Financial Futures: Enabling modernization and innovation in regional banking
Nicole Pienkos, senior vice president and group executive of Regional Banking, FIS
September 19, 2022
Like many organizations, regional banks are experiencing a time of rapid change. In the wake of a pandemic and in order to keep up with an increasingly digitized society, these institutions need to augment their services to remain competitive among other banks and appeal to societal shifts.
But regional banks don't need to go on this journey of digital transformation alone. Fintechs and other partners are ready to help them make sense of the evolving retail banking industry and adopt modern solutions.
In today's episode of Financial Futures, I'll be joined by vice president and business executive at FIS® Mike Gravelle. We'll be exploring the challenges that are facing regional banks and examining some of the solutions and opportunities that are emerging out of this period of innovation. We'll also find out what sets regional banks apart from the community and national banks and what makes them uniquely suited to address the financial needs of their customers. Plus, we'll hear how having the right tech partners helped regional banks to rapidly adapt to the hurdles presented by the pandemic.
Keep reading to explore the highlights, and listen to the full episode.
What defines regional banks
Regional banks are larger than community banks and smaller than national banks. They have a geographic presence in one or multiple regions (i.e., the Southeast or the West Coast). Regional needs may differ. For example, banks in coastal areas might have a greater need to support international customers with capabilities like international addresses, multiple currencies or multiple languages. Regional banks are relationship-focused and work closely with their clients.
Regional bank challenges
The COVID-19 pandemic accentuated existing problems such as the struggle to engage clients online and through mobile solutions. Banks also need to learn how to leverage their data to find insights that could improve customer engagement and further develop relationships. Digital transformation brings up concerns around reliability, availability, resiliency, fraud and compliance.
Facing the workforce crunch
Banks have to do more with less. Recruiting new talent and training them quickly is especially challenging in the banking industry as many banks are in rural communities or other areas where finding talent is difficult. Employees are no longer staying with one bank for decades, so banks need to have easy-to-use technology that new employees can learn at speed. Banks are also learning how to transition from a traditionally in-person culture to a flexible culture of remote or hybrid work.
Technology challenges and opportunities
Fintechs are developing engaging, disruptive technologies that appeal to younger consumers. Strong partnerships will help banks keep up with rapid advancements in technology. For example, robotic process automation (RPA) can take over reoccurring back-office tasks and free up resources for bank employees to focus on engaging customers.
In 2020, when the Small Business Administration and the US Treasury rolled out the Paycheck Protection Program, regional banks were more successful in getting funds to small businesses and communities than some larger national banks – in part because of a real-time lending solution from FIS that cut weeks of labor out of the process with automation. This allowed regional banks to create new customer relationships and strengthen existing ones.
The value of partnerships
Partnerships can help banks get through difficult times. During the COVID-19 pandemic, fintechs like FIS supported banks, who in turn were able to support their clients. For a successful partnership, all parties need to understand their customers’ needs and quickly adapt to meet them with technology. Partners must be able to support tactical day-to-day needs such as operational emergencies while also connecting on a strategic level to plan for the future. Regional banks should look for a partner with a broad set of technologies that integrate into a comprehensive ecosystem.
Click below to listen to the full episode.
Erin Dangler: Regional banks are an essential part of our communities, and during the pandemic they were able to utilize their strong relationships with their customers to quickly provide financial aid.
Mike Gravelle: Regional banks are really in a tricky position where they have to both compete with some of the FinTechs that are rising up, but at the same time, cooperate with those FinTech providers too. So it's really kind of creating this coopetition situation in the marketplace.
Erin Dangler: Like the rest of the banking industry, regional banks are facing a number of challenges, including digital transformation, attracting the right talent and adapting to a hybrid way of working.
Nicole Pienkos: I think technology is a big part of the answer. I don't think it's the only answer, but certainly if the technology is not there and you don't have the right solutions for your clients, you're going to struggle to be successful.
Erin Dangler: This is Financial Futures, the podcast that charts the frontiers of FinTech innovation. In this series, we'll be discussing the advances that are modernizing regional banking, bringing cutting edge tech to institutions and customers alike. I'm your host, Erin Dangler. And in today's episode we'll be taking a dive into the regional banking sector. We'll be examining what sets it apart from the national banks, the challenges they face and how they have been uniquely equipped to help communities affected by the pandemic. And today, from FIS, we speak with senior vice president and group executive of regional banking, Nicole Pienkos, and vice president and business executive Mike Gravelle, all about this cornerstone financial service. But first, Nicole gives us a breakdown of how regional banks are defined.
Nicole Pienkos: Today's focus is really around regional banks and that's a category of banks that falls between community and I would say national banks, that's often defined as a bank by asset size 10 billion to a 100 billion in assets. However, I would say that asset size doesn't really define regional banks, there's very strong regional banks in the company that are well under 10 billion in assets and those that are over 10 billion in assets. So defining a bank by asset size is very difficult to do. But regional banks are definitely larger than community banks, smaller than national banks, as you would assume, and they have a geographic presence.
Erin Dangler: Can you talk a little more about the geographic presence? What geography, what regions do they serve as opposed to a national or community bank?
Mike Gravelle: Regional banks really are geographically based, so there could be one or multiple regions within the US that you might find a regional bank. I mean, it could be in one particular region like the Southeast or the Northeast or the West Coast, but sometimes a regional bank could span multiple regions within the US as well. We do find that there's differences sometimes as well. You will see that there's different capabilities that maybe one particular region needs to support that might be different from another.
So for example, the regional areas on the coastline, whether it's the East Coast or the West Coast, they might have a greater preponderance to having to support international customers. So being able to support things like international addresses, or multiple currencies or multiple languages, it becomes important for those banks, which might not be the case in the middle of the country for the Midwest or the Upper Midwest as well. We also see that there's sometimes different products or solutions that these different regions might offer as well. So that's kind of a nuance that we do see when we look across all the different clients that we support across the US.
Nicole Pienkos: I think another differentiator when you look at regional banking is really, they are relationship focused, so very relationship oriented and working very closely with their clients.
Erin Dangler:What challenges have regional banks faced during the pandemic?
Mike Gravelle: I mean, really some of the challenges that these banks have faced predated the pandemic and the COVID situation, but what the pandemic did is really accentuate the problem. It made it worse. It kind of really brought it to a forefront. One of the things that we see is that these banks are struggling in terms of their digital presence, in what they do to engage their clients either online or through different mobile solutions. And that became suddenly, when the pandemic came to bear, it became critically important because people weren't able to go to a branch or weren't able to go to an ATM at a branch location and engage with their bankers more directly. So being able to have the right technologies to support that digital level of engagement became absolutely critical. And having a really good user experience in terms of how you can engage end customers in a remote capacity was very important.
Another important thing too, is that with those digital solutions and how you engage with those customers, a lot of data comes through those different solutions. So being able to look under the covers of some of the data that's flowing in and out of these different solutions becomes ever so important. And being able to identify insights, and those insights then drive towards how you can better engage with customers as you continue down that journey of developing that relationship.
Nicole Pienkos: So as banks transform to look at digital transformation, making sure that there's reliability, availability, resiliency on their platform is essential to their success. In addition, there's a high level of demand, both pre-pandemic and post-pandemic around regulatory needs, compliance, fraud, cyber security continues to be paramount, and a focus, and a challenge, and also an opportunity with a strong technology partner. The last point I would add is just the demand of the system, the high availability of the systems and core platforms that are essential as we see very high merger and acquisition activity across the industry, and allowing banks to scale is really important.
Erin Dangler: It sounds like there's multidimensional challenges that they've had to overcome. And Mike, as you mentioned, these were things that preceded the pandemic and the pandemic just kind of poured gasoline on a fire that may have already been burning. And it's not just that it disrupted the consumer side, the need for digital technology, but it also disrupted the workforce side. Overnight, these banks had to become working virtually, just so many things to overcome. And what's interesting is it looks like FIS was really able to adapt to this virtualization of the digital environment in just 24 hours of the pandemic, what made that possible?
Nicole Pienkos: FIS invested a lot in its technology in terms of internal use for employees. And I remember vividly back to that March 2020 timeframe where many of us packed up our desks, our children, and we all thought it would be two weeks we'd be at home at that point, fast forward two plus years later. So it was really fortuitous for FIS, obviously no one could foresee the pandemic coming, of the level of investment in embracing video conferencing, and a lot of things that the company brought to bear just in this very short timeframe right before March of 2020. We employ 78,000 employees globally today, we were able to pivot a very large percent of our staff within 48 hours of the announcement of the economy shutting down, and that really helped us help our clients and banks to ensure that the resiliency of their platform, we were not going to miss a beat from a service perspective. It also helped our employees.
The other thing I would say is we certainly had essential workers that got us through the pandemic, and we couldn't be more proud of those that still came into the buildings, although the vast majority of our staff could work virtually, not everyone could, so I would like to acknowledge those folks. There was a lot going on in that period, and we're extremely proud of how quickly we could pivot and go to, I wouldn't call business as usual, but certainly a business as a new norm.
Mike Gravelle: Nicole talked about the availability and the resiliency of our platforms, we were very fortunate as well that we had started some investments as a company back in about the 2016 timeframe, really modernizing all of our platforms and kind of building out an FIS private cloud environment. And we were well along in that journey, so that really positioned us well to make sure that all of our solutions were up and running and supporting our clients through this period where they were really stretching them to their limits and kind of working hard with them. In addition to that, we also drove investments where we leveraged automation. We built out different bots within our platforms, and those bots were in place as issues were happening in our environments. So we might have a little bit of a situation developing and these bots kind of jumped in and then kind of self-healed the platform to make sure that we were up and running and resilient through it all. So it was other investments that just really positioned us well. We were very fortunate given the very unfortunate situation that played out.
Erin Dangler: So, another challenge, we've talked about the challenges of the pandemic, but we've also seen a lot of industry facing gaps in the workforce. Are you seeing that in banks as well?
Nicole Pienkos: Banks in particular, just like other industries, have to do more with less. But in particular, from a banking perspective, we've seen a lot of accelerated retirement plans. We've seen some of that in technology as well, to be fair. And it's really that dichotomy of making sure that you can get new talent, recruit new talent and get them trained quickly, because particularly in the banking industry there's a lot of tenure, a lot of experience, and there's also a lot of consolidation, and so making sure you get the right talent is key to success. And succession planning is really important. We certainly interacted with our clients who are looking at that as they've had an influx of retirement.
The other challenge that's out there is really kind of new workforce cultures. So banks traditionally have been very much in person, certainly running their operations from a branch perspective. There are lots of digital institutions as well that have that culture of kind of remote workforce. But a lot of banks are really in that transition period on how to accommodate a flexible work culture as they look to attract new talent.
Mike Gravelle: All the things that Nicole pointed out are spot on in terms of kind of what we're seeing. I mean, we've been very engaged [inaudible ] to what she shared before. And we've kept a high level of engagement with our clients. And even talking through this issue of their workforce situation and what's playing out for them, they are struggling to recruit talent just like we are and other companies as well. I mean, it's really tough. It's a competition out there to find the best talent. And many of these banks are in regional communities. They might be rural communities or areas that are not necessarily urban, so it can be very difficult in those locations to try to find that talent and bring it in.
The other shift that's been difficult, I think we're all going through that is, we were all working from home for a year or more, many of us were, right? So as our bank customers, our regional banks have kind of shifted as well, kind of going from work from home back to being in the office or in a hybrid format, that's taken a toll with some of their employees, their associates and struggling to adapt to that shift of back in the office and being maybe enamored with maybe other companies out there that might support fully work from home, so that's a transitional shift that they're going through too.
To really end this, the whole concept of a 30 to 40 year old bank veteran that stays with one bank for their full career is really becoming a thing of the past, there's a lot of movement in this industry. And what that really stresses is ensuring that we have really easy to use, easy to train technologies to ensure that we're able to support those that are new into an organization and helping them to embrace the technology to get their jobs done.
Erin Dangler: It's clear that many of the issues affecting banking on a macro scale are also proving challenging for regional banks but embracing digital technologies may be the solution to overcoming these challenges, as well as addressing the equally troublesome skills and workforce gaps within the sector.
Mike Gravelle: In some ways, those digital technologies that are in customer facing allow for technology to come in place and those customers can engage directly with those, and it takes a little bit of the edge off of the bank employees of having to engage directly and work with them. And then more complex, more sophisticated issues or problems that an end customer of the bank might face, that's where they need to then engage with a banker to really kind of roll up sleeves and dive into a more complex issue.
Nicole Pienkos: Yeah, I would absolutely agree with that, Mike. I think technology undoubtedly has created a lot of efficiency and a lot of banks to continue to focus on growth.
Erin Dangler: So we see a lot of the pros that FinTechs can offer. What about some of the challenges that FinTechs present?
Mike Gravelle: Well, certainly the FinTechs are kind of rising up and they continue to grow. There's many different FinTech providers out there entering the market. And many of them have really exciting and engaging and sometimes disruptive technologies that they're able to offer up to end customers. And younger generations of customers, we're all a part of that, I don't know if I put myself in the younger camp, but there's a lot of younger generations out there and they're attracted by these new and engaging technologies as well. And that can be viewed in some ways as a threat to the traditional regional bank out there. So regional banks are really in a tricky position where they have to both compete with some of the FinTechs that are rising up, but at the same time, cooperate with those FinTech providers too. So it's really kind of creating this coopetition situation in the marketplace.
Erin Dangler: Yeah, we use a phrase in the business I'm in, collaboration, not competition, and really it's just everyone bringing their gifts together to the table to find a solution. And we know that banks, and maybe regional banks more than others, have a traditional history, no one likes change, but we've got to adapt with the times, and with challenges come opportunities. So how can banks overcome these challenges that are presented, and what are the opportunities for them?
Nicole Pienkos: Yeah, I think as Mike said, emerging technologies are going to be key, but also that partnership. Looking for partnerships with FinTechs, your technology partners, because the technology is evolving at such a rapid pace that it's really, really important that they're strong partnerships. That being said, I think those relationships with partners and FinTechs are really important to review from a stability standpoint. As we spoke a little bit earlier, trust, reliability, cybersecurity are all paramount to success for any bank, especially regional banks as well, because of the strong relationship and trust focus with their end clients. So as you look at FinTech partnerships and you look at some of the emerging technologies that Mike shared, our banking as [00:16:00] a service platform, even cryptocurrency, making sure that you've got that partnership and have a strong relationship to ensure success as you adopt those new technologies is going to be key.
Erin Dangler: Tell us about the opportunities that come with the workforce issues.
Mike Gravelle: One of the things that we've done is really invest in automation. I talked earlier about some of those self-healing bots that we've built and deployed here internally at FIS, but some of the same technology, Robotics Process Automation, RPA, and building out these bots, we've done a lot of that to help our banks as well. And looking at some of the operational very reoccurring, frequent type activities that they perform in a back office environment, and we've built bots that effectively take over some of that work and get that work done.
And what that does in the end, just given that our banks are dealing with fewer resources themselves, it can free those resources up to focus on much more client or end customer relationship based activities, right? Engaging with people to develop and grow their business with the bank, as opposed to dealing with more mundane kind of operational activities in the background. So that's one key area of investment. I would also extend and go back to a theme that we talked about before, which is really around building and ensuring that we're building out technologies that are really easy to use, intuitive, easy to train and learn. And we've spent a lot of time focusing on the modernization [00:17:30] of all of our platforms to really do just that. And that's really going to help our banks equip their talent as their onboarding new talent to basically embrace these technologies and work with them.
Nicole Pienkos: We couldn't be more excited about the level of investment for our regional banking partners and clients into our modernized platform.
Erin Dangler: I'd love to hear a specific example of a time when technology was able to solve a pressing issue for a bank. Can you talk about that a little bit?
Mike Gravelle: I'll start kind of in the broader arena of regional banks, and again, going back to the pandemic and COVID, and what happened in early April, I think it was, 2020, the Paycheck Protection Program, PPP, rolled out, that was a part of the CARES act. And the program was administered by the SBA and also the US Treasury. But there was a rapid effort to really get all kinds of funds out to small businesses, communities alike and get those funds out there to keep people alive. I mean, to keep the money rolling out and to support them. And some of the data that we've looked back on as an industry, looking back is that the post PPP data really indicates that regional banks and community banks in particular were wildly successful in terms of accomplishing that mission really compared to some of their counterparts, the national banks, the very large banks, which tend to be a little bit more transactional in nature.
Again, it was that relationship focus that regional banks have that really help them to connect with the customers that they do have today, and then also kind of develop new relationships with new customers. But that relationship focus is really what came to heart in terms of helping them to be much more successful than they ever have been. And the outcome of that ultimately is that that developed new relationships for these banks in the years ahead, right? So it helped to kind of reinforce the ones that they had. Those banks came to heroic efforts to get loans out to them and to help them through that period, so those relationships are going to be very sticky for years to come. In addition, it also helped them to identify and create new customer relationships where some of the larger banks were not able to do that at the same rate or speed that these banks could.
Nicole Pienkos: FIS had a product, SBA, a real time lending solution in market before the PPP program came to light, so we were able to very quickly and nimbly make some tweaks, a non-technical term, to get that in market here very, very, very quickly and stand up our clients to serve the communities in which you know their clients are. And so back to some of what Mike's points were, we really focused on relationships, there has been a lot of press in terms of the transactional nature of PPP and small businesses that weren't able to get the funding in those early days, this is where we've really focused with our clients in making sure that they had a solution, but also an automated solution. So we also brought to bear kind of a self-service onboarding tool that cut several weeks of labor out of the process so we could get the funding to the small businesses that needed it as quickly as possible through some of the automation and our technology tools.
So it was extremely powerful, as Mike had indicated, it really solidified the relationship those small businesses have with the regional banks, and we're able to take care of many, many of the small businesses that were suffering at the time. So FIS was so proud to be part of that and also drive the automation that could get the money out faster. When you think through where we were from a pandemic perspective, many of those small business loans had to be signed in person. So the technology allowing you virtually to set at your computer and process the loan documents with e-signature and the automation just got the money flowing much more quickly, small businesses benefited, but obviously the entire economy benefited to get that money and keep those businesses open. So we couldn't be more proud of what we were able to bring with the technology in very short order to help the end clients and the banks.
Erin Dangler: It's all about trust, and it just sounds like the technology really ensured that trust for people in a time of high anxiety. So what do you think, people listening to this podcast, people maybe in regional banking who are thinking about getting more into technology, what can they learn from that? What's the takeaway?
Mike Gravelle: Clearly, we think it's very important, right? I mean, it offers a really important dimension in terms of getting work done and being able to support all of us as end consumers at the end of the day. And some of that coming through obviously the regional banks that they work with, it's a balancing act. I mean, we have to find ways to stay current with technology, but a lot of it is relationship based at the same time, right? So there's a dimension, which is clearly technology as an aid or a tool supporting how we work with each other to get things done, but there's also the strong element of just having a relationship focused model. And regional banks, this is their game, this is what they're very good at. And it's kind of bringing the best of the two worlds together. So I think that's some of the most key points that I would [inaudible ].
Erin Dangler: So having the right tech to help support the strong relationships they build with customers could be one of the keys to the future success of regional banking, but Nicole stresses that it isn't the only one.
Nicole Pienkos: I think technology is a big part of the answer. I don't think it's the only answer, but certainly if the technology is not there, you don't have the right solutions for your clients, you're going to struggle to be successful, absolutely.
Erin Dangler:So when getting into new technologies, we've talked about this collaborating, it's important to partner and help navigate through things. Why is it important to have a partner?
Mike Gravelle: A partnership is key to kind of get you through thick and thin times, right? And as we talked about, during this discussion today, we look at COVID and the pandemic as a great example of that. And even to what Nicole talked about earlier, tied to what FIS did to support our clients, and in turn what our clients did to support their end customer, that's a great example of partnership on all fronts, right? We're working with our banks to support them, our banks in turn are supporting their end customers, small businesses and consumers, merchants alike, and it's really about that bond. And a big part of it is listening, listening to our customer needs and understanding what their needs and desires are, and then being able to respond as quickly as we can with technology or adapt technology that we do have to kind of rise to the occasion to meet a unique need like we did during that COVID pandemic period.
I think the last piece that's really important is what's key in a partnership is supporting both the strategic as well as the tactical. There's tactical day to day needs that pop up all the time, and a partner is there to support those, when emergencies happen, operational emergencies, but it's also... It's again, back to that listening, it's engaging and thinking ahead and being connected at a strategic level as well is just another significant element in terms of bonding a relationship. And we take that to heart. I mean, that's a big part of our model in how we support our clients.
Nicole Pienkos: I think it's really important. And you spoke to it a little bit, but that differentiation between a true partnership and a vendor relationship is essential to success. That partnership, as Mike eloquently put it, there's a dynamic there that's different than a traditional vendor relationship. You're really focused on the end consumer at the end of the day, no matter where you are in terms of the technology provider.
Erin Dangler: What should regional banks in particular be looking for in a partnership? I mean, we've mentioned some of them, but are there things specific to a regional bank as compared to another type of bank?
Mike Gravelle: It is some of the things we talked about, right? A good advocate, strategic dialogue, those types of things, but you have to have the right technologies too, and I think a broad set of technologies. I mean, that's something that we at FIS do, we have a very comprehensive portfolio, different solutions. And then we spend a lot of hard time integrating those solutions together so they come together in the form of an ecosystem that really kind of works well together. And in a regional bank, it has quite a bit of size and scale, right? They're a large organization, they do a lot of complex things for their customers, and they need a lot of capabilities, technology capabilities to live up to that. So it's important when they look for a partner that they find one that has that comprehensiveness, but then is able to kind of weave it all together into an integrated platform, and that's something that we do very well.
Erin Dangler:We're about to wrap up, this has been really informative. Do you have any final words you'd like to share with our listeners out there?
Nicole Pienkos: We hope these sessions provide a great insight into key industry topics and very relevant topics to regional banking listeners. Throughout the series, we did address a couple of key areas to differentiate our technology solutions, as well as talk very openly about opportunities and challenges as it relates to regional banking. Some examples of the emerging technology we talked about today, the robotic process automation, open banking platforms, banking as a service and API-based and event-based frameworks, as well as brand new emerging technologies, such as cryptocurrency, I think are all really thematic and important to continuing the opportunities from a regional banking perspective in overcoming some of the challenges in the industry.
Erin Dangler: Nicole Pienkos is senior vice president and group executive of regional banking at FIS, and Mike Gravelle is vice president and business executive at FIS. That's it for today's show, thanks for joining us. We'll see you next time when we'll be finding out how regional banks are responding to the future of money and bringing cryptocurrency to the mainstream of financial services.