Community banks are spending more on technology across the country, a new report shows, partly in response to the pandemic and partly in response to a variety of competitive threats.
According to the Bank Director 2021 Technology Survey report, sponsored by CDW, banks have increased their technology spending by an average of 10% over the past year. In addition, more than three-quarters of responding bank managers and board members say their institute’s technology budget has increased for fiscal 2021. The average amount a bank spent on technology in 2021 was $ 1.69 million. It’s a large number, but according to the report, it may not be enough in the ongoing battle with big banks and an impending battle with fintech companies and nontraditional lenders for customer loyalty.
The $ 1.69 million amount, says Emily McCormick, vice president of research at Bank Director, “is significantly less than megabanks like JPMorgan Chase & Co. and Bank of America Corp., both of which are more than $ 10 billion annually – Spend dollars “. Technology. The community banks need to think outside the box and use the resources available – internal and external – to get the most out of their budgets. “
For the banks surveyed, technology spending averages 1% of assets. Banks With Assets Less Than $ 500M. Larger banks, institutions with assets greater than $ 1 billion, spend more on expertise in the form of in-house staff and managed services, the report said. An average of 40% of the technology budget goes into core systems.
In terms of competition, banks remain the most affected by the usual suspects: other banks and credit unions are the biggest concern at 54%, followed by large and supraregional banks at 45%.
What is noteworthy, however, is the percentage of bankers who are concerned about a range of threats that may have been virtually nonexistent five years ago. That list includes giant retailers like Amazon and Walmart, which 18% of respondents cite as one of the top three threats to competition; Tech giants like Apple, Facebook and Google with a 23% concern rate; so-called neobanks or challenger banks like Chime, fintech companies that offer mobile banking, with a concern rate of 31%; and digital payment providers like Square and PayPal with a concern rate of 36%. For example, Bank Director points out, Square launched a small business banking suite soon after the survey was completed in July.
“The rise in technology spending in response to COVID-19 and an evolving competitive landscape matches what CDW sees in our clients in the financial market,” said Scott Hiemstra, director of sales who leads the financial services team at CDW. “Digital transformation has come to the fore as banks and credit unions adapt to a hybrid work environment and focus on improving the customer experience while putting security first.”
The Brentwood, Tennessee-based bank director provides board-level research, peer insights, and in-depth services to executives and board members. The survey interviewed more than 100 independent directors, chief executives, COOs and senior technology executives of US banks with assets less than $ 100 billion.