Community banks remain resistant to new technology despite increased threats from bigger institutions and nonbanks.
Such hesitancy was on display earlier this year when the Florida Bankers Association canceled a fintech conference marketed to bank CEOs and other executives — due to a lack of interest.
The association's decision left bankers such as Drew Saito disappointed.
“I was shocked,” Saito, a senior vice president in charge of South Florida expansion at First Green Bank in Fort Lauderdale, said during a presentation at American Banker’s 2017 Blockchains + Digital Currencies conference in New York.
“My chief technology officer, the CEO of the bank and I were planning on attending,” Saito added. “What I thought of as the [association’s] most important conference … they just got rid of it.”
Saito’s experience epitomizes small banks' unwillingness to learn about new technology, much less adopt it.
The level of tech spending at community banks hasn’t changed much in recent years, based on research by the Federal Reserve and the Conference of State Bank Supervisors. About 31% of bankers surveyed in 2016 planned to spend an amount equivalent to 0.15% or more of total assets in technology, or a negligible rise from a year earlier.
That approach could prove problematic for community bankers, with Saito drawing comparisons to the demise of the video rental chain Blockbuster. For instance, he said distributed ledger technology is evolving quicker than the implementation of the smart phone or the Internet.
“I feel like this is happening rapidly,” Saito said. Some bankers, he said, don’t think it is their responsibility to innovate.
A lot of community banks “are organized, grown and eventually sold,” he said. “There certainly is a lack of innovation and I think that’s where the opportunity lies.”
The $300 million-asset First Green, which has been a pioneer lending to firms that endorse environmentally friendly principles, uses technology offerings to attract more customers and work more efficiently with existing ones, especially businesses. The bank has promoted commercial remote deposit capture, which allows it to work with commercial clients that are hundreds of miles away.
First Green is also planning to work with a tech firm to pilot a distributed ledger project, Saito said in an interview after his presentation. The company also aims to automate compliance functions.
Other banks can innovate by seeking collaborative opportunities through their state banking associations or tech firms, Saito said. Still, it seems most community bankers will be hesitant about technology.
“They’re going to wait until the last minute,” Saito said.
To be sure, the issue extends beyond U.S. banks. Saito noticed similar attitudes among 25 global bankers he met during a recent event in Madrid.
“Their level of understanding of financial technology … was not what I anticipated,” he said, expressing amazement that a Miami banker was teaching foreign executives the ins and outs of distributed ledger technology. “But it’s an opportunity, too.”
Banks also need to become more open to working with fintech firms, particularly in areas where the two sides can collaborate.
Regional and community banks will be “heavily reliant on external partners going forward,” Saito said. “It has to be more of a two-way situation where we innovate together.”