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n e w h a v e n b i z . c o m | J u l y 2 0 2 1 | n e w h a v e n B I Z 15 IMAGE | ADOBE STOCK N ot long ago, all banking had to be done weekdays before 3 p.m., or in a few hours Saturday morning. Today, with just a fingerprint and mobile device, a world of banking is literally at our fingertips. Credit cards used to be processed at the cash register with a machine that imprint- ed the card number on a paper slip, which would be sent off with the evening batch – now we just wave our card over a reader and the funds instantly transfer from a bank. is transformation has forced banks of all sizes to invest significant sums of money into digital technology and infra- structure and while big lenders with deep pockets have had the advantage, many community banks have found ways to keep pace, or at least remain competitive. ey've done it by enlisting the help of outside vendors, including financial technology companies that have already developed the latest digital banking tools. While some in the industry view fintech companies as potential competitors, oth- ers, particularly small banks, are embrac- ing them as partners that offer access to the latest technology without having to develop and implement it in-house. Still, the continued growth of digital banking is having a deep impact on the industry and is oen referenced as one of the reasons banks decide to merge. Eighty-one percent of banking CEOs Community banks (try to) keep pace with industry's digital transformation By Melissa Nicefaro surveyed by PwC in 2020 said they were concerned about the speed of technologi- cal change. One competitive advantage local banks say they have is that on top of digital offerings they also add an extra layer of personal assistance to customers. Indeed, many Connecticut banks have been closing branches as more people bank online. Brick-and-mortar establish- ments that remain open are increasingly turning into information, engagement and advisory hubs offering education, finan- cial advice, full-ser- vice capabilities and community offerings, according to PwC. "I think what we do well is we offer the most popular technol- ogy offered by the big banks, but we do it with personal service — a customer can come into one of our branches and we will coach them through online banking, bill pay, or any of our mobile options," said Jorge Santiago, exec- utive vice president at e Milford Bank. With six branches and $510 million in assets, e Milford Bank entered the digital banking world in the late 1990s. At the time, customers had to download a disc and soware in order to access the service. Around 2000 they began to offer online options that included account transfers and the ability to check payment history and account balances. ey've recently added Apple Pay and the per- son-to-person payment system CelPay to their lineup. Keeping data safe With more offerings comes more reason Digital Banking for strong security. Milford Bank partners with Fiserv, the largest core processor for small banks across the country with a network of over 5,000 financial institutions for many of its core services, Santiago said. "But by pooling our resources with oth- er banks, we can offer a good, safe, secure way of saving money," Santiago says. "Fiserv is closely monitored by the Federal Deposit Insurance Corp. We use only vendors that we know are well-vet- ted. In addition, we have our own firewall company outside of Fiserv. So we kind of wear belts and suspenders when it comes to security." It's certainly not an unusual concept when it comes to banking and security. Greg Shook, president and CEO of Es- sex Savings Bank, which has six branches and $505 million in assets, said one of the most important things for banks is mak- ing sure customers' money is safe. "at's the first reason anybody uses you. at's why we put it there — to keep your money safe," he said. "We knew we needed a great firewall, but there is always a better mousetrap being built. e trick is knowing when to move to the next new technology. It has to be built safely with no back doors on it." A lot of technology has little return on investment, but is expensive. "Before we added a lot of these bells and whistles, it cost us a lot of money just when we did bill pay — it costs us $9 a month for every account," Shook said. "And we're charging no fees on those accounts. All of those add-ons mean the bank is adding expenses. Our debit card just got that new piece to where you can just wave it over the scanner to use it. at's our latest toy. Our average cus- tomer might be a little older, but we have young folks in as well. ey love this." Bankers say they are forced to continue to invest in the latest technology because online features attract new customers. Guilford Savings Bank's digital bank- ing manager, Pat Murphy, says there are benefits to small banks that large banks can't enjoy. "e price to support that technology has come down through our technology partners," said Murphy, whose bank has $983 million in assets. "We don't need an in-house IT service package because we can hire a partner that is able to facilitate that product or service at a much more cost-effective rate. So we can offer the online account opening, our debit cards work internationally — we have a very far reach for being a small bank." e reach also extends to the bank's vendors. "Because they work with all these com- munity banks, they know that our cus- tomers expect a different level and higher level of service," Murphy said. "If there's something our customers are asking for, we actually have some skin in the game to bring it up to the people who make those changes. Sometimes that's harder for a customer's voice to actually get heard by the people who make the technology. I think that's one of the biggest differentia- tors for us." Pandemic's digital impact Out of necessity, when the pandemic struck and customers were not allowed in banks large or small, Guilford Savings' commercial account manager Alex Sul- passo knew that differentiation was going to be key and changes needed to be made. "On the commercial cash management side we switched to a completely paper- less enrollment," he said. "We were able to quickly shi to e-sign, which greatly simplified the process for enrolling for the cash management user." In about three days they went from paper to paperless, a process Sulpasso said was like flipping a switch and never turning back. Milford Bank added the ability to open accounts online during the pandemic, during which the bank saw 85% growth in mobile adoption by its customers, Santiago said. "I know, that's absurd. Customers are returning to our lobbies slowly, but we don't believe they'll ever come back at the same level because they've gotten so used to the convenience of the technology," he said. n 0 10% 20% 30% 40% 50% 60% Regulatory compliance Enchancing customer service Implementing new technology 56% 46% 30% Source: PwC Banking 2020 Survey Top 3 investment priorities for U.S. Banks Greg Shook Jorge Santiago

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