COVID-19 Accelerates Need For Banks To Broaden Digital Business Banking Services A Great Experience Is More Important Than Ever

COVID-19 Accelerates Need For Banks To Broaden Digital Business Banking Services

A Great Experience Is More Important Than Ever

BY EDDIE DAVIS, SPECIAL TO BANKING MID ATLANTIC

Advances 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.

FINTECH PARTNERSHIPS

A number of big technology companies and alternative lenders have emerged as big players in lending, and in facilitating business-to-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 have an existing merchant account. This payment method essentially frees up business’ cash and makes it possible for them to cover expenses that would not otherwise be payable with credit.

Ask yourself, how valuable would such a service be for your struggling small business clients right now?

ADAPTING TO THE PANDEMIC

People and institutions are often called upon to adapt quickly in times of duress and uncertainty. We’re seeing it with businesses across America that are having to learn new ways to serve their customers while adapting to the restrictions aimed at slowing the outbreak.

Community banks are no exception. Forward-thinking banks that saw the importance of speeding up the loan application process to give their clients a fighting chance of getting a slice of the PPP loans did so through partnerships with digital platforms. Now that the loan program is over, community banks should be thinking of ways they can more quickly process what is expected to be a crush of loan forgiveness requests from businesses that were approved for a PPP loan.

NOBODY PLANNED FOR LOAN FORGIVENESS

Sorting the requests for forgiveness is going to present banks with a big challenge, as they’ll have to ensure that borrowers have been able to present supporting documentation to back up how their loan funds were used.

Because the standards for documentation, collection and submission of the paperwork needed for businesses to get their loan forgiven are continually changing, banks need an adaptable solution. Here’s another area where outsourcing this process to a Fintech company can help streamline the process for borrowers and banks alike.

The need to rely on technology to solve an issue like loan forgiveness is another example of why making the transition toward a cloud-based, digital banking model can pay off in the long-run. Keeping up with technological changes is like firing at a moving target, but one that community banks need to keep working to hit consistently in an ever-competitive marketplace where customer engagement, convenience and immediacy are crucial to maintain a competitive edge.

A great digital experience is more important than ever.

Eddie Davis is the SVP of sales & operations for FINSYNC, a consolidated cash flow management platform.