What We Learned in 2020: A New Digital Banking Strategy
The need to deliver a digital experience to a bank’s small business and commercial customers has been a rallying cry for several years. While the need has been there, the digital focus has been heavily centered on the consumer customer. This is partially driven by the digital relationship we personally have with our banks and the simplified experience brought to us by the smart phone. Bank strategy has always been to start with the consumer customer since those products are easier to digitize and there is a large ROI due to high volumes.
During the recent crisis, all things were turned upside down. In many industries, not just banking, employees were no longer working in offices creating a challenging new reality. Working remotely meant virtual meetings. For banks, a traditional, paper-based loan origination process, with some or limited digitization, became a challenge. The PPP Loan process (brought to us by the SBA) created a distraction to moving the digital strategy forward. The bureaucracy in the process stopped PPP from being a learning experience on how to experiment with an internal digital process.
As many are coming back to offices and banks, now is the time to address this challenge. Digitization of the customer experience is a much-needed commodity that is often undervalued. Too often, it is connected to a disjointed internal process that is being supported by a remote workforce. Because of this, the ultimate desired customer experience has not been realized.
When entering 2020, the only uncertainty perceived for the year centered on the November election. Now the election has passed, but there are so many more uncertainties. As we reflect on 2020, what might we expect for 2021?
On the small business and commercial side, banks have reported they are starting to loosen lending standards. However, commercial demand is in the range that we saw in 2009. If this continues well into 2021, margins will be squeezed, and costs will be under a microscope. Investing in a digital commercial banking strategy for employees of the bank, not just the customers, will ultimately help drive costs down.
It is no surprise that 2020 has created the “digital everything” mindset. We are all looking at digital alternatives to many regular “analog” activities in our lives. This mindset upends the “branches reimagined as gathering places like Starbucks.” It is not hard to see how that strategy is dead for 2021 and maybe beyond. Disruption is our new future.
Clients that I speak with fit into two categories. One group just wants to return to the way things were before the pandemic. They are hoping and praying that vaccines will get people comfortable with getting back to normal. They were comfortable with their policies, processes, and technology. They want to live in the past. The other group started planning for the new reality of digital prior to 2020. They view 2020 as a speed bump. Most started on the consumer side and were just starting to gain momentum on the small business and commercial side of the bank. They saw the wave coming but the 2020 wave was way bigger than anyone was ready for. Which group does your bank fit into?
The good news is 2020 was a wakeup call for everyone. 2021 will be a challenging year from an economic perspective, but it is an ideal time to make investments that will payoff in the remainder of the decade.
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Thank You for the Banking Disruption, COVID-19. Now Please Go Away.
Posted on Friday, December 11, 2020 at 1:30 PM
by John Watts
As SVP of Operations & General Manager of Lending Solutions, John Watts is responsible for the leadership and direction of the company’s lending solutions. Watts coordinates the development and delivery of Baker Hill’s loan origination and portfolio risk management solutions. Relying on almost 30 years of experience in the financial services and business industries, Watts directs Baker Hill’s Advisory Services, Implementation Project Management, Configurations, Education Services, Client Support teams as well as Product Management, Product Development and IT to ensure success.
Watts is also past president of the Indiana Golf Association and a former member of the board of directors for Indiana First Tee. Watts earned his bachelor’s degree in Business Administration, Investments, Finance and Banking from University of Wisconsin – Madison and received his master’s degree in Business Administration, Finance, from University of Wisconsin – Whitewater.