Banking Exchange Magazine Logo

Who Are the Winners from the Digital Banking Transition?

Ratings agency KBRA has laid out how the digital transition is levelling the playing field for small banks

  • |
  • Written by  Banking Exchange staff
  • |
  • Comments:   DISQUS_COMMENTS
Who Are the Winners from the Digital Banking Transition?

Traditional large banks are facing growing pressure amid the advances digital banking within regional and community competitors, according to a new report from Kroll Bond Rating Agency (KBRA).

The coronavirus pandemic has accelerated the rise of digital banking with increased emphasis on online lending, deposits, and processing, the rating agency reported.

Smaller regional and community banks across the US have been responsible for a large part of the support provided to small businesses under the Paycheck Protection Program (PPP). Online services have allowed smaller creditors to push past their scale limitations and compete on a level beyond their inherent asset size via technology-enabled lending.

Smaller banks boosted their PPP lending capabilities by partnering with fintechs, such as New Jersey-based Cross River Bank, which partnered with more than 30 fintech companies to facilitate billions of dollars on small business loans.

Larger banks’ ability to invest in technology had previously made it harder for smaller banks to remain competitive, KBRA said.

However, electronic banking has redefined how customers access services, providing smaller banks with the opportunity to evolve their product delivery systems to lower cost-digital platforms.

While digital banking has become popular with consumers due to its accessibility and user-friendly interface, the report also highlighted increasing operating and regulatory compliance costs as a key contributing factor to banks switching to online banking.

New services such as remote deposit capture and online account opening have also aided the digital shift, coinciding with temporary cuts to in-branch services at the height of the Covid-19 pandemic last year.

The report cited MVB Financial’s 2019 sale of three branches located in the West Virginia panhandle. The bank redeployed the capital into its nascent fintech-oriented businesses with a focus on generating low-cost deposits and fee revenue opportunities.

Other banks have made similar moves to consolidate their branch networks on the back of their customer bases increasingly preferring online services.

Chicago-based Byline Bank is preparing to close 11 branches, nearly 20% of its network, this year after an increase in uptake of its digital services. Illinois’ Midland States Bancorp has made a similar move, reducing its physical branch network by 20% through 13 closures or mergers.

New York’s Five Star Bank and Georgia-based Colony Bank also announced multiple branch closures last year.

back to top


About Us

Connect With Us


Webinar: From KYC to IDV

How three leading banks are utilizing cutting-edge
digital tools to onboard, win, and wow customers

Time/Date: June 23, 2021 11:00 a.m. ET

Digital adoption, already moving at warp speed, accelerated seven years into the future during the COVID-19 pandemic. As the number of bank branches continues to fall, with at least one study predicting all branches will disappear by 2034 (Fox Business) and foot traffic declining (Vox), today’s most innovative banks are charting a new, digital-first path to win over customers while increasing security, meeting KYC compliance requirements, and winning customers to drive revenue.

In this webinar, you’ll hear from John Baird, Founder & CEO of Vouched, Tyler Crawford, COO of Bankers Healthcare Group, Anand Sathiyamurthy, CPO of Flagstar Bank and Daniel Sheehan, Chairman & CEO of Professional Bank as they describe their vision for digital transformation and how customer expectations are changing to digital first. They’ll also explore how fostering an innovation mindset creates new ways to tackle complex KYC problems and allows them to quickly compete in new markets and win customers.


This webinar is brought to you by:
Vouched Logo