S E RV I C E S
COVID-19 Accelerates Need For Banks To Broaden Digital Business Banking Services
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A Great Experience Is More Important Than Ever B Y E D D I E DAV I S, S P E C I AL TO B A N K I N G MI D AT L A N T I C
dvances in technology and communications have led to unprecedented disruption for banks in recent years. Even so, few industries have shown their ability to quickly adapt when necessary. With many small businesses eager to secure a financial lifeline via the government’s Paycheck Protection Program, many community banks scrambled to quickly make online applications for the loans available. Even banks that didn’t already offer online applications for lines of credit, term loans or other lending products made the PPP application available, giving borrowers a faster way to apply for the funds while complying with social distancing restrictions. Despite the challenges involved in the transition, community banks succeeded, enabling their business customers to file for the government-backed loan at a time when they needed it the most. This shift to a paperless and more immediate method for handling PPP loan applications puts pressure on banks to continue this transition across all of their business lending offerings. The coronavirus outbreak has added urgency to this shift, because small businesses that applied for a PPP loan electronically are expecting they will be able to file their loan forgiveness application with their lender the same way. TECH IN FINANCE AN ACCELERATING TREND Gen-X business owners and, increasingly, entrepreneurs from the far larger and even more tech-savvy Millennial generation have grown accustomed to the convenience of digital consumer banking and financial services, and now expect it when it comes to their small business banking. Expectations of digital business banking stem from the explosion of financial services innovation that fintech companies kicked off more than a decade ago. This disruption isn’t likely to abate anytime soon, which puts pressure on financial institutions large and small to keep up. But community banks have a distinct advantage
when it comes to making such changes, because they can make decisions much faster than larger banks. As an executive at a fintech company that, among other things, uses technology to streamline the business financing application and review process, I’ve seen how quickly banks can transform by adopting technology to improve established practices in lending and beyond. The coronavirus pandemic has helped speed up the digital transformation in banking. Community banks with the digital infrastructure in place to more quickly process small business clients’ applications under the PPP have been able to better serve their clients at a time when a delay of even a day or two could make the difference between their customer getting access to funds or ending up empty-handed.
Photo credit: iStockphoto/Ridofranz
FINTECH PARTNERSHIPS A number of big technology companies and alternative lenders have emerged as big players in lending, and in facilitating businessto-business payments and funds transfers in recent years. Even major wireless carriers now offer
banking services. Most banks do not have a core competency in software development, and it would be cost-prohibitive to develop one. However, there are great ways to team up with Fintech firms that specialize in tools that can be offered in partnership. This way, banks can leverage the technology to clear the obstacles that they’ve faced when extending small business loans, including documentation, compliance, cost and underwriting. In the process, they can broaden access to financing for their customers, without going all-in on big infrastructure changes. FINTECH MORE THAN JUST BANKING Another area that’s undergoing a tech-makeover is digital payments. Some financial services companies are enabling small businesses to make payments via email by tapping their existing credit cards, even if the recipient doesn’t ISSUE THREE 2020 | BANKING MID ATLANTIC 17
