In my last two articles, I outlined the benefits of pilot programs as an alternative to traditional rip-and-replace strategies and provided a step-by-step guide to implementing them effectively. Now, we turn to real-world examples in community banking, primarily at banks with under $10 billion in assets. These case studies were drawn from our own clients, sources like American Banker, FDIC and OCC announcements, and vendor case studies. By examining these successes, we can see how pilots not only validate solutions but also build momentum for broader adoption, ensuring banks remain competitive in a digital-first landscape.

The challenges of traditional tech adoption for community banks

Banks grapple with limited resources, making big-bang implementations particularly burdensome. Key hurdles include:

• Budget and staffing constraints: Extended vendor evaluations and full rollouts strain finances and IT teams, delaying ROI.
  
  
• Regulatory pressures: Compliance with FDIC, OCC, and other bodies require careful testing, especially for fintech integrations.
  
  
• Competitive demands: Customers expect seamless digital experiences, but untested tech risks downtime or member loss.
  
  

Pilots address these by enabling phased, low-risk experimentation, often through partnerships that share costs and expertise.

Understanding pilot programs in bank strategies

Pilot programs involve targeted testing of technologies, such as AI for fraud detection or FedNow for instant payments on a subset of operations, select branches, or accounts. For community banks, these often leverage federal initiatives like the OCC’s Innovation Pilot Program or FDIC’s Rapid Phased Prototyping (RPP) Pilot Program. Using temporary interfaces or “sidecar” systems, banks can validate solutions without overhauling cores, gathering data on performance, compliance, and user feedback before scaling. This is particularly relevant for core processing pilots, where modular testing of transaction engines allows for incremental upgrades to legacy systems.

Case studies of successful pilot implementations

• The Cooperative Bank (Roslindale, MA; Assets: ~$1.3B) — Fraud Protection Software Pilot: This Massachusetts-based community bank partnered with fintech startup Carefull to pilot an AI-driven platform aimed at protecting older customers from financial exploitation. The system monitored checking, savings, and credit card accounts for red flags like late payments, unusual transactions, or missed bills, using AI to send alerts to customers or trusted contacts. Integrated via APIs for minimal disruption, the pilot analyzed billions in transactions, preventing potential losses and building customer trust. As the first formal partnership from Alloy Labs’ inaugural cohort, it expanded Carefull’s reach, with the bank noting improved senior client retention.
  
  
• Bridge Community Bank (Solon, IA; Assets: ~$200M) — FedNow Real-Time Payments Pilot: As an early adopter in the FedNow pilot, this Iowa bank collaborated with Temenos to process instant transactions on select accounts. Part of a program with 120+ organizations, it focused on speedier settlements for consumers and businesses, achieving sub-second finality. Outcomes included competitive edges in efficiency, and the bank was later part of the full launch in July 2023 involving 35 banks.
  
  
• Project Hamilton Phase 1 (Federal Reserve Bank of Boston and MIT; Exploratory for Small Banks) — Core Transaction Processing Pilot: This multiyear research developed a modular CBDC platform, testing two architectures: one with batched transactions (~170,000 TPS) and a parallel model (1.7 million TPS), emphasizing privacy and resilience. Open-sourced under MIT license, it provided insights for bank cores for distributed designs for high-volume processing.
  
  
• AppTech Payments BaaS Pilot (Merchant-Focused, Extensible to Community Banks) — Core Processing Integration Pilot: Tested Banking-as-a-Service (BaaS) features like virtual accounts, debit cards, ACH/wires, and real-time invoicing with merchant clients to streamline core operations. Pilot success, reducing payment friction and enabling instant transfers, led to full launch; integrated cloud/on-site for banks.
  
  
• Various Community Banks — Financial Reporting Tech Pilot: The FDIC’s Rapid Phased Prototyping (RPP) competition selected four vendors — Apiture, FIS, Google Cloud, and S&P Global — to collaborate with supervised banks on modernizing financial reporting. Pilots tested proofs-of-concept for tools that supplement Call Reports with more timely, granular data, aiming to reduce reporting burdens and enhance sector monitoring. Involving up to nine banks, the program focused on tech sprints for emerging solutions, yielding insights into automation and efficiency.
  
  
• Various Community Banks — OCC Innovation Pilot Program: The OCC’s voluntary program allows eligible banks to test innovative activities like digital banking enhancements and AI-driven processes for 3-24 months, with early regulatory input to ensure safety. Open to community banks, it encourages fintech collaborations without enforcement actions during testing, provided proposals meet criteria like consumer benefit and risk management.
  
  

These examples underscore pilots’ role in driving low-risk innovation, including for core systems.

Implementing a successful pilot program

To execute effectively:

1. Strategize and scope: Align with needs like payments or core processing; keep small for enthusiasm.
   
   
2. Partner and test: Use temporary interfaces; monitor metrics.
   
   
3. Evaluate and scale: Analyze results, phase out interfaces upon success.
   
   

Pilot programs have proven transformative for community banks, turning tech adoption into a strategic advantage. At CCG Catalyst, we advocate this approach to navigate digital demands while preserving community focus. By starting small, banks can achieve big results, ensuring resilience in an evolving landscape.