Bank Director | Digital Banks Archives

The process for opening a consumer account at most financial institutions is pretty standard. It’s not uncommon for banks to provide a fully digital account opening experience for retail customers, while falling back on manual and fragmented processes for business accounts.

Common elements in business account opening include contact forms, days of back-and-forth communication or trips to a branch, sending documents via secure email systems that require someone to set up a whole new account and a highly manual document review process once the bank finally receives those files. This can take anywhere from days to multiple weeks for complex accounts.

Until very recently, the greatest competitor for banks in acquiring and growing business accounts was other banks. But in recent years, digital business banks have quickly emerged as a more formidable competitor. And these digital business banks empower users to open business accounts in minutes.

We researched some of the top digital business banks to learn more about how these companies are winning the business of small businesses. We discovered there are three key ways digital banks are rapidly growing by acquiring business accounts:

1. Seamless, intuitive user experiences. Business clients can instantly open accounts from a digital bank website. There’s no need to travel to a branch or pick up a phone; all documents can be submitted online.
2. Leveraging third-party technology. Digital banks aren’t building their own internal tech stacks from the ground up. They’re using best-in-class workflow tools to construct a client onboarding journey that is streamlined from end to end.
3. Modern aesthetics. Digital business banks use design and aesthetics to their advantage by featuring bright and engaging colors, clean user interfaces and exceptional branding.

The result? Digital banks are pushing their more traditional counterparts to grow and innovate in ways never before experienced in financial services.

Understanding what small businesses need from your bank
A business account is a must-have for any small business. But a flashy brand and a great user experience aren’t key to opening an account. Small businesses are really looking for the right tools to help them run their business.

While digital banks offer a seamless online experience, community banks shouldn’t sell themselves short. Traditional banks have robust product offerings and the unique ability to deal with more complex needs, which many businesses require. Some of the ways businesses need their financial institutions to help include:

Banking and accounting administration.
Financing, especially when it comes to invoices and loan repayment.
Rewards programs based on their unique needs.
Payments, specifically accepting more forms of payment without fees.

It’s important to keep in mind that your bank can’t be all things to all clients. Your expertise in your particular geography, industry or offerings plays a huge role in defining your niche in business banking. It’s what a lot of fintechs — including most digital banks — do: identify a specific niche audience and need, solve the need with technology, and let it go viral.

While digital banks might snap up basic small and medium businesses, the bar to compete in the greater market is not as high as perceived — especially when it comes to differentiated, high-risk complex entities. But it requires a shift in thinking, and the overlaying the right tech on top of the power of a community based financial institution.

It’s important that community bank executives adopt a smart, agile approach when choosing technology partners. To avoid vendor lock-in, explore technologies with integration layers that can seamlessly plug new software into your bank’s core, loan origination system, digital banking treasury management system and all other platforms and services. This means your bank can adopt whatever new tech is best for your business, without letting legacy vendors effectively dictate what you can or can’t do.

Your level of success in winning at digital banking comes down to keeping the client in focus and providing the best experiences for their ongoing needs with the right technology. While the account itself might be a commodity, the journeys, services and offerings your bank provides to small businesses are critical to growing and nurturing your client base.

Before the end of 2021, regulators announced that JPMorgan Chase & Co. had agreed to pay $200 million in fines for “widespread” recordkeeping failures. For years, firm employees used their personal devices and accounts to communicate about business with their customers; the bank did not have records of these exchanges. While $200 million is a large fine by any account, does the settlement capture the true cost of being unsure about where firm data resides?

In 2006, Clive Humby coined the phrased “data is the new oil.” Since then, big tech and fintech companies have invested heavily in making it convenient for consumers to share their needs and wants through any channel, anytime — all while generating and accumulating tremendous data sets makes deep customer segmentation and target-of-one advertising possible.

Historically, banks fostered personal relationships with customers through physical conversations in branches. While these interactions were often triggered by a practical need, the accumulated knowledge bankers’ had about their customers, and their subsequent ability to capitalize on the power of small talk, allowed them to identify unmet customer needs with products and services and drive deeper relationships. Fast forward to the present day: Customer visits to branches have dropped to unprecedented levels as they embrace digital banking as their primary way of managing their finances.

But managing personal finances is different from banking. While most bank interactions revolve around checking balances, depositing checks and paying people and bills, the valuable interactions involve open-ended conversations about the desire to be able to buy a first home, planning for retirement or education, and funding large purchases like cars. These needs have not gone away — but the way consumers want to engage with their institution has completely transformed.

Consumers want to engage their banker through channels that are convenient to them, and this includes mobile messaging, SMS, Facebook messenger and WhatsApp. JPMorgan’s bankers may not have been trying to circumvent securities regulations in engaging with customers on their terms. Failing to meet your customers where they are frustrates both customers and bankers. Failing to embrace these digital channels leads to less valuable data the bank can use.

Banking platforms — like digital, payment and core banking — can capture data that provides insight into consumers’ saving and spending behavior, but fails to capture latent needs. Institutions that make it more convenient for customers to ask their personal banker something than Googling it opens up an entirely new data source. Allowing customers to ask open-ended questions augments transactional insight with unprecedented data on forward-looking needs.

In a recent case study, First National Bank of Omaha identified that 65% of customers expressed interest in exploring new products and services: 15% for credit cards, 12% for home loans, 9% for investments, and 7% for auto loans.

If “data is the new oil,” the real value lies is in the finished product, not the raw state. While data is exciting, the true value is in deriving insights. Analyzing conversational data can provide great insight. And banks can unlock even greater value when they analyze unprocessed conversational data in the context of other customer behavior, like spending patterns, propensity to use other engagement channels and socio-demographic changes.

At present, most of this data is owned and guarded by financial processors and is not readily available for banks to access and analyze. As banks extend their digital engagement model, it is imperative they own and can access their data and insights. And as banks increasingly see the benefits of allowing customers to engage with their banker in the same way they talk to their friends, key considerations should include:

Conversation aggregation. Is a customer’s conversation with multiple bankers aggregated to a single thread, avoiding data lost through channel switching?
Are conversations across channels retained within a dedicated and secure environment?
Can conversations transition from one relationship banker to another, avoiding the downfall of employee attrition?
Are suitable tools powered by artificial intelligence and other capabilities in place to ensure a real-time view of trending topics and requests?
Data access. Is raw conversational data readily available to the bank?

Engaging customers through digital channels presents an exciting opportunity for banks. No longer will data live within the mind of the banker: rather, insight that are derived from both individual and aggregate analysis can become a key driver for both strategic and tactical decisioning.