Utah banks need to increase digital components to stay competitive

Are Utah banks missing the train that’s headed to new digital components, and why are so many struggling to innovate? And is the Beehive State an outlier in the race to add new technologies to minimize risks? 

A study earlier this year from the Conference of State Bank Supervisors revealed that two-thirds of community banks nationwide expect cybersecurity risk to be “most difficult” as they implement new technologies over the next five years. That’s a jump from 42 percent of banks feeling that way in 2024. National reports say 70 percent of IT spending in large banks is spent to support legacy platforms, even though the industry as a whole — and equally true with Utah banks — indicates the need to upgrade their programs and platforms to digital technologies.

So what’s the holdup? One is cost — new equipment, the “down time” it may take to train employees and get everyone on the same page. Another is the fact that changing systems and procedures isn’t something easily done. A bank’s technology is already dealing with millions of transactions every day, and to migrate an existing system or practice into a new one is similar to rebuilding an aircraft or shipping vessel mid-journey. But the cost of doing nothing to upgrade may be even higher.

The Utah Banking Association says its members cite digital-platform upgrades and modernization of office practices as top priorities. It’s easier for smaller banks to make changes than those part of a larger network, but they also have limited budgets, and changing out equipment does entail some costs.

“What we’re seeing in Utah is smaller banks trying to keep their hometown feel while rolling out digital tools that match what the big players offer,” said Tom Lee, director of emerging bank leaders at the UBA. And even if budgets increase, smaller rural or regional banks may have a harder time hiring the right people who understand technologies and can help usher in changes.

But change is inevitable, no banking pun intended. The publication American Banker says 80 percent of banks are planning to increase their tech investments by year’s end, prioritizing security and fraud mitigation, data and analytics, and AI. Another survey by Bank Director magazine says 71 percent of banks increased their tech budgets this year by an average of 10 percent.

Like all businesses, bankers need to know that customers expect more convenience and connection than ever before, since modern technology in all other facets of their lives are providing that.