Let me start this piece with a disclaimer.
This is an article telling banks to spend money on technology, and I’m a guy running a company that benefits when banks spend money on technology. So, it’s fair to say that I have some pretty heavy inherent bias.
With that bit of transparency established, let’s get on with it.
There have been thousands of stories talking about COVID-19 and its dramatic impact on the economy. As of last week, the government reported that 22-million people had filed for unemployment. Small businesses are shuttering at an alarming rate and large businesses like United Airlines are seeing losses unlike anything since 2008. In a nutshell, it’s unbelievably bad.
The black box that is the C19 virus fuels a level of fear that is sometimes supported by hard pandemic science, and other times inflamed by the frightening power of the unknown. Either way, fear—of both the known and unknown—is at the core of our actions, driving governments to implement stay and shelter orders, and local municipalities to shut down non-essential businesses.
Banks are essential businesses
But, as defined by more than 30 states, banks and credit unions are essential businesses that need to find a way to stay open and let people interact with money.
So, what are banks doing right now?
We talk to scores of banks, and I can say that every single one of them struggled to get their remote working processes nailed. This is to be expected since it’s only a handful of challenger banks and fully chartered progressive banks like Radius Bank who operate daily in a digital world. The remaining 10,000 or so institutions just weren’t geared to operate their businesses remotely.
To their credit, and it may have taken a while, but the vast majority of banks that we speak with today have got their remote set-up operating with as much fluidity as one could hope.
Banks are also running at breakneck speed trying to manage the massive influx of mortgage refinancing requests. I know of at least three banks that have taken people from completely unrelated divisions of the bank to help the Lending Group manage the workload.
I bet some digital loan origination tools would be pretty useful right about now.
Also, for the past month, many banks have been chasing the PPP SBA lending market, trying to figure out exactly how to originate and fund the millions of small business loan requests coming out of the CARES Act. When the money ran out last week, millions of applications were stalled by slow processes and a lack of generally available technology to help (although big kudos to MX for getting out their open source PPP loan solution for banks). It looks like more money is coming, so this need for bank support will continue.
There’s no doubt that banks are busy and, being risk-averse enterprises by definition, erring on the side of reduced expenditure in order to keep their staff employed. But what will they do when PPP and re-financings are finished?
In my opinion, they need to get back to the thing that banks do very well: helping their customers.
Getting back to helping customers
A recent JD Power survey asked respondents how their financial situation was impacted by C19. Turns out 71% of respondents said that it has had a negative impact on their financial situation, with 28% saying it had devastated or severely hurt their financial situation.
Banks can most certainly help beyond the lending work they are already doing. Unfortunately, this doesn’t seem to be happening as much as it should.
The other day, I had an email exchange with the owner of digital initiatives at a $4 billion dollar bank. Not surprisingly, he’d been heads down on PPP and mortgages, and had been told that his budget for the year was scrapped. In my, admittedly, biased view, now is exactly the time not to be slashing your digital budgets.
We believe banks should be investing hard in digital and focusing in particular on four key digital concepts:
- Make sure your digital channels are up and running, and optimized to enable clear communication between you and your customers. This seems obvious, but we know of multiple banks that haven’t been able to handle the influx of mobile and online traffic.
- Give customers the digital features they need to understand their financial picture, e.g. budgets, spending insights, preemptive NSF alerts, overdue bill alerts, etc. This knowledge can help customers make sense of their finances at a critical time.
- Facilitate lending with easy, fast digital origination technologies. My company Harvest actually had to not use our California-based bank for PPP; instead, we found a small, sub-$1B bank in Virginia that was geared and ready to go for PPP.
- Provide savings and investment services that help you retain deposits while improving your customers overall financial wellness. Use this type of wealth automation to drive better financial outcomes.
It’s the combination of these features over time, or all at once if you’re lucky, that will keep your customers engaged with your institution, and will help you stem the loss of, on average, 5% of deposits to various fintechs.
Where will you be when the music stops?
I was on the phone early this morning with a $2 billion dollar bank that had put just about every able bodied person on either PPP or home loan origination. Just about everyone that is, except the digital banking team. That team had received marching orders to fast track their innovation around digital transformation in order to keep their business relevant.
“While everyone else is working on loans, we’ve been told to keep moving on our digital initiatives so we can come out of this stronger than when we went in.”
I know where this bank will be when the COVID-19 music stops.
Do you know where you’ll be?
– Drew Sievers, CEO, Harvest Savings & Wealth Technologies
Click here to learn more about how Harvest’s platform can help you retain deposits, increase customer and advisor satisfaction, and create profitable wealth accounts of any size.