Community banks are being pushed to evolve in ways never seen before. Cost and integration are two barriers to technology adoption cited most by the industry. The instinct to think through the lens of cost makes plenty of sense for cash-strapped community banks, but the truth is that it says little about whether a new technology will be worth the investment.
When asking the question “how much will this cost,” it is also important to recognize this as a lagging indicator and ask the far more important questions beforehand about operational improvements.
The True Cost of “Cheap” Technology
The Sticker Price vs. The Operational Cost
A cheaper-to-license product requiring exponentially more effort on the part of employees to make it work is not, objectively, a cheaper technology. It is a transfer of costs from the technology to the labor category. Time is wasted, errors are made, and someone must fix them, all of which have opportunity costs that bear no connection to the price of the software itself.
Industry research suggests that budget technologies have costs that are 70%-80% higher than projected when accounting for indirect costs.
This is not to say cheap tools are not appropriate in specific cases, but rather that the true costs of “cheaper” technologies are frequently much higher than the acquisition price implies, and these costs can be far greater than the direct payment to the vendor for an expensive tool.
The Integration Burden
A tool that fails to integrate well with the rest of the ecosystem is not a cheaper technology either, but rather a method of funding additional support costs for employees working around the technology and wasting time rather than enabling them to do their jobs while remaining productive.
Systems integration was identified as a top challenge among more than 2,500 community banking industry professionals in a recent survey conducted by Wolters Kluwer. And system integration struggles are what 10% of the non-adopting institutions say they encountered.
CIO data reveals that these are not isolated considerations for banks; with 63% of community banks still using systems in place for over a decade (even before the year 2000), adding new technologies represents new integration hurdles.
Shifting Your Outlook
A change in the default outlook on cost and integration can improve the way banks make vendor selection decisions. This begins by shifting the focus from cost reduction to capacity building. Rather than asking how a vendor fits within a restricted technology budget, the discussion turns to how a vendor might expand the capacity of the organization to perform more work without increasing staff. This is an inherently different value proposition.
The Better Question: What Problem Are We Removing?
Defining the Problem
It is good to identify the problem that you are solving before you start the search for a vendor.
Many modernization efforts fail to begin with the end in mind, instead trying to simply identify a problem that fits a particular potential tool. It is critically important to distinguish between a problem and a capability; solutions do not generally exist for capabilities because there is no singular definition of having more capabilities. There are solutions, however, for problems.
The “Remove” vs. “Add” Distinction
It is easy to conflate a feature with a problem solved, but the two concepts are fundamentally different.
Solutions “remove” things while features represent “adds.” The distinction is critical to making sure the right questions are being asked about the right challenges.
If the commercial lending team wastes three hours per application manually entering data that already exists elsewhere, the fundamental question is not “what does the new platform offer?” but rather “will this platform eliminate the three hours spent on each application?”
The Right Framing
The question “How much does an onboarding tool cost?” Presupposes that the bank knows exactly what it wants and is only looking for the cheapest provider. Whereas, “Will this save the five hours of manual data entry I do on every new business account?” Shows a desire to actually eliminate a pain point.
This type of question also assumes the ability to measure specific outcomes post-implementation that the bank can hold the vendor accountable to, not merely a nebulous sense of satisfaction with the investment.
Measuring Success Prior to Implementation
The Pre-Mortem Metric
Defining the metric for success before implementation is essential in order to measure it afterward. How will success be defined after the implementation is complete if the bank does not have a clear definition beforehand?
This is especially important for smaller banks, the majority of which operate with thin margins and limited resources. With limited room for error, these banks cannot take ill-advised technology bets on vague promises of “efficiency” or “process improvement” or “better insight.” These concepts, while nebulous, still represent directional goals that are useful as touchstones for discussions with vendors, which brings us to the topic of metrics.
Key Areas of Measurement for Community Banks
Three areas of measurement tend to stand out for community banks.
- hours spent per account opened or loan funded;
- error rates or exceptions;
- customer drop-off rates.
These represent the key touchpoints for most digital transformation initiatives and are appropriate for most vendors as minimum acceptable targets for improvement.
These reflect broad goals tied directly to actual problems that prompted the software purchase in the first place. As such, a platform that improves each of these areas is demonstrably valuable, while one that fails to improve any is not, technology budget aside.
The ROI of Efficiency Improvements
If the new system saves twenty hours per week, the question of license costs suddenly seems far less interesting. One regional bank saw a return on investment of 97% and a payback period of fewer than ten months on a new back office tool by automating away 66% of the bank’s administrative oversight burden.
Having those metrics in place enables the bank to actually know when it has achieved its goal and demonstrates to executives and stakeholders that the technology acquisition was indeed money well spent.
Implementation as a Partnership
Beyond the License
The value of any software acquisition is significantly discounted by the degree to which it is configured to meet the needs of the organization. The software license is merely one part of the transaction; implementation is the other, no less important.
The latter carries outsized importance for many community banks due to limited technology expertise, and it is here that banks should evaluate vendors based on their ability to deliver on implementation-related promises as much as, if not more than, their technology offerings.
The Long-Term View
New technology is rarely an upgrade and downshift in a single step. There are frequently recurring optimizations to ensure the technology continues to serve its original purpose as conditions change. The needs of the bank in six months and in six years will not be identical.
This is especially true for the needs of customers and regulators in the years ahead. New tools represent new ways of doing business that must evolve over time if they are to continue delivering value. Failing to optimize in the months and years following deployment is a sure way to see the benefits shrink and the costs balloon.
Building Better Banking Today
At Implemify, we specialize in optimizing workflows and processes so your systems are as efficient, scalable, and user-friendly as possible. By pairing our approach with Creatio’s low-code/no-code development tools, we help banks automate repetitive tasks and improve productivity without the overhead of traditional coding. Whether the bottleneck is customer onboarding, loan origination, or regulatory compliance, we build solutions around the specific problem you need removed.
No-code adoption is already widespread in financial services. 58% of organizations have deployed these platforms, mostly in invoice processing and expense approval. The question is no longer whether low-code works for banking. It’s whether your institution is using it to solve the right problems.
We don’t just implement. We stay involved. Ongoing support ensures your systems continue to evolve with your institution rather than falling behind it.
Ready to stop counting costs and start removing problems? Contact us to learn how our low-code/no-code solutions can cut software development time by as much as 90%.
FAQs
What’s the first thing I should look at before buying new banking software?
Ask what specific manual task or bottleneck it removes. Price comes after you know the problem.
How do I know if a cheap tool will actually save money?
Add up staff hours spent on workarounds and error fixes. If those costs exceed the license fee, it’s not cheap.
What metrics should we track to measure technology success?
Time saved per account or loan, error rates, and customer drop-off during onboarding. Pick two or three before you buy.
Why is integration such a big deal for community banks?
If a tool doesn’t connect to your core, your staff becomes the integration. That adds work instead of removing it.
What does Implemify actually do for banks like ours?
We build low-code/no-code solutions that automate workflows and cut development time by up to 90%. Contact us to see how.
