Digital marketplace: a customer-focused approach to community banking

Modern banking success relies on actionable data, scalable digital infrastructure and FinTech partnerships to enhance engagement and growth.

In brief

• Retail banks must turn customer data into actionable insights to deliver personalized digital services that meet evolving customer needs.
• A scalable digital marketplace can help banks boost customer acquisition, unlock new revenue streams, and improve operational efficiency and risk management.
• Strategic partnerships with FinTechs are essential for community banks to accelerate transformation with greater speed, scale and access to innovation.

When people hear the term “community banker,” they often picture a local branch manager who knows nearly every customer by name and understands their key financial milestones — buying a home, financing a car, saving for college or planning a family vacation.

To keep pace, many consumer banks are racing to optimize product and service delivery across digital channels while striving to create a unified user experience. By 2025, an estimated 216 million US customers will be using mobile and online banking services.³ But delivering a truly comprehensive digital experience requires more than basic functionality. It spans seamless onboarding, personalized financial content, a broad suite of product offerings and intelligent product matching — all critical to meeting modern consumer expectations and ultimately driving deeper engagement and higher lifetime value.

The dual mandate: efficiency and smarter risk management

Cybersecurity risks and an increasingly complex regulatory landscape are two of the most pressing challenges retail banks will face in the coming years — both play critical roles in a rapidly evolving digital environment. Data breaches and cyber threats can compromise customer information, damage reputations, and lead to significant financial losses for both customers and banks.

Alongside the growing threat of cyber attacks, the need to comply with shifting regulations — particularly those around data privacy and anti-money laundering — can continue to strain the operational capability of banks, especially smaller institutions. The paradox retail banks face is that these risks are only the starting point; to deliver effective, modern digital experiences, institutions must also modernize the infrastructure that supports them.

While much of the digital investment has focused on the front office — enhancing customer-facing apps and interfaces — the benefits of digitization must extend deeper. Modernizing core infrastructure allows banks to realize dual benefits: operational efficiency and stronger risk management. By streamlining back-office processes, automating manual workflows and integrating intelligent compliance tools, banks can not only lower costs but also improve their ability to detect and manage risk — creating a more resilient and scalable foundation for long-term growth.

Now or never: competing in a digital-first culture

Banks cannot afford to be reactive. Rising consumer expectations, mounting regulatory pressures and intensifying competition from FinTechs demand a proactive and comprehensive digital strategy — one that spans the entire customer lifecycle and internal infrastructure.

To remain competitive and resilient, banks must:

• Acquire customers through new channels by embracing embedded finance models that lower acquisition costs while opening up new revenue opportunities. 
• Deliver a seamless, secure onboarding experience that integrates frictionless digital flows with robust data protection and identity verification. 
• Provide a comprehensive suite of financial products including savings, lending, insurance, credit and investment options — offered in a way that’s easy to access and compare. 
• Increase engagement and lifetime value by turning customer data into real-time insights that drive personalized content, timely product recommendations and proactive financial guidance. 
• Adopt modern infrastructure and partner with leading FinTech companies to accelerate digitization with speed and scale. 

These are no longer nice-to-haves. They are table-stakes in a rapidly evolving financial landscape — strategic moves that banks of all sizes must master to meet the expectations of today’s digitally empowered consumer.

Transforming banking through a digital marketplace

To meet rising customer expectations for enhanced digital services, banks are accelerating investments in core system and infrastructure transformation. While large institutions often have the resources to rearchitect their digital experiences using advanced Gen-3 banking platforms, many regional and community banks lack the scale, budget or in-house capabilities to undertake such a significant overhaul.

A digital marketplace with an embedded finance platform can help regional and community banks — regardless of their digital maturity — level the playing field, enhancing their ability to accelerate digital transformation and deliver advanced, customer-centric experiences. It empowers them to build compelling value propositions that grow their customer base, deepen engagement and reduce attrition in an increasingly competitive market.

Historically, regional and community banks relied on opening new branches to drive growth. Today, digital account acquisition has become a competitive necessity. A digital marketplace can help banks meet this challenge by providing a tailored, customized digital platform that delivers a broad mix of personalized products and investment options — creating meaningful value for their customers through:

• An embedded finance model — Acquire customers by participating in financial marketplaces and deepen engagement, offering customers a full-suite of product offerings through a single integration — paired with a unified, personalized shopping and onboarding experience. This streamlined approach enables banks to broaden their offerings, meet customers at their point of need and significantly enhance overall satisfaction.

• Digital onboarding and core banking system integration — Provide a fast, intuitive onboarding experience using a hosted digital infrastructure with know-your-customer (KYC) support, aligned to a bank’s own compliance processes and requirements. This improves customer experience while ensuring regulatory compliance.

• Personalized customer engagement — Maintain brand control and leverage consumer data insights to manage incentives and create engaging experiences across thousands of uniquely targeted product-specific campaigns. Utilize demographic and geographic targeting to tailor products and marketing, fostering deeper customer connections and loyalty.

• Streamlined account activation — Activation programs can enable banks to launch their digital marketplace in weeks, driving deposit growth. These programs include risk assessment and a clear business case, ensuring swift implementation of digital strategies.

By integrating these unique capabilities with deep banking domain knowledge, a digital marketplace can equip banks with the tools they need to thrive in a competitive landscape, ensuring they can meet the demands of today’s digital consumers effectively.

Embracing change for a sustainable banking future

As the banking industry faces unprecedented challenges and evolving consumer expectations, digital marketplaces have emerged as a vital resource for financial institutions seeking to thrive in this dynamic environment. By enabling banks to offer a comprehensive suite of digital products and personalized services, it empowers institutions — regardless of size or digital maturity — to enhance customer engagement and drive growth.

Navigating any new digital journey can be daunting due to the multitude of available platforms, vendors and resources in the market today. Finding the right implementation advisor and collaborator is crucial. This is where EY professionals provide trusted assistance by providing industry-specific insights, transformative strategies and implementation experience that assist organizations in managing the complexities of digital transformation. Through strategic partnerships, banks can now leverage innovative solutions to streamline operations, reduce attrition, improve customer experiences and unlock new revenue opportunities.

In an era where customer expectations are soaring, banks must not just adapt but lead the charge in digital transformation. This is not just about accelerating deposit growth; it’s about forging enduring relationships that elevate customer loyalty and drive sustainable success. By embracing a digital marketplace, banks can redefine their competitive edge and transform the way they engage with their customers, ensuring they thrive in the dynamic financial landscape of tomorrow.

This article was originally published on ERP Today.