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Small Banks A Step Ahead With New Technology

Some small banks beat their larger peers to the punch by rolling out cardless ATM technology faster and more easily.

During Wells Fargo & Co.'s May 24 investor day, Executive Vice President and Head of Innovation Steve Ellis highlighted the bank's plan to implement cardless or near field communication capabilities at ATMs starting in June. The technology will allow users who have debit cards in their mobile wallet to unlock their phone, tap the ATM and go through with transactions as usual, he said.

Meanwhile, a $1.2 billion bank in Massachusetts had rolled out the cardless ATM feature last August. CarrieAnne Cormier, vice president of retail operations and strategy at Hudson, Mass.-based Avidia Bank said the bank began the project in May 2015 with its core processor FIS. She pointed out that the implementation was mostly a software update and that the bank was drawn to the technology partly because of the competitive environment in their Massachusetts market.

Cormier said that Avidia Bank has always been an early adopter of new technology. "Cardless cash was really just a natural extension of that," she added.

The bank's ability to move quickly on the project had a lot to do with its small size, Cormier said. With a smaller budget, Avidia Bank has to be more selective in terms of IT projects, but it can turn projects around faster than an institution with more layers of approval, she pointed out. Cormier said that she doesn't buy into the community bank emphasis on "great customer service" as a differentiator.

"We all say that," she said. "I think what's going to set us apart now and in the future is our mobile technology."

According to Ken Siegman, senior director in West Monroe Partners' Banking practice, the consumer demand for omnichannel technology requires the nation's smallest banks to compete in an increasingly crowded space.

"To be a traditional community bank is going to be harder and harder," he said. "You can't sell it just on good customer service. You're going to have to be innovative and have a sense of what your customers want and figure out where to invest and how to get the biggest bang for your buck."

Siegman pointed out that small banks are more technologically agile than their larger peers, but they are also heavily reliant on their core processors.

“The bank’s ability to move quickly on the project had a lot to do with its small size, Cormier said. With a smaller budget, Avidia Bank has to be more selective in terms of IT projects, but it can turn projects around faster than an institution with more layers of approval”
"Small banks, those who have a vision and see the need, actually can act faster," he said. "In many ways, their ability to look at and deploy new technology sometimes is limited in that core processor's ability to either provide it or support it."

Siegman noted that core processors are not known for aggressively deploying new technology in the marketplace, but he pointed to the growing number of fintech companies who are developing products that are compatible with core processor systems.

"What I'm seeing in the marketplace are community and regional banks who are buying technology outside of their core processor and then easily integrating it into that core," he added.

Cormier said that fintech companies have been great partners for Avidia Bank. While the bank plans to continue working with FIS, she pointed out that it is possible that the company could develop its own mobile app internally and use the core processor's technology to run it.

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