Fintech companies have a unique vantage point from which to view the COVID-19 crisis.
Technology leaders are working long hours to help banks go remote, fill in customer service gaps and meet unprecedented loan demand. They’re providing millions of dollars in free services, and rapidly releasing new products. They’re talking to bankers all day, every day, and many of them are former bankers themselves.
Bank Director crowdsourced insights about banks’ pandemic-fueled tech initiatives from 30 fintech companies and distilled their viewpoints into five observations that can help banks sort through the digital demands they face today.
“Nice to Have” Technology Is Now “Must Have”
Online account opening, digital banking, financial wellness and customer service are garnering fresh attention as a result of the COVID-19 crisis.
Before the pandemic, these areas were thought of as “nice to have,” but they weren’t at the top of any bank’s tech expenditure list. COVID changed that.
Account opening and digital banking are essential when branch lobbies are closed, and customers are looking to their banks for advice in ways they never have before in times of widespread uncertainty.
These new demands have created a unique opportunity to push technology initiatives forward. Ben Morales, who had a 24-year tenure in banking before founding personal loan fintech QCash, observed that bank leaders shouldn’t “waste an emergency. Now is the time to push bank boards to invest.”
Bank boards are already talking about COVID as a potential inflection point for tech adoption, says Jon Rigsby, a former banker who co-founded and now is the CEO of Hawthorn River Lending. He notes that this moment is different from past crises. “In my 27-year banking career, I’ve never seen bankers change so fast. It was quite phenomenal.”
Customer Service, Financial Wellness Are Taking Center Stage
Consumers are increasingly seeking guidance from their banks, inundating call centers. As a result, communication and financial wellness tools are getting their moment in the sun.
Boston-based fintech Micronotes has witnessed exponential growth in demand for their product that helps banks initiate conversations with their customers digitally. Micronotes introduced a new program that’s purpose built for pandemic in mid-March. The Goodwill Program helps banks proactively communicate with their customers around issues like relief assistance and the Small Business Administration’s Paycheck Protection Program (PPP). Inbound interest in the firm from banks was nearly eight-times higher two weeks after the program launched, compared to the two weeks prior to launch, Micronotes reports.
Banks already equipped with digital communication tools are seeing an uptick in usage. Kasisto, a New York-based fintech, reported that several clients have seen a 20% to 30% increase in the use of KAI, a virtual assistant that can converse with customers and lessen the burden on call centers.
Financial wellness initiatives are also seeing liftoff. Happy Money, a personal loan fintech that uses financial and psychometric data to predict a borrower’s willingness to repay a loan, launched a free financial stress relief product for its bank partners’ customers. And SavvyMoney, a fintech that provides credit information to borrowers alongside pre-qualified loan offers, is seeing an influx of inquiries from banks that “understand the need to provide their customers with tools so they can better manage their money during uncertain financial times,” says CEO JB Orecchia.
Due Diligence Can Move Faster, When It Has To
Several fintechs have noted that banks are speeding up their vendor due diligence processes immensely — but not by relaxing standards.
Vendor onboarding programs can sometimes stretch to fill an entire year, according to Rishi Khosla, CEO of London-based digital bank OakNorth, but they don’t have to. OakNorth developed its own credit underwriting and monitoring solution, and recently spun out a technology company by the same name to provide the tools to banks outside of the U.K.
Khosla has a unique perspective given his dual roles as both a banker and technologist. He says some banks have created “unbelievable processes” that, when cut down, actually only amount to 10 to 20 hours of work. In this environment, he says, a commercial bank partner can get 20 hours of work done within days. They’re in “war mode,” so they can take a dramatically different approach, but with no less rigor.
“It’s not like they’re taking shortcuts. They’re going through all the right processes,” he says. “It’s just they’re doing it in a very efficient, streamlined manner without the bureaucracy.”
Approach Existing Partners First
Banks now wanting to adopt new technology may find themselves at the end of a long waitlist as fintechs are inundated with new demand. Fintech providers are prioritizing implementations for existing customers first — just as most banks prioritize existing borrowers for PPP loans.
To get the technology they need fast, some banks are getting creative in rejiggering the tech they do have to meet immediate needs.
Matt Johnner, a bank board member and the president of construction lending fintech BankLabs, got a call from a bank client a few days after the rollout of PPP loans. The bank wanted to customize the BankLabs construction loan automation tool to process PPP loans. Johnner says the bank “called because they know our software is customizable … and that we go live in 1 hour.”
Because of the exponential rise in digital demand, a bank’s success with technology during the pandemic has been based largely on what they had in place before the outbreak, according to many fintechs.
“Some banks are innovating through this and are thinking near and long term, especially those that have made good investments in digital banking and have a solid foundation to build out from,” explains Derik Sutton, VP of product and experience for small business solution Autobooks. “The most common response we get [from banks] is ‘We wish we had done this sooner.’”
Resist the Urge to Slash-and-Burn
There are typically three ways that banks respond in crisis, according to Joe Zeibert, who started his banking career as an intern at Bank of America Corp. in summer 2008. He recently joined pricing and analytics platform Nomis as managing director of global lending solutions after an 11-year career in banking, and believes history can be a useful indicator here.
“Similar to the financial crisis, we see some banks rushing to innovate who will be ahead of the curve when they get out of the downturn. Others are playing wait and see, and then others are slashing tech and innovation budgets to cut costs wherever they can,” says Zeibert. According to him, the more innovative banks came out of the last crisis better off than their peers that cut tech spending. “They came out of the downturn with a 5-year innovation lead over their competitors — a gap that is almost impossible to close,” he says. Banks now should resist the urge to slash and burn and, instead, focus on investing in technology that will help them emerge from the crisis stronger.
Most technology companies are reporting an influx of inbound interest from banks, and strong momentum on current projects. Fintechs appear to be rising to the occasion, and one sentiment they all seem to share is that it’s their time to give back; to help banks and, as a result, the nation, weather this crisis together.
*All of the companies mentioned in this article are offering new products, expedited implementations or free services to banks during COVID-19. To learn more about them, you can access their profiles in Bank Director’s FinXTech Connect platform.