Independent Banker - May 2022 - 27

PORTFOLIO INNOVATION STATION
Back-office
innovation
By Charles Potts, ICBA
ommunity bankers are embracing
innovation like never before-
with impressive results. But with so
much emphasis placed on customerfacing
products and technologies,
innovating back-offi ce operations
can fall to the bottom of the priority
list. ICBA sees things diff erently. We
believe operations is the " engine " that
drives every aspect of banking and,
ultimately, the bottom line.
Operations play a role across
multiple facets of community banking,
including account onboarding,
payments and transactions, fraud
analysis, compliance and regulatory
guidelines. Without the fi nely tuned
engine of operations, these critical
functions could slow and possibly
stall, delaying essential, customerfacing
services.
On a practical level, what steps can
community banks take to strengthen
their back-offi ce operations?
1. Unbundle your end-to-end
operations and conduct a SWOT
analysis. This can identify your
operational strengths, weaknesses,
opportunities and threats. You
might also consider a gap analysis.
Are there places where you
can replace redundant manual
labor with automated tools like
artifi cial intelligence (AI), robotic
process automation (RPA) and
machine learning?
2. Consider collaboration
opportunities. Community
C
banks have always done what was
necessary to meet the needs of their
customers. Paycheck Protection
Program (PPP) loans are just one
example of how bank staff dug
deep and rallied around their
community to get the job done.
3. Partner with a bank-enabling
technology service provider.
Doing so can be tremendously
benefi cial in automating resourceintensive
back-offi ce procedures
and processes. There is a plethora
of options to help automate
compliance requirements,
including Know Your Customer
(KYC), Bank Secrecy Act (BSA)/
anti-money laundering (AML) and
loan applications, as well as other
back-offi ce processes.
Minimizing friction
Community banks may also want to
explore banking as a service (BaaS).
BaaS uses application programming
interfaces (APIs) to enable nonbank
entities to build bank off erings on
top of their infrastructure. Using this
model, licensed banks can integrate
banking services with products
created by nonbank businesses. This
means that companies like Uber and
Apple can embed fi nancial services
into their platform.
Take, for example, $7.1 billionasset
Metropolitan Commercial Bank
in New York City, which launched its
Global Payments Group (a pillar of its
BaaS business) to support its middlemarket
commercial customers. This
BaaS approach has been fi nancially
advantageous for the bank. In 2021, the
bank reported that its Global Payments
Group processed more than 90 million
client transactions totaling $22.1 billion,
which accounts for 69% of its noninterest
revenue.
Perhaps you've heard the platform
business model and motto " Maximize
collisions and minimize friction. "
Technology and Innovation explains it
this way: " Simply, successful platforms
increase the quantity (maximize
collisions) and quality (minimize
friction) of interactions between
producers and consumers. "
As bankers, we learn this during our
fi rst day in management training. Our
job is to remove barriers and friction for
our customers. It's up to us to walk the
walk every day to improve back-offi ce
operations and collaboration between
the back and front offices. 
Charles Potts (charles.potts@icba.org)
is ICBA executive vice president and
chief innovation off icer
independentbanker.org Q 27
http://www.independentbanker.org
Independent Banker - May 2022

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