With other firms eyeing the financial services market, banks could find themselves left behind by their customers, experts at Boston FinTech Week 2019 warned.

When Inclusiv, a federation for community development credit unions, recently launched a mobile app, it did not introduce innovative features. Instead, the app prioritized needs and transactions that might matter more to low- and middle-income customers, people not often considered when banks develop financial technology innovations. 

“Digital has really enabled us to think carefully about what it is that we do and what our customers and members value, and how we might bake that into digital platforms that we’re developing,” said Cathie Mahon, Inclusiv’s president and CEO, during a recent panel discussion about financial technology at this year’s Boston FinTech Week.  

How customers at community banks and credit unions can benefit from the financial technology ecosystem was one topic raised during four days of panel discussions and special events at Boston FinTech Week, held from Sept. 9-12. Sponsored by the Boston-based nonprofit FinTech Sandbox, the event brought together workers and leaders from across the fintech industry, including financial institutions, startups and venture capital firms.  

FDIC to Offer Helping Hand 

For FDIC Chairman Jelena McWilliams, technological innovations threaten the viability of small banks. Speaking on FinTech Week’s first day, McWilliams said small banks risk losing customers to their competitors because they are not at the forefront of technological innovation. 

“I think we’re going to have a problem with small banks in the United States,” she said. 

Along with the cost of technology initiatives, some of the challenges faced by small banks apply to the larger fintech ecosystem, including cybersecurity, regulatory uncertainty and compliance. These risks are more likely to deter smaller banks from pursuing innovation.  

To help explore innovation further, McWilliams said she plans to add a chief innovation officer to the FDIC. Having an innovation office will allow the FDIC to help banks while it learns from others in the industry, she said. The agency plans to modernize the processes for supervising banks, she added, with a view on technology, potentially having positive effects for banks. 

Encouraging banks to innovate, giving them a path to pursue innovation and providing more certainty around the processes are important to prevent small banks from being left behind, she said. 

“If we don’t allow banks to innovate, we’re going to push more banking services outside of the banks,” McWilliams said. 

Brand Loyalty a Concern 

FinTech Week panelist Rep. Trey Hollingsworth (R-Indiana), a member of the House’s Committee on Financial Services, said he sees fintech as a way to allow banks to reach more customers, especially in rural areas. Fintech can help financial companies improve existing products while also developing new products and services for customers, he said. 

Inclusiv’s Mahon said her organization works with the core system to find ways to better serve customers.  

“We have partnered with core data processing systems and really been thinking about what mobile banking looks like for a low-income consumer who operates on very tight margins, who’s very concerned about getting things wrong because it’ll really impact their household budget,” she said. 

Speaking on the same panel with Mahon, Avidia Bank COO Robert Conery said banks can partner with fintech startups to add more front-end options for customers. He also advised financial institutions to keep generational preferences in mind. 

“There’s more brand loyalty to the app than there is brand loyalty to the bank,” Conery said. 

In just seconds, he added, apps can also be deleted.