Community banks and credit unions face a digital experience gap that’s widening as fintech competitors and large banks set new standards for seamless service. While citing regulatory constraints and legacy systems as barriers, the real challenge is often institutional risk aversion and process inertia. By mapping back-end workflows, auditing customer journeys, and calculating true unit economics, smaller financial institutions can identify where friction costs them customers and efficiency.
It seems like it should be table stakes. Customers should be able to browse their bank’s website with the same ease and personalization they experience on Amazon or DoorDash or Expedia: intuitive navigation, smart recommendations, instant access to relevant products, seamless checkout, transaction confirmed. But for many financial institutions, that vision — commonplace in so many other market sectors — still feels out of reach.
Most retail industry observers — especially those unfamiliar with small and mid-sized financial institutions — would probably be surprised to find that so many banks and credit unions haven’t yet adopted such an approach. Others may take at face value financial institutions’ own reasons for failing to take the leap: data security, regulatory constraints, deeply embedded legacy technologies.
But in a market where digital expectations are shaped by the best of e-commerce, banks and credit unions that can deliver this kind of experience may unlock meaningful gains in customer engagement and back-end efficiency that together enable growth at scale. More importantly, they will emerge better able to compete with the large banks and fintechs that continue to erode their customer bases.
Financial institutions that find this argument compelling, and want to give the e-commerce experience a second look, can start by taking an honest inventory of their current state.
Step 1: Look Around
Financial institutions should start with the end in mind, asking themselves: What exactly do we want to achieve? For many, the answer might be deeper customer relationships, faster onboarding, or more efficient cross-sell. It might be gaining better control over your balance sheet so you can more effectively adjust product and revenue mix in a harder-to-predict interest rate environment. It might be expanding your reach among younger generation consumers.
Your outlook on objectives like these must be shaped by a realistic understanding of the competitive landscape and changing market expectations.
“Other industries have been shifting rapidly to keep up with the competition and with technology advances, but banking has simply not kept pace,” said AK Patel, founder and chief executive of ATTUNE, a platform that helps financial institutions streamline onboarding, lending and cross-selling.
At the same time, large banks as well as fintechs are setting new benchmarks for digital experience: Chase’s app now offers prequalified product offers with one-click acceptance, while SoFi lets users manage everything from savings to student loans through a single, unified interface. Meanwhile, consumer expectations are evolving — especially among younger cohorts. A new report by Capgemini found that 74% of Gen Z and millennial customers expect personalized product recommendations from their financial institution, yet only 26% feel they currently receive them.
Step 2: Map Your Current Back-End Process
To deliver a seamless front-end experience, banks must first reckon with the complexity in their back office. Most institutions have accumulated layers of specialized applications around their core system—each added over time to address a specific product gap, compliance need, or service requirement. Over the years, this has led to fragmented workflows and a growing burden of manual tasks, approvals, and cross-checks.
“Banks like to raise the issue of regulatory constraints but in many cases they are simply risk-averse when it comes to process change,” Patel said. “They do understand they need to adopt new technologies, but they don’t understand the true implications of all of the back-end processes.”
Take, for example, a bank that uses separate systems to verify business licenses, pull legal records, and validate account documentation—each requiring staff time and system handoffs that delay onboarding and increase the cost to serve. By mapping these processes end to end, institutions can identify points of friction, quantify their operational drag, and begin imagining a future state — one with fewer individual applications, more streamlined data flows, and less reliance on manual intervention to sell the customer what they came to buy.
Step 3: Map Your Current Customer Experience
Just as it’s essential to understand the internal process landscape, banks should take a hard look at what they demand of their customers—tracing their journey from landing page to transaction confirmation. This means looking at every touchpoint — digital and human — and identifying where friction arises and things break down. Consider unclear product descriptions, redundant data entry requirements, inconsistent messaging across channels, or long wait times for confirmation or approval.
A customer interested in opening a high-yield savings account might have to click through multiple pages, enter the same information twice, or wait days for account activation. These moments add up, eroding trust and pushing potential customers toward institutions that offer faster, more transparent pathways.
Patel describes a bank whose process for opening a business account involved emailing a PDF form, which then took up to two weeks to review and finalize. The client — with $100,000 ready to deposit and recurring deposits poised to follow — receives a customer experience closer to 1995 than 2025. Delays like this don’t just inconvenience a client; they signal that the institution may not be equipped to meet their needs.
By mapping the customer experience thoroughly banks can spot opportunities to simplify, clarify, and accelerate — from product discovery to post-sale onboarding. And with every improvement, they move closer to offering a digital experience that earns loyalty and confidence, not just transactions.
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Step 4: Do the Math
For many institutions, the tipping point isn’t about getting past technology challenges — it’s making a mindset shift that reprioritizes unit economics. One regional bank discovered that it was spending more to originate loans than it was making on them, a direct function of repeated human touchpoints, and disjointed systems. In another example, onboarding a business customer required logging into five separate systems to complete KYB checks — a process that took over an hour and cost upwards of $35–45 in staff time. What would that one process cost if it were reduced to a single API call?
Multiply such savings across hundreds or thousands of transactions, and the opportunity becomes clear. Yet many banks don’t track cost at the product or process level. To be sure, they track performance data closely (as regulators require), including net interest margins and their associated efficiency ratio. But institution-wide metrics miss the operating inefficiencies hiding in plain sight. Running the numbers at a more granular level, and comparing current costs with streamlined alternatives, can uncover high-impact opportunities hiding behind sunk-cost assumptions.
Crucially, Patel said, the bank would also get back human resource capacity which they could then apply more productively, to higher-touch activities that benefit from personal intervention. Digitally mature banks meet high customer expectations by improving the whole experience, not just online workflows but also by showing up with human hand-holding when it really counts.
“Community banking is all about relationship building. But that doesn’t mean you can ignore the expectations of the next generation,” he said. “You have to marry high-touch with high-tech if you want to grow.”
Blocking and Tackling — The Future
For community institutions, the roadmap is becoming clearer. The building blocks for an Amazon-like experience already exist — through APIs, data integrations, and fintech partnerships — but realizing that vision requires breaking from familiar patterns: measuring what’s really costing you, rethinking outdated workflows, and letting go of the idea that compliance and IT should be the default gatekeepers of change.
That kind of shift isn’t just about keeping up — it’s about aligning with where the next generation of customers is headed. As digital expectations continue to rise, particularly among younger consumers, institutions that rely solely on traditional service models may struggle to attract and retain new business. The goal isn’t to compete head-to-head with the largest banks, but to combine a community institutions’ existing strengths — trust, relationships, local presence — with table-stakes digital experiences that clear the path for profitable growth.
Source: The Financial Brand
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