Creating Strategic Value through Financial Technology

Preface

As the financial crisis and Great Recession illustrated, the health and vibrancy of the banking industry is an important ingredient in a healthy economy. In the United States, community banks play a special role in the economy as they constitute the majority of banks, are collectively the largest providers of agricultural and small business lending, and are often key employers and providers of financing in their local communities. While conditions have improved since the depths of the financial crisis, community banks face difficult market conditions with intense and growing competition from both larger banks and non‐bank lenders, a relatively difficult interest rate environment that places pressure on margins, and a heightened regulatory and compliance burden.

Community bankers are also increasingly facing an additional challenge with the rise of FinTech and its vast array of emerging companies and technology innovations in different areas of financial services. FinTech is a challenging strategic threat to assess for banks since competition is coming from startups focused on addressing a number of core banking services. While many bankers view FinTech as a potential threat, FinTech offers the potential to improve the health of community banks for those banks that can selectively leverage FinTech to enhance performance and customer satisfaction and improve profitability and returns. FinTech can also help level the playing field for community banks to compete more effectively ...