Here are three common pitfalls when assessing preparedness:

Assuming that a working tech stack is enough. Aging core systems built up over many years accommodate basic modern experiences, like mobile banking, and can continue to fulfill the bank’s basic functions. But a tech stack dominated by legacy systems may lack the extensibility and scalability to change quickly and robustly in response to new technologies and evolving customer needs. A need to make meaningful changes could very well eliminate an illusion of preparedness.

Defining competition too narrowly. As we’ve written, community bankers in general see other community banks as chief competitors, followed by other traditional banking institutions with a physical in-market presence. However, as we’ve also covered, under many circumstances, nonbank apps are also a substantial threat to FIs’ relationships with their customers. Being prepared technologically requires understanding the capabilities of all of your competitors and how they might change customer expectations.

Benchmarking technology in a way that isn’t relevant to the business. Customer demand should be the ultimate arbiter of technology choices. Blindly checking boxes is a quick way to buy functionality that doesn’t matter much to customers and makes it hard to enforce discipline in cutting functionality when it’s no longer useful. It’s tempting to use megabanks’ offerings as the gold standard for the customer experience, but FIs with smaller budgets need to be efficient with their choices using the needs of their market.

Intellectual honesty and the right frame of reference are fundamental to modernization, which forms the foundation for the technical flexibility and operational sophistication needed to innovate. A past survey of ours asked an open-response question about respondents’ definition of “digital transformation,” and many responses were tactical, such as digital channels, automation, analytics, and cloud. It’s prudent for bankers to grasp the technology practices they should reinforce and the changes they should make, but that view needs a broader, strategic lens. Commitment to innovation, a philosophy that considers best-of-breed solutions, and productive relationships with fintechs are crucial.