Coronavirus Underlines Digital Transformation Urgency

The passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act means up to $350 billion in loans guaranteed by the Small Business Administration is set to flow to small businesses by the June 30 funding deadline.

Community and regional institutions are, of course, the logical partners for distribution of this capital. But a challenge remains: How will those financial institutions reach out to the market when their lobbies may not be open, and businesses may not be comfortable with face-to-face interactions?

Banks have done little to change the way they interact with their business customers in the digital age. In good times, this lack of transformation allowed large technology companies like Amazon.com, PayPal Holdings and Square to siphon customers away. The current environment complicates efforts for banks that have not already transformed to be responsive to their customers immediate needs.

Customers prioritized convenience — now banks will be forced to. Even prior to social distancing, consumers prioritized speed and convenience, whether it came to new technology or where they banked.

Winning at business banking was always going to require banks to offer business customers a frictionless experience. But the ability to operate business banking functions digitally has taken on new meaning — from defining quality service to becoming a necessity during a pandemic.

Three Critical Points of Friction in Business Banking
Now more than ever, it should be every institution’s goal to make working with businesses as easy as possible, especially when distribution of SBA dollars is at stake.

To meet this moment, banks need to remove three critical friction points from their business banking experience:

  • The Application: Paper applications are long and tedious, and the process is even more difficult for SBA 7(a) loans. To remove friction, institutions need to focus on data and access. They should use available data and technology to pre-fill applications as much as possible, and provide them digitally either for self-service or with banker assistance.
  • The Decisioning: Underwriting loans is a labor-intensive process that can delay decisions for weeks. An influx of Paycheck Protection Program loan applications will only compound the inefficiencies of the underwriting process. Banks need to automate as much of the underwriting and decisioning process as possible, while keeping their risk exposure in mind. It’s critical that banks select companies that allow them to use their own, unique credit policies.
  • The Account Opening: Banks also need to think about long-term relationships with the businesses they serve during this time. That means eliminating common obstacles associated with opening a business deposit account. For example: If a business has already completed a loan application, their bank should have all the information they need for a new account application and shouldn’t ask for it twice. They need to ensure businesses can complete as much of this process remotely as possible.

At Numerated, the sense of urgency we hear from bank leaders is palpable. Our team has been working overtime — remotely — to provide banks with a quick-to-implement CARES Act Lending Automation solution. Banks have been working just as fast to understand the current environment and build strategies that will help them meet their customers’ rapidly shifting needs.

In many ways, the COVID-19 pandemic has forced banks to consider digital transformation as a solution to this problem. Still, many firms have held off for any number of reasons. Institutions that have focused on digital transformation will be the most successful in improving the business banking customer experience and will lead the way during this pandemic as a result.

From Eastern Bank Corp. in Boston that used digital lending to become the No. 1 small to midsized business lender in their competitive market, to First Federal Lakewood, in Lakewood, Ohio, that is using digital experiences to retain and grow strategic relationships, institutions of all sizes have launched new digital capabilities, better positioning them to face what’s ahead.

As the nation’s businesses grapple with this new reality, these financial institutions are examples for others exploring how to serve business customers when they can’t see them face to face. Doing so will require a reimagining of the way we do business banking.