Top 10 Community Bank IT Projects

The banking industry is grappling with a quickly changing technology environment, and that is particularly true for community banks given their fewer resources. Still, several are looking for ways to provide their customers with cutting-edge digital products, overhauling their antiquated systems and using technology to strip out costs and find better uses for their tech teams. The following are ten examples of community banks that have made technology a priority.

First National Bank of Central Texas is now arming its bankers with iPads so that they can open accounts for small business customers on the road. (Get the full story here or see below.)

For First National Bank of Central Texas in Waco, building longstanding ties with its commercial customers means emphasizing personalized, face-to-face interactions.

The $800-million asset bank primarily caters to small-to-midsize business owners who don't have the time in their hectic schedules to come into bank branches to conduct financial business.

"We compete with the big boys, so we have to look at ways to differentiate ourselves," said Steve Mullens, an executive vice president of operations for the bank. "Our customers are very busy — many of them are sole proprietors — so we often have to go to their place of business to meet their needs."

To be better able to serve customers on their own turf, the bank bought a new account opening solution for iPads from FIS in late spring 2015. Now, bankers can complete the entire new account function remotely on the tablet, including the signing of signature cards, check ordering, debit card ordering and providing basic customer services outside of a branch. While the service is also available to open individual retail accounts remotely, it's in business banking where the biggest impact has been realized.

Besides the convenience it provides customers, the new technology has also digitized the account opening process. Documents are emailed to the customer and all of the internal documents are electronically delivered to the bank's imaging system and archived. The solution is interfaced with the bank's core system, FIS's BancPac, and the accounts are opened directly from the iPad.

"The old process was very slow and cumbersome," Mullens said. "There would be a lot of back and forth, we'd have to print documents and image them. Now every document is digital and stored in our systems without paper being produced. It's a seamless process."

Mullens said the bank intends to expand the service to be able to close loans remotely within the next 18 months.

"For example, our ag lender could quite literally close a loan right out in the cornfield, on the hood of a tractor," he said. "These days, people don't come into bank branches as much as they used to … any way we create that personal interaction is something we are interested in."

— Bryan Yurcan

Univest believes its subscription-based pricing model may have solved a persistent fee conundrum - charging small-business customers for various services without irking them. (Get the full story here or see below.)

Serving small businesses can be a challenge, in part because they often need a lot of attention yet don't add much to the bottom line.

That's why the largest banks tend to pass over this segment in pursuit of bigger businesses. The void creates an opportunity for small banks, but only if they can figure out how to make the time-intensive relationships pay off.

Univest Corp. of Pennsylvania believes it has an answer.

Over the past year and a half, Univest's small-business division has overhauled its loan application process, introduced add-on services that customers typically wouldn't find at a bank and developed a subscription model that allows them to pay a flat rate based on what services they want.

"If we came into that vacuum left by the big banks with the same old labor model, we'd soon figure out the same thing they did," says Hugh Connelly, who oversees Univest's small-business banking. He also serves as president of the bank's national equipment finance company, called Univest Capital.

"Our history is built on being small-business lenders, but without technology, it can be a fairly expensive segment to serve. So what do you do?"

The $2.8 billion-asset Univest, in Souderton, Pa., invested in a technology project that allowed for significantly quicker credit decisions and loan funding — now loans are done in just a couple of days, instead of weeks — while also dramatically cutting expenses.

Such speed gives the bank the ability to better compete with the growing crowd of alternative lenders that offer swift approval and funding, Connelly says.

The ability to deliver fast matters, even though most borrowers aren't actually demanding it, he says. "People want to know it can happen quickly, but don't necessarily need it to happen."

Sam Kilmer, senior director of Cornerstone Advisors, says online competitors have changed the landscape for small-business lending significantly, with their speed and convenience.

Banks realize they have to adapt, Kilmer says, because borrowers care a lot more about getting funding than who provides the funding. "When you're a small-business owner, you're not thinking about the 'who,' you're thinking about the money and getting the money now," he says.

So instead of trying to fit small businesses into other platforms — either commercial banking or consumer banking — more banks are looking into what they can do from a technology perspective to better serve this segment.

Univest's small-business makeover began about 18 months ago with the adoption of nCino's Bank Operating System — which the bank has been customizing ever since.

The system, designed by the prolific small-business lenders at Live Oak Bancshares in Wilmington, N.C., streamlines commercial loans by eliminating repetitive processes. The system has helped catapult the $1 billion-asset Live Oak to second place on the list of most active lenders in the Small Business Administration's 7(a) loan program. It is sandwiched between Wells Fargo and U.S. Bancorp, with $1.15 billion in SBA loans written in fiscal 2015. Live Oak spun out nCino a few years ago.

"It is a sophisticated tool out of the box, but we've adjusted it and modified it," Connelly says. "Not everyone uses the software the same way."

nCino runs on top of Salesforce's customer relationship manager, which brings more efficiency to the credit process by tying the marketing, sales and underwriting together. While nCino is perhaps the most notable example of such a product, others are popping up. For instance, in the fall the private equity firm Riverside Co. bought Baker Hill, a credit origination platform, from Experian and is pairing it with Database Marketing Agency.

"We are seeing marketing, sales and service converging around the delivery channel," Kilmer says.

Expect more banks to adopt such solutions too, rather than pair with an alternative lender.

"Most banks looking to grow in a highly competitive market will take their brand directly to market by upgrading their technology," Kilmer says.

Since moving on to the nCino platform, Univest has made some tweaks, including incorporating its homegrown credit decision modeling into the platform. Univest has been building the model for a decade and wanted to keep it.

Univest also built electronic signature capabilities into the system.

Through its upgrades, Univest managed to shrink the up-front costs of processing a loan 92% between 2014 and 2015. "Something that may have cost a couple of thousand now is a couple of hundred," Connelly says.

While Univest was researching how it could better serve small businesses, it asked those business owners about all of their pain points, not just those associated with traditional banking. From there, it created a list of offerings and bundled them similar to the way cable companies offer telephone and internet services with their cable TV.

"We asked them, 'What are the things you need? What are the things you wish you had? And if we put them together and charged you a fair, reasonable fee, would you pay it?' " Connelly says. "The feedback was, if we built it, they would buy it."

The general thinking is that small businesses, much like retail customers, are averse to paying fees. But a good deal makes all the difference, Connelly says. "Americans are fed up with fees, but they don't mind paying for value."

Univest Prime, which is what the bank calls the bundle of services it offers to small businesses, comes in three forms: a basic package for $24.99; a premium package for $49.99; and a professional package for $74.99. All three packages cover typical small-business banking, cash management and credit.

The basic package adds perks such as five cashier checks a month and mobile deposits.

The professional package includes 15 cashier checks a month, terminals for deposits and payments processing, and LifeLock's "ultimate" identity theft protection.

Connelly says identity theft protection can be especially helpful to small-business owners, because they tend to share their personal information more widely than the average consumer. For instance, office managers may know their boss' Social Security number and mother's maiden name, in order to transact on their behalf.

Univest compares its pricing structure to the one Netflix uses, where customers can choose what they pay based on the level of service they want.

Univest Prime began beta testing a year ago and went live in the summer. Connelly says the products have been well received.

The premium package has been the most successful, and users are getting about $2 worth of bank services for every $1 they spend for the bundled package.

Univest also partnered with a local AT&T distributor to offer all of its small-business customers cheaper cell phone rates. Essentially Univest negotiated a group discount that allows its customers to save between 10% and 30% on their cell phone bills.

The benefits have been an attention-getter, Connelly says. Some customers are initially skeptical of the offer, but more often they are intrigued. Noncustomers wonder why their bank isn't offering something similar.

"As we went down this path, we knew we needed to be more holistic," Connelly says. "We could continue to just be traditional bankers, but I don't think we would have been happy long term."

— Robert Barba