To Survive, Smaller Banking Institutions Need a Strong ...€¦ · Building a technology foundation As the banking industry continues to evolve, technology is sure to continue playing

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To Survive, Smaller Banking Institutions Need a Strong Technology FoundationAs small and mid-sized banks and credit unions set the strategies that will move them into thefuture, they have to consider implementing new technologies. But the first step is to make sure their existing network infrastructure is up to the task.

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The past decade has seen a sea change in the way banks operate, both internally and with their customers. A shifting regulatory environment has meant banks need to comply with more or different rules. And customers increasingly are demanding different ways of interacting with their financial institutions, boosting demand for remote banking and other services.

Technology has been a catalyst for much of this change. Industry regulators have worked to keep pace with rapid innovation in financial technology, and customers have responded positively to the efficiencies technology brings to routine banking tasks such as transferring money and paying bills.

For credit unions and smaller banks, however, keeping pace with emerging technologies has become a considerable operational challenge. In addition to deciding which technologies to adopt, banks need to figure out how best to manage integrating these technologies into their existing suite of internal and client-facing offerings.

To gain more insight into how these banking organizations are adopting emerging bank technologies, Windstream commissioned Source Media Research to survey banking executives who are technology decision makers at manager levels and above in Tier 1, 2, and 3 institutions.

How are banks using technology?The study reveals how banks and credit unions expect to change their technology strategy over time. In the near term, the top implementations for most of these institutions involve mobile banking and security. Some 21% of survey respondents say that improving security will be the top area of focus area in the next 12 months, while 18% are prioritizing investments in mobile banking. And in that timeframe, roughly half of all banks and credit unions expect to commercially implement security technology (55%), mobile banking upgrades (49%) and branch wi-fi services (47%).

Figure 1: Technology Strategy: Next 12 MonthsPercent of respondents

Which of the following best describes your institution’s strategy for implementing each technology over the following time

periods? (Next 12 months) Select one for each. n=166 (Base=All respondents)

Source: Windstream Emerging Bank Technology Study, SourceMedia Research/American Banker, November 2017

21% of survey respondents say

that improving security will be the top area of focus in the next 12 months.

Commercially implementingProof of concept/piloting

ConsideringNot considering

Security technology

Mobile banking upgrades

Branch Wi-Fi

Cloud computing or SaaS applications

Bank data center upgrades

Unified communications

Fintech innovations

Biometric authentications

Video banking

AI voice-based banking/chatbots

55% 12% 26% 6%

49% 15% 29% 8%

47% 11% 21% 21%

35% 15% 31% 19%

30% 14% 29% 26%

26% 12% 32% 29%

26% 23% 36% 15%

25% 16% 32% 27%

18% 13% 27% 42%

18% 28% 43%11%

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Fintech and unified communications technologies will

assume even greater importance soon.

The attention that banks and credit unions are paying to security, mobile banking and branch wi-fi is more than matched by their understanding of the potential power of these technologies: When asked whether mobile banking and security technology were viable banking solutions, more than 9 out of 10 respondents say yes.

In each case, more than 70% of respondents note that these banking solutions have gained widespread acceptance at their institutions. Meanwhile, 87% believe branch wi-fi is a viable banking solution, and 42% say the acceptance of this technology is gaining traction at their institutions. One reason: Executives are likely seeing the customer service benefits of branch wi-fi. Not only can customers take advantage of the wi-fi network while in the bank or credit union, but banking associates also can make use of wireless connectivity to bring solutions directly to their customers. For instance, that may mean bringing a tablet to a customer in the branch to open an account or offer a mobile banking tutorial. Branch wi-fi also allows banking institutions to gather important data analytics on customers, from the types of devices they use to how long customers spend in the branch.

Fintech and unified communications technologies will assume even greater importance soon. Some 59% of respondents expect their institutions will either consider or pilot fintech innovations within the next year, and 44% expect to consider or pilot unified communications technologies within 12 months.

These priorities change quite a bit as the time frame moves farther out: Three years from now, 50% expect to be implementing fintech innovations commercially, in a bid to improve customer experience and target the needs of certain customer segments such as millennials. Meanwhile, 39% expect to have rolled out customer- and security-centric technologies such as biometric authentication. And more than 50% expect to still be considering or piloting unified communications technologies as well as AI voice-based banking technologies.

Figure 2: Technology Strategy: Next Three YearsPercent of respondents

Which of the following best describes your institution’s strategy for implementing each technology over the

following time periods? (3 years) Select one for each. n=166 (Base=All respondents)


Commercially implementingProof of concept/piloting

ConsideringNot considering

Security technology


Branch Wi-Fi

Fintech innovations



Biometric authentications


Video banking


64% 6% 24% 6%

58% 10% 25% 7%

56% 7% 22% 16%

50% 12% 29% 9%

47% 9% 30% 13%

42% 11% 27% 20%

39% 16% 34% 11%

32% 20% 31% 18%

31% 13% 35% 22%

28% 17% 31% 24%

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One reason that more banks aren’t implementing unified communications could be a lack of familiarity with those technologies. Just 18% of respondents say they are familiar with unified communications — among the lowest levels of familiarity among all technologies reviewed by the survey participants. That said, some 45% of respondents report that unified communications is gaining traction at their institution as a viable banking solution.

Figure 3: Familiarity With Technologies in BankingRating of 4 or 5 (high familiarity)

How familiar are you with each how each of the following types of technologies used in banking? Rating of 1 to 5 (“Not at all familiar” to “Extremely familiar”). n=166 (Base=All respondents)


For some banks and credit unions, the goal in five years’ time is to become even more technology-based — to the point where they are able to move away from a traditional branch model. That includes

• shrinking branch footprints,• decreasing physical employees supporting in-branch transactions, and• deploying video-assist tellers for drive-through transactions and, potentially, inside branches.

As a result, banks and credit unions report that areas such as branch transformation and the integration of digital and physical channels will be primary areas of focus. In five years, nearly half of all respondents expect to be implementing emerging security technologies, mobile banking upgrades and branch Wi-Fi. Among the technology areas most frequently under consideration by respondents are fintech innovations and unified communications.

Are banks prepared for these new technologies?As banks make short-, mid- and long-range plans to upgrade and adopt emerging technologies, they need to first investigate the state of their current infrastructure that supports their existing and planned technology deployments. In particular, a bank’s legacy network may be outdated or simply unable to handle the heft or required bandwidth of new technologies.

As a result, 45% of respondents say they’re implementing or planning modernization or consolidation of existing data centers within the next 12 months. A similar number of survey participants (43%) say the idea of data center upgrades is gaining traction as a viable banking solution at their institution.

For some banks and credit unions,

the goal in five years’ time is to

become even more

technology-based. 62%

51%

45%

43%

3 40%

33%

31%

29%

18%

17%


Branch Wi-Fi

Fintech innovations

Biometric authentication

Security technology


Video banking




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Banks and credit unions must make sure their networks are up to the challenge of handling these new technologies. If they’re not, the desired operational efficiencies and improvements to customer experience from new technologies may not materialize due to poor application performance. Fortunately, technology’s march forward also brings considerable efficiencies when it comes to networking, and financial institutions may be able to overlay a new and relatively cost-effective technology strategy without having to completely rebuild its network.

Systems such as cloud-based applications (software-as-a-service) and new network technology including software-defined wide-area networks (SD-WANs) can help institutions deliver the full range of benefits from emerging technologies while delivering the application performance and security customers expect. What’s more, these tools can provide more visibility and control over how apps are used on a network and the resources they consume.

For instance, technology such as SD-WANs can maximize existing network infrastructure, making it more cost-efficient and able to effectively support the increasing bandwidth required by data intensive technologies. Centralized management tools offer more control over how apps are routed on the network, and can help deploy apps remotely across an enterprise network. Meanwhile, these types of networks can more reliably support the types of user experiences that banking customers have come to expect, helping the banking institution make the most of their digital transformation.

What’s more, SD-WANs address the heightened need for digital security. These networks add a critical layer of end-to-end protection across all networks—from intranets to cloud networks—helping branches communicate securely with each other and with data centers. Devices are authenticated and all traffic is encrypted, SD-WANs also can help segment different types of data traffic in a secure fashion, enabling banks and credit unions to utilize proprietary networks for different lines of business. For banking institutions that require even more security, SD-WANs can be augmented with additional security services at different points in the network, whether at the branch, in the cloud or at a data center.

Finally, SD-WANs can reduce a bank’s reliance on IT to set up new network equipment. Thanks to the security of these networks, equipment can be delivered directly to a branch and installed without assistance from IT support. Once the device is installed, it can automatically and securely configure itself, essentially getting up and running without a time-consuming installation process.

Building a technology foundationAs the banking industry continues to evolve, technology is sure to continue playing an important role in helping institutions deliver the best experiences and service to their customers. Increasingly, that likely will mean moving beyond the branch to deliver banking solutions to customers, whether at community events or through non-traditional venues such as retail spaces, pop-up stores or kiosks. Emerging technologies can give banks and credit unions more freedom to deliver the banking experiences customers want, when they want them.

And as banks and credit unions ponder their technology implementation strategies in the near-, mid- and long-term, they’d do well to consider whether their existing infrastructure will allow them to get the most bang for their technology buck. By building a strong foundation for these new and emerging technologies, banks and credit unions will put themselves in a better position to fully realize the benefits of these powerful digital tools.

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About WindstreamWindstream Holdings, Inc. (Nasdaq:WIN), a FORTUNE 500 company, is a leading provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers across the U.S. Windstream offers broadband, entertainment and security services for consumers and small and medium-sized businesses. Windstream also provides data networking, core transport, security, unified communications and managed services to mid-market, enterprise and wholesale customers. Services are delivered over multiple network platforms including a nationwide IP network, our proprietary cloud core architecture and on a local and long-haul fiber network spanning approximately 150,000 miles. Additional information is available at windstream.com or windstreamenterprise.com. Please visit our newsroom at news.windstream.com or follow us on Twitter at @Windstream or @WindstreamBiz.

About SourceMedia ResearchSourceMedia Research provides full custom B2B research solutions for marketers, agencies and other organizations targeting business sectors, such as accounting, banking, payments, mortgage, insurance, HR/employee benefits and wealth management. SourceMedia Research is a unit of SourceMedia Inc., whose B2B media brands include Accounting Today, Financial Planning, American Banker, The Bond Buyer and Employee Benefit News.

MethodologyIn November 2017, SourceMedia Research conducted an online survey among 295 banking executives at manager levels and above in Tier 1, 2, and 3 institutions, drawn from the opt-in subscriber base of American Banker.

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To Survive, Smaller Banking Institutions Need a Strong ...€¦ · Building a technology foundation As the banking industry continues to evolve, technology is sure to continue playing