Digital Tools to Help Community Banks Improve Customer Service, Operations

Technology has changed community banks and credit unions in a lot of ways. It’s been a boon for customers who prefer self-service options — but as bank executives know, customers still prefer human interaction and physical branches for more complex needs.

So where should community banks invest in technology — including data, digital transformation, artificial intelligence (AI), and automation? With so many tools available, figuring out which ones to invest in is key for budget management and improving customer service.

Learn how community banks and credit unions can develop a strategic and actionable approach to technology adoption, regulatory compliance, organizational change management, and operational efficiency.

The digital transformation imperative

Digital transformation is no longer a choice but a necessity for community banks aiming to remain competitive. Customers today demand seamless, personalized, and efficient services, all of which can be achieved through using digital tools.

However, the volume of available technologies can be overwhelming. From AI-driven back-office customer service solutions to advanced data analytics and robotic process automation (RPA), the options are vast and varied.

Understanding customer and employee expectations

The first step is understanding the expectations of primary stakeholders — customers and employees. Customers increasingly prefer self-service options for routine transactions but still value the personalized touch of physical branches and relationship banking for more complex needs.

Employees want tools to enhance productivity and reduce mundane tasks, allowing them to focus on more meaningful interactions with clients. Your data contains information around preferences and behaviors, so maturing your data strategy to glean those insights is key.

Strategic planning and education

Community banks and credit unions should educate their management teams, board of directors, and employees about the potential and limitations of various technologies rather than seeking a technology implementation first approach without scoping the technology’s value.

This education should also include strategic implications, such as how tools align with the institution’s long-term goals and values as well as the impact on existing infrastructure and staffing.

Regulatory environment and compliance

The regulatory landscape for digital tools and technologies is often murky, with most areas lacking clear and specific guidelines. Despite this, community banks must prioritize compliance to avoid potential legal pitfalls.

This requires understanding existing regulations and anticipating future changes. Engaging with industry bodies and regulatory professionals can provide valuable insights and help institutions stay ahead of the curve.

While specific guidelines aren’t available, there is enough guidance in third-party risk management in the critical areas of data governance and cybersecurity for your institution to start the conversation and consider the digital tools available.

Data privacy and security

Community financial institutions must implement robust cybersecurity measures to protect sensitive customer information and maintain trust. This includes regular risk assessments, vendor reviews, investing in advanced security technologies, and cybersecurity training for employees.

Cyber resilience

Beyond preventive measures, community banks must also develop a plan to quickly recover from cyber incidents. This involves developing comprehensive incident response plans, conducting regular drills, and training staff on in their roles during a crisis. Cyber resilience not only reduces downtime but also reinforces customer confidence in the institution’s stability and reliability.

Balancing relationship banking and self-service

One of the most significant challenges for community banks and credit unions is balancing the desire to maintain relationship banking with the growing demand for self-service. While digital tools can handle routine tasks efficiently, the human touch remains irreplaceable for complex financial advice and relationship development.

Leveraging technology for operational efficiency

To achieve this balance, community financial institutions can leverage technology to drive operational efficiencies, freeing up employees for high-value interactions. AI and automation can streamline back-office processes, reduce errors, and enhance overall service delivery. For example, RPA can handle repetitive tasks such as data entry and compliance checks, while AI can provide predictive analytics to inform strategic decisions.

Personalized customer experiences

Digital tools should be used to enhance rather than replace the personal touch. For instance, data analytics can provide insights into customer and member behavior, enabling community banks to offer tailored products and services. Virtual assistants can handle simple queries, allowing human advisors to focus on more complex issues. This hybrid approach allows customers to receive the best of both worlds — the efficiency of digital and the warmth of human interaction.

The planning and testing phases of these systems is too often overlooked. Make sure you are spending the time during your configuration and validation stages to provide feedback to these large language models and other tools to have the confidence their responses are accurate.

Developing a roadmap for success

Given the multitude of digital tools, community banks and credit unions need a clear roadmap to guide their journey. It should outline your strategic priorities, identify technologies to meet your needs, and provide an implementation timeline. It should include a strong focus on regular education and training so all stakeholders can leverage the new tools effectively.

Continuous learning and adaptation

Digital transformation is not a one-time project but an ongoing process. Community banks should regularly review and update their strategies in response to emerging trends and changing customer and member needs. This agile approach allows them to stay relevant and competitive.

Collaborative approach

Community banks should consider a collaborative approach, including working with fintech companies, other financial institutions, their core and ancillary systems, and industry associations to share knowledge and resources. Collaboration can accelerate innovation, reduce costs, and help institutions navigate regulatory challenges more effectively.