Can Your Financial Institution Handle a Digital-Only Brand?

By David Mitchell, President of NYMBUS

The articles and research have said it all: Fintechs are disrupting the market, and there is no better time than the present for financial institutions to innovate to compete.

As Bank Director recently reported, more financial institutions are exploring digital-only subsidiary banks that operate separately from their traditional organizations. Creating a niche, standalone experience offers many benefits to both banks and credit unions. This includes:

  • Reaching new consumers outside of their current geographic footprint
  • Less overhead costs compared to those associated with physical branches
  • Meeting financial goals by generating additional deposits

These advantages appeal to any financial institution. But for many, the question remains: Now what?

Before stressing over buzzwords like ‘seamless transactions’ and ‘frictionless user experience’, it’s important to start with a basic foundation. This means having the right underlying infrastructure in place to support everything the new digital brand requires at launch, and be set up to rapidly respond to new digital products and services that today’s marketplace requires.

This is no small order.

Legacy Financial Technology Is Hindering Digital Innovation

One of the largest challenges financial institutions face when exploring new digital transformation strategies is their existing technology. Many are saddled by legacy providers with outdated banking infrastructures and middleware, which makes it difficult to respond quickly as new products and innovation strategies emerge, including digital-only subsidiaries.

Until recently, modernizing core capabilities meant going through a full-blown conversion. And it’s no secret that conversions can be time consuming and may even delay a financial institution’s ability to rapidly engage new consumers and revenue opportunities. Conversions also tend to be a more expensive alternative, and disruptive to both employees and consumers.

These financial and operational obstacles can be hard to justify to a cost-conscious board. However, innovation has to happen immediately for financial institutions to stay relevant.

Outsource the Operational Resources to Quickly Go-to-Market

In today’s environment, getting to market quickly with a digital brand is just as important as getting to market at all.

For financial institutions looking to immediately acquire new digital consumers and revenue, a recent alternative is to procure a Banking-as-a-Service partnership for use exclusively by the digital-only brand, leaving the existing organization undisrupted to continue operating on its current technology architecture. From the selection process to the full deployment of a subsidiary digital brand, the initiative can move forward unencumbered by the needs of the traditional operation.

NYMBUS SmartLaunch was introduced to the market with this low-risk approach in mind. Its game-changing Banking-as-a-Service business model eliminates the need to undergo a technology conversion. All of the software required to launch a new digital-only brand is included and managed by NYMBUS’ team of industry banking experts. The legacy operation and its current customer base are not disrupted for accelerating this strategy for growth.

And because SmartLaunch also manages all of the operations to run the digital brand (customer facing call center, to back-office, to digital marketing and website services) no additional resources or staff need to be hired.

Put into this perspective, the upfront investment and risk by the financial institution for introducing a new digital brand can in fact be minimal.

There’s No One Size Fits All in Digital Transformation

Circumstances are unique for each financial institution. What they all do share is a need to deliver the enhanced experience and competitive, digital financial products that today’s consumers expect.

For banks and credit unions looking to quickly acquire new deposits and revenue through a digital-only brand, outsourcing the tools and broader operations is now a viable option. And with the right technology partnership, there is always the opportunity to convert the larger organization over at a later time.

In either case, the most important decision of all is in choosing the optimum fintech partner. Choose wisely and choose once.