Payments Rank High on Community Banks’ To-Do Lists

Against a backdrop of continuing industry consolidation, community banks see digital payments as a key competitive weapon, according to newly released survey data from Bank of New York Mellon Corp.

“Nearly 30% of those polled indicated that launching new technology services focused on efficiency and security, such as instant payments, are critical to maintaining a competitive edge,” New York City-based BNY says in a news release. “To be able to deliver these services effectively, 20% of banks surveyed are looking to collaborate with other companies over the next five years.”

Working with the Harris Poll research organization, BNY surveyed senior executives at 108 community banks throughout the U.S. with assets ranging from about $100 million to $10 billion for its 2024 Voice of Community Banks Survey. The main topics were digital technology, including payments, security, and risk control.

Asked about which of 10 emerging digital-technology services are part of the bank’s “strategic vision” for the next five years, artificial intelligence and machine learning came in first, cited by 37% of respondents, followed by e-signature technology at 31%. Mobile-wallet and payment apps were close behind in third place, cited by 30% of the executives. Biometric identification and blockchain technology came in next, cited by 28% and 27% of respondents, respectively.

“Among the banks surveyed that are looking to expand their capabilities, 96% showed an interest in partnering for treasury services, such as real-time payments,” Shofiur Razzaque, head of community banking & solutions at BNY, said in the survey report. “It can be costly and often inefficient for community banks to build these kinds of solutions themselves.”

Razzaque’s unit provides various services for community banks. “On the technology front, one in three banks expressed an interest in innovative technology services, such as instant payments, to maintain a competitive edge,” he said. “They also want to leverage technology more for risk mitigation, as well as regulatory and compliance needs.”

Some 27% of respondents see cybersecurity threats as one of their top three challenges, ahead of customer acquisition and retention and data management and analytics.

Citing recent data from the Federal Reserve Bank of Kansas City, BNY says the U.S. has nearly 4,600 banks, 97% of which are community banks. Thirty years ago, the country had 10,453 banks, according to the Federal Deposit Insurance Corp.