prioritize efficiency and productivity. In fact, twice as many global execs are focusing on enhancing productivity through technology and automation now versus 2016.

Meanwhile, legacy processes are walled off inside operational silos that don’t speak to each other, limiting organizations’ ability to extract and transfer data across the enterprise, let alone understand customer needs and behaviors.

Compounding this issue is increasing competition from fintechs and challenger banks, which are capitalizing on changes in consumer behavior and the broad shift toward digital banking. To enhance customer satisfaction through a compelling and convenient digital experience, incumbent institutions are rapidly bringing on new systems and employing emerging technologies like AI, machine learning, and data analysis. But these systems must be able to integrate and communicate with legacy systems effectively in order to provide customers with a seamless digital experience without adding manual tasks.

Automation positions community banks for long-term success

These challenges are significant but not insurmountable. Here are five ways that workload automation and orchestration (WLA&O) can help community banks withstand the current banking crisis and come out stronger and more resilient on the other side.

1. Eliminate manual processes.
   Workload automation is designed to streamline and eliminate redundant manual processes like data entry, file transfers, and report generation. Modern WLA&O systems are also adept at supporting integration across multiple technology environments and solutions, including cloud, on-premises, and hybrid tech stacks.
   
   A reduction in manual processes equates to fewer errors, improved accuracy, and less system downtime, with the ultimate result being a better customer and employee experience.
   
2. Enable smart scaling of the business without adding headcount.
   With the growth of digital banking, community banks now have the ability to expand their customer base well beyond their hometown, enabling them to serve customers across the country as well as across the street. But to effectively compete with major national financial services providers and digital-only banks, they need to be able to scale—efficiently and cost effectively.
   
   This is where automation plays a critical role. With modern WLA&O solutions, less IT expertise is needed in house to manage complex, multi-platform systems. Through low-code and no-code self-service automation options, front-line staff with little or no IT experience can trigger fast automation sequences at the push of a button—empowering them to run reports and perform customer-facing routines.
   
3. Support operational resilience and better compliance.
   In the back office, modern-day workload automation serves as an effective bridge across diverse on-premises, cloud-hosted, and hybrid environments. It helps strengthen compliance and security and improve business continuity. WLA&O also enables institutions to gain operational resilience through self-healing routines when applications or systems are disrupted without warning.
   
4. Give time back to focus on strategic innovation.
   By reducing or eliminating time-consuming manual processes like data entry and file transfers, staff get time back to focus on higher-level initiatives, like engaging with customers, developing new products, researching new markets, and optimizing processes. In order to compete today, community banks must focus on the needs of their core customers by offering the most competitive, value-added services and consultative advice.
   
   As an example, Open Technology Solutions, a credit union service organization (CUSO), implemented workload automation in its core processing platform with a goal of eliminating around-the-clock staffing. Following deployment of a leading automation tool, the CUSO was able to redeploy 11 operations staff into new, higher-value strategic roles.
   
5. Retain institutional knowledge for the long haul.
   Financial institutions can retain skilled talent by elevating their responsibilities beyond the mundane, while keeping critical knowledge within the organization. That’s because institutional knowledge is maintained right within the automation system, and staff only need to know how to activate the automated process, rather than understand each step within a complex set of workflows.
   

Community banking is at a crossroads. The current banking crisis has highlighted several critical challenges, from economic uncertainty and rising costs to evolving consumer expectations and a growing tech talent gap. To respond effectively, community banks need to innovate at a faster pace than ever before. Automating core workload processes is a key step toward achieving this transformation.