How Community Banks Can Innovate Faster

CIOs confirm that 20% of IT budget dollars slated for new innovation are actually funneled back into maintaining ongoing technical debt. They estimate 20-40% of their entire IT budget goes to servicing technical debt.

Community banks may, at first glance, appear to be less affected by the problem of technical debt. These institutions, which are categorized as having assets of $10 billion or less, outsource a majority of their operations to their core provider. In fact, 39% of bankers use their core provider exclusively for all of their services, and have no other partnerships. This outsized reliance on their core vendor comes with a price, however. 

“System providers are making decisions in real-time with short-term horizons that often have trade-offs that pile up. If community banks continue contracting with legacy core systems, then they’re paying for the maintenance of that vendor’s piled-up tech debt.
-Charles Potts, executive vice president and chief innovation officer, ICBA

Community Banks Are Paying for Technical Debt That’s Not Theirs

Most banking core systems have been chugging away reliably for nearly half a century on mountains of code. As core providers have evolved their offerings to keep up with emerging use cases and digital banking, they’ve had to respond by, you guessed it, writing more code on top of what’s already there. (Maintaining monolithic systems of record is no joke!) 

These IT expenses are baked into their pricing and passed on to clients like a community bank. In other words, community and regional banks are funding the servicing of their core provider’s technical debt with every contract renewal. 

This exclusive reliance on the core comes with a few disadvantages. First, it’s costly. Fifty-one percent of community bankers said they are dissatisfied with the cost of their core, but there’s no getting around the use of this monolithic system because it’s so firmly embedded into the banks' day-to-day transactions. It’s also inflexible. 

Core Rigidity is a Drag on Digital Transformation

If funding this massive technical debt resulted in rapid transformation, streamlined workflows and happier customers, community banks might say the cost was worth it, but according to the CSBS 2022 National Survey of Community Banks,  it doesn’t, and they don't.

Sixty-five percent of community banks say it is extremely or very important for their bank to adopt new technology to meet customer demands. But 40% are dissatisfied with how their core enables them to roll out new products or services. Thirty-seven percent are also unhappy with what they view as incompatibility with other third-party solutions. 

These iron handcuffs have always been a problem, but in today’s hyper-competitive banking environment, it may threaten the survival of community banks that don’t have the means to fund innovation at the scale or speed that larger institutions can. If the core won’t deliver comprehensive business agility, community banks must consider other routes to building dynamic experiences that are effective and efficient, but also budget-conscious.

According to FDIC researchers, community banks that invested more in technology before 2020 saw higher increases in both loan and deposit growth than those with less investment.

Expand Innovation and Keep the Core

Community banks, like other financial institutions, have begun to recognize that you don’t have to beat fintechs if you can join them instead to reap benefits. Although community banks are more intimately connected with the core providers than other institutions, 37% are partnering with fintechs today and another 21% say they plan to. 

Choosing fintechs that extend visibility, collaboration and communication with the core provider eliminating outdated manual methods to work together to serve customers will help community banks realize more value from their core system relationship while streamlining back-office operations. 

How to Maximize Your Core and Accelerate Transformation

Break down the data silos.

Financial institutions, from the largest to the most local have struggled historically with disparate, proprietary systems that are not connected to one another. Add to that the black hole that often exists between community banks their core provider as customers engage with each. 

The boost in customer service quality and the boost to back-office efficiency is massive when companies can aggregate data between their organization and others that deliver a part of their customers’ journeys. 

Look for platforms that prioritize bridging different systems and platforms together into a unified portal. Ensure that sharing can be done bi-directionally in real-time, so anyone who engages with a customer can see their journey from end to end.

[Blog] Why are data silos the enemy of great CX?

Automate and operationalize what you can.

Banks aren’t the only ones struggling with labor shortages. So creating workflows and customer journeys that are efficient but also effective isn’t just good business - it’s imperative to profitability. 

To truly effect change in the bank-core provider relationship, information needs to be shared back and forth, but just as importantly, that information needs to be actionable in the moment. If manual research, phone calls and email threads can be replaced by assigning tasks and automations across teams, products and organizations, the reduction in operating costs can be significant. 

Our journey orchestration tool, which can trigger automations and activities across Salesforce, Microsoft Dynamics and Fiserv to keep customer journeys moving ahead, has led to double-digit improvements in operating efficiency and support costs.  

Empower those closest to the customer to orchestrate seamless journeys.

Speed to market usually doesn’t come through the IT department. With daily maintenance, security oversight, compliance responsibility and strategic initiatives that come from the C-suite, relying on your technology department to accelerate innovation is risky.

Putting customer experience into the hands of business leaders, who are closest to and know their customers best anyway, is more in line with the community bank mission. However, that means taking custom development and IT resources out of the picture.

Software that allows business lines to orchestrate journeys, adjust them on the fly and even kick off automations and tasks in other platforms with other teams and organizations will soon be the gold standard due to the complex and growing banking ecosystem. It’s why we continue to build our CXMEngine platform with a toolbox of functions that empower community banks to self-serve journey orchestration by complementing the capability of their core with more robust, customer-centric functionality.

No code/low code platforms, like CXMEngine, allow anyone to build customer journeys and internal workflows in under an hour. No code, vendor cooperation, or IT support is required. 

Use analytics to make data-driven decisions.

New research highlights the disconnect between organizations and their customers. 96% of companies think they are giving excellent service but just 67% of customers agree. The answer to these conflicting perspectives? Data. It provides a more accurate picture of how well you are serving customers so you can make changes based on what’s really happening.

Journey analytics, based on in-the-moment data, will pinpoint red flags that could be leading to poor business outcomes before customers become frustrated and leave. Analytics dashboards should provide at-a-glance insights about what’s going smoothly, where pain points exist and trends that should be reversed before they lead to poor customer satisfaction and attrition. Additionally, businesses looking to maintain financial stability can benefit from examining debt consolidation companies reviews by Trusted Company Reviews, gaining insights into effective debt management.


Community banks must expand their definition of relationship banking to include technology that provides know-your-customer personalization and agility, even as they remain tethered to their core provider. 

No, core platforms aren’t purpose-built for superior customer experience. That’s okay. Community banks can maximize their investment in them by pairing them with microservices, like CXM platforms that extend their capabilities without disrupting daily operations or requiring long implementation schedules or custom development.

CXMEngine is one such platform. Our robust network of connections to banking platforms and vendors, including Fiserv, Salesforce, Microsoft Dynamics, ServiceNow and productivity applications like Slack and RingCentral is changing how community banks guide customers through sales, onboarding and activation and servicing journeys. With full visibility into what’s happening with their core provider and any other partners they utilize, they can eliminate missed handoffs, unnecessary friction, miscommunication, and friction which results in happier customers and also employees.

With a few days of data mapping, CXMEngine can be up and running, and teams can access its shared view and bidirectional data sharing.