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Many financial institutions have decided now is a better time to hire talent rather than buy another bank or credit union, enter new markets, or add business lines. The proof is in several high-profile recruiting announcements from small and midsize financial institutions.

CapStar Financial Holdings in Nashville, TN, will expand outside its home state for the first time after hiring a First Horizon banker in Asheville, NC. Encore Bank in Little Rock, AR, will move into Boulder, CO, after recruiting a former market president at Great Western Bancorp.

IC Federal Credit Union in Fitchburg, MA, hired former Avidia Bank executive CarrieAnne Cormier as its chief operating officer. Citadel Credit Union in Exton, PA, hired a team of bankers from Santander Bank with plans to launch a business banking division in August.

Columbia Banking System in Tacoma, WA, and Western Alliance Bancorp in Phoenix, AZ, are entering Salt Lake City after recruiting bankers from large competitors such as Bank of America, U.S. Bancorp, and Zions Bancorp.

Banks are also going after talent to grow or add new lines of business. RBB Bancorp in Los Angeles hired three bankers to beef up its Small Business Administration lending. Encore hired a banker to build a business banking community association.

 In our recent report, we made the case that banks and credit unions consider Buy Now, Pay Later (BNPL) as part of a holistic suite of payments products.

While a study from IntraFi Network found that four out of five small banks and credit unions are reluctant to get into BNPL, SRM believes that traditional FIs have the infrastructure to handle compliance requirements from agencies such as the Consumer Financial Protection Bureau.

Several initiatives by the Consumer Financial Protection Bureau (CFPB) seem poised to increase competition between traditional financial services providers and fintechs.

An effort to regulate nonbanks has gained support from banks and credit unions. Still, the CFPB’s plan to make it easier for consumers to move accounts will pressure traditional financial institutions to offer more products and better services.

These initiatives are coming when the agency is scrutinizing overdraft and nonsufficient funds (NSF) fees, the CARD Act, and the terms and disclosures of Buy Now, Pay Later (BNPL) offerings – the latter a topic SRM recently wrote a report on.

All signs point to the need for banks and credit unions to buckle up in coming months. These expected changes will likely bring fintech even more into the mainstream and raise the stakes when it comes to recruiting and retaining clients.

In a recent conversation with a Colorado banker about tech strategies, he mentioned a looming investor meeting. He was putting together an overview and was trying to decide the best way to proceed.

"These are the people who provide the underlying support for what we're doing, so I want to make sure they know the road we're on will provide the value they want," he told me.

Fintech is helping a growing number of banks and credit unions reconfigure the communities they serve.

Historically, financial institutions have focused on clients based on geography, be that a neighborhood or city for banks or a local company or industry for credit union membership. Over time, those boundaries became more fluid as banks entered new markets and credit unions expanded their fields of membership.

As summer approaches, bank consolidation has been steady but not as brisk as many thought.

There have been 37 transactions announced by March 18, 2022. If this pace continues, it would be about 25% below last year, though many of 2021's deals were in the works before the pandemic. As with many other business transactions, they were shelved as Covid-19 took hold.

The CUNA Governmental Affairs Conference was in-person for the first time in three years, giving many credit union executives a long-overdue chance to have face-to-face meetings.

SRM made the most of the week, engaging with scores of executives, getting a sense of their challenges and opportunities, and lining up discussions to assist in crafting strategies and finding solutions for both.

Financial institutions should brace for substantial regulatory change in the year ahead.

Turnover at the top of several federal agencies, including the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp. (FDIC), foreshadows more scrutiny for FIs.

Everything seems to be on the table, including timelines for implementing the Current Expected Credit Loss (CECL) accounting standard, data privacy, and Bank Secrecy Act compliance.

There are, however, several areas that we believe merit the most attention in the coming months.

Creating a US central bank digital currency (CBDC) could have several benefits; however, it would also cause a plethora of systemic challenges for the existing financial system.

Financial institutions (FIs) of all sizes struggle to recruit and retain younger employees and customers – a challenge exacerbated by the rise of neobanks that offer enhanced experiences, streamlined processes, and faster decisions.