Most community financial institutions generate >70% of total income from interest margin. A volatile rate and lending environment can throw budgeted projections out the window and potentially reverse recent margin gains. With margin uncertainty on the horizon, it may be worth exploring overlooked opportunities.
Let’s start with a simple question:
Why is innovation so hard for community financial institutions?
It’s not because we lack intelligence, talent, or vision. The challenge lies in the very DNA of our business models — built to be stable, secure, and predictable. But here’s the paradox: The same strengths that make you resilient also make you resistant.
Regulation, risk aversion, and legacy systems—these are not just operational hurdles. They shape your leadership teams’ mindset. In a world moving at digital speed, that will leave even the most respected institutions struggling to keep up. Meanwhile, fintech startups, unburdened by tradition or compliance baggage, are iterating at the pace of curiosity.
They’re not better, they’re just unencumbered.
How do you manage around institutional resistance?
The path forward isn’t about becoming something you’re not. It’s about learning how to embrace innovation without compromising your core values. Forget BaaS, a wholly owned subsidiary is your secret sauce.
Let’s start with a couple of data points – 3%, 2%, 1% and 45 million. Less than 3% of your customers will take out a car loan in 2025, less than 2% will take out a mortgage loan, and less than 1% will open a commercial relationship with you. At the same time, financial institutions will see more than 45 million eyeballs visiting your online banking platforms every day – and you are the only digital platform globally that doesn’t monetize that free, repeat traffic. Simply put, you have thousands of visitors to your web assets every month, but there’s no products and no ‘shopping cart’ for your customers to shop and buy online.
You have access to more valuable NPI (non-public information) than any other business model in the US, which can yield powerful insights. An operating subsidiary can see opportunities that are unique to your model and can drive enterprise wide innovation from this data – again, in simple terms, I see my customer making a monthly subscription payment to Chewy.com – lets offer that customer pet insurance. The takeaway message – empower a small subset of your team to be the driving forces behind tomorrow’s solutions – let them leverage your customer data and be your champions of innovation in motion – unencumbered by the traditional thinking inside the bank.
They can create meaningful innovation if you, as executives, make the hard decision and empower them to lead, innovate, while letting the bankers know we are serious about the future of banking.
HOW?
Add an innovation section to your ALCO and/or Board Meeting Agendas – and let your team own the responsibility to innovate – and deliver the next generation of financial results. Over time, this will reduce the institution’s dependence on Net Interest Margin and increase fee income.
About Insuritas | A HUB International company
Insuritas is a leading provider of embedded insurance solutions, enabling financial institutions to offer a comprehensive suite of insurance products directly to their customers. Through its advanced technology platform and extensive carrier network, Insuritas helps financial institutions drive non-interest income, enhance customer loyalty, and deliver seamless insurance experiences. For more information, visit www.insuritas.com.
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