How Digital Transformation Improves M&A Opportunities for Banks During COVID-19


a leader in M&A advisory discovering opportunities for bank M&AThe COVID-19 pandemic triggered a major push for technology adoption. Without warning, organizations of all kinds had to quickly find new ways to improve performance and meet ever-changing demands while adapting to a challenging new environment.

Community banks, in particular, experienced significant disruption due to the coronavirus, making digital transformation, or the integration of digital technology throughout an organization to change operations and help customers, essential for sustainability and growth. Mergers and acquisitions (M&A) activity was low in 2020 as banks struggled to help customers throughout the pandemic. However, bank consolidation is projected to be on the rise in 2021. Now, banks that focused on refining their digital offerings have a competitive edge whether they are looking to acquire or be acquired in 2021.

Bank M&A and Data Strategies

M&A opportunities often drive financial institutions to develop a data strategy for the purpose of aligning people and systems to accelerate modernization, build a powerful IT architecture and achieve business goals. With a strategy in place that incorporates technology selection, systems integrations, communications and change management, bank leaders can take advantage of new opportunities with minimal disruptions to their operations during a bank M&A transaction.

Rethinking Traditional Bank Models

an individual using an online banking service as a result of innovationDigital transformation can lead to the development of new banking models that promote growth. It is important to remember that digital transformation is not a strategy based on technology, but rather the adoption of a business strategy that enables financial institutions to promptly and efficiently respond to market needs. More banking services are moving out of branches and going online. While the services themselves are not changing, the method of access is an attempt to enhance the customer experience. Banks that invest in innovation and better technology may serve as a better candidate in terms of merging with or acquiring other banks on the market.

Online Banking Capabilities are in High Demand

Community banks are increasingly investing in digital technologies to improve customer acquisition, retention and satisfaction. According to a mobile banking survey published by Business Insider, approximately 80 percent of respondents say that mobile is their primary banking channel. COVID-19 has forced banks to put greater focus on their digital capabilities, which is good – online banking offers countless benefits, including convenience, lower fees, immediate transfers and overall higher efficiency.

Technology Investments are on the Rise

a bank leader reviewing financial analytics on a clear tabletMany banks are looking outside of their own institutions for growth opportunities and promising investment ideas. Digital transformation helps more financial institutions align their business strategy with technological capabilities. Joint ventures, direct acquisitions and alliances all remain favorable options, but more businesses are using their external and corporate venture funds to invest in new technologies. With the uncertain progression of COVID-19, technology performance is more crucial than ever before to business success.

According to EY’s Global Capital Confidence Barometer that surveyed businesses about the impact of digital transformation on their companies, more than half of the respondents reported that they are allocating between 25 and 50 percent of their investment capital on their digital future. Many studies cite digital transformation is the key to business growth, regardless of industry.

Speak with a Digital Transformation Expert

Banks are striving toward enhanced digitalization as customer expectations continue to change. This demand has only been accelerated by the COVID-19 pandemic. For long-term success, banks must redefine the customer experience by putting customer needs at the forefront. They must take a mobile-first view, ensuring that customers are able to use banking services at any time and from any device. It is also essential that banks develop a data strategy for personalization. By undergoing the process of digital transformation, banks are more adequately prepared to either acquire or be acquired, depending on their strategy.

To learn more about digital transformation and how it has created more bank M&A opportunities during COVID-19, reach out to the digital transformation experts at Hartman Executive Advisors today.


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