Market Commentary: Fintechs Fast Track Growth
Market Commentary
Fintechs fast track growth, even in uncertain times
In a constantly evolving and uncertain market, fintech partnerships can
fulfill specific and unique consumer needs for community banks and
credit unions.
In a January 2020 podcast, FDIC Chair
Jalena McWilliams expressed concern for
the future of community banking.
As it turns out, McWilliams’ comments
are closely echoed by Christian Ruppe,
CEO of Monotto, creator of innovative
products such as RoboSave. Both agree
that unless community financial institutions
partner with fintech providers, they won’t
be able to meet consumer expectations
in a continuously evolving tech market.
And Ruppe is quick to point out that means
credit unions too.
1 Finastra
Fintechs fast track growth
Market Commentary
However, he is also quick to say that a
single fintech product isn’t likely to help
community banks and credit unions keep
pace with the rapid velocity of change in
markets today.
“
Unless community financial
institutions partner with fintech
providers, they won’t be able
to meet consumer expectations
in a continuously evolving
tech market.
”
Why a single fintech won’t save
community banking, but multiple
partnerships will
A look at the numbers is all it should take to
convince a community institution that future
success hinges on technology adoption.
• 70% already use mobile banking to
manage their account1
• 34% are using a mobile app to
transfer money2
• 51% are interested in voice banking3
While data points like these tell us that
consumers are seeking more digital tools,
we know that they don’t necessarily want
a digital bank.
A single fintech won’t save community banking,
but multiple partnerships will.
Despite the launch of neo banks ten years
ago, less than 22% of Americans have
moved to strictly online banking. Gen Xers
take the largest piece of the “neo bank pie”
as a whopping 30% using a digital only
institution. The older generations?4
Forget it. Before Covid-19, only about 8%
of the Baby Boomer Generation banked
completely online. They’d rather have the
option to visit the branch.
However, J.D. Power reveals that big banks
are outranking online banks and community
financial institutions alike when it comes
to customer satisfaction. The reason is
wrapped up in all of those digital bells and
whistles that big banks can provide.5
But here is the one overarching caveat, there
is no guarantee that consumers will feel the
same way next year, as financial institutions
of all sizes try to keep up with the blistering
pace of innovation and adapting to the “new
normal”.
2 Finastra Fintechs fast track growth
Market Commentary
According to Ruppe, it’s a slippery slope
and financial institutions aren’t the only
ones fighting the slide. The very fintech
companies that are providing digital-first
technologies to community banks and credit
unions are facing the same upward battle
against rapid innovation in technology.
“You are never going to find a company that
is able to produce the “next big thing” every
single time,” says Ruppe. “All you can do is
enable a way for all fintech companies to
get that technology in front of a user.”
That way forward relies on collaboration
between financial institutions and a range
of fintech innovators, using application
programming interfaces or APIs.
Entering the Platform World of APIs
To understand APIs in very simple terms,
think of the USB ports on a desktop
or laptop computer. You might have a
keyboard, a mouse and even an external
hard drive all connected through USB to
create an effective working environment.
“
That way forward rel
collaboration betwee
institutions and a ran
innovators, using app
programming interfa
APIs work on a similar prem
a way for community bank
unions to just as seamless
and tools from different inn
“If you are a community ba
union looking to the future,
question is, how can we m
have access to that next bi
way you are going to be ab
you have a platform in plac
those products to be imple
says Ruppe.
“Ultimately, we don’t know
comes from, all we can do
and enable it whenever we
king,
ppe, it’s a slippery slope
titutions aren’t the only
e slide. The very fintech
are providing digital-first
community banks and credit
g the same upward battle
novation in technology.
oing to find a company that
ce the “next big thing” every
s Ruppe. “All you can do is
all fintech companies to
ogy in front of a user.”
d relies on collaboration
al institutions and a range
ators, using application
terfaces or APIs.
atform World of APIs
APIs in very simple terms,
ports on a desktop
ter. You might have a
use and even an external
nnected through USB to
ve working environment.
“
That way forward relies on
collaboration between financial
institutions and a range of fintech
innovators, using application
programming interfaces or APIs.
”
APIs work on a similar premise, by providing
a way for community banks and credit
unions to just as seamlessly plug in services
and tools from different innovators.
“If you are a community bank or credit
union looking to the future, and your biggest
question is, how can we make sure we
have access to that next big thing, the only
way you are going to be able to do that is if
you have a platform in place that enables
those products to be implemented quickly,”
says Ruppe.
“Ultimately, we don’t know where innovation
comes from, all we can do is prepare for it
and enable it whenever we discover it.”
Of course, it’s all a bit more complicated
than simple plug and play for application
developers who must innovate the new
ideas and build them, but APIs provide an
environment where banks and credit unions
can find the products they need and quickly
roll them out to consumers.
That’s why Ruppe decided to partner with
Finastra using FusionFabric.cloud, when it
came time to bring Monotto’s products to
life. “The speed at which Finastra’s clients
can onboard RoboSave is unprecedented.
Pre-API revolution, this was just a dream.”
As Ruppe gets to work on the products
and services that will “completely
automate financial stability”, he sees
platforms as the only way community
banks and credit unions will manage the
slippery slope of continuously evolving
technology inventions.
“You have to have a platform that enables
quick innovation,” says Ruppe. “Having one
that can implement any kind of product is
essential for community banks and credit
unions who want to stay on the front lines
of innovation.”
70%
already use m
to manage the
34%
are using a mo
to transfer mo
51%
are interested
For more information visit
References
www.finastra.com/
communitymarkets
1. “Survey 95 Percent of Consumers Give
High Marks to Digital Banking.” American
Bankers Association. American Bankers
Association Press Release, Mov. 13,
2019. Web.
5. “Ten Years After Great Recession,
Innovation Overcomes Reputation as
Bank Switching Hits Record Low, J.D.
Power Finds.” J.D. Power. J.D. Power
Press Release, Apr. 25, 2019. Web.
2. Ibid.
6. “Survey 95 Percent of Consumers Give
High Marks to Digital Banking.” American
Bankers Association. American Bankers
Association Press Release, Mov. 13, 2019.
Web.
What questions can we answer for you?
Let’s talk
3. Jeane Han. “Seven Charts: The State of
Digital Banking in 2020.” eMarketer, Mar.
3, 2020. Web.
4. Wells-Barrett, Chelsea. “Neobank
Adoption: How many Americans have
digital banking.” Finder.com. www.finder.
com/neobank-adoption (accessed April
16, 2020).
7. Ibid.
8. Jeane Han. “Seven Charts: The State of
Digital Banking in 2020.” eMarketer, Mar.
3, 2020. Web.
About Finastra
Finastra is building an open platform that accelerates collaboration and innovation in financial services, creating better
experiences for people, businesses and communities. Supported by the broadest and deepest portfolio of financial services
software, Finastra delivers this vitally important technology to financial institutions of all sizes across the globe, including
90 of the world’s top100 banks. Our open architecture approach brings together a number of partners and innovators.
Together we are leading the way in which applications are written, deployed and consumed in financial services to evolve
with the changing needs of customers. Learn more at finastra.com
Finastra and the Finastra ‘ribbon’ mark are trademarks of the Finastra group companies.
© 2020 Finastra. All rights reserved.
GL 2890 / 0420
Do You Know What It Takes to
Be Customer Obsessed?
(and Why It’s So Important?)
a BOLT company
Hitting the bullseye
of customer satisfaction in
the modern age of insurance
buying takes a new customerobsessed focus.
Meeting the demands of
changing to consumer
attitudes and preferences
in the age of digital requires
more than dedication.
It requires independent
insurance agents to
develop a customerobsessed focus.
As an independent insurance agent, you need to be friendly,
engaging and like working with people. These traits, coupled
with in-depth insurance savvy, have kept agencies competitive
for decades, but these characteristics alone may no longer be
enough to keep consumers happy in the digital age.
Changing technology and online purchasing in the retail
industry have redefined your consumer’s expectations and
preferences, resulting in a new customer persona. This
evolving consumer is pushing insurers to move beyond
meeting basic coverage needs to exhibiting a customerobsessed focus.
According to leading research and advisory firm Forrester,
developing a concentrated customer focus is a top strategic
imperative for 72 percent of carriers today.1 But how will
independent agents foster the same level of customer
centricity with smaller budgets and more limited tools at their
disposal, and is it really worth the effort?
2
a BOLT company
What is Customer Obsession and Why Is it Important?
What if Amazon sold insurance? It isn’t as farfetched as you think. In a study of over 32,000
insurance-buying consumers, 29 percent of
respondents said that they would be willing to buy
their coverage from online giants such as Amazon
or Google, and that number is rising.2
Behind attitudes like these is a consumer
perception that the tech leaders care about them
and will go out of their way to provide a superior
service. In consumers eyes, they are customer
obsessed.
Morning Consult conducts daily favorability polls,
surveying consumers on their thoughts regarding
major brands. Over the course of 2017, they found
no measurable decline in consumer attitudes
toward the big online giants. Both Amazon
and Google continued to measure favorably in
consumer perceptions throughout the year, above
75 percent.3
Contrast that to United Airlines after a major PR
nightmare involving a passenger who was forcibly
removed from one of their aircraft after refusing to
relinquish his seat. Net favorability ratings for the
airline plunged into negative numbers, impacting
the industry as a whole with a customer freeze of
disappointment.4
On the other hand, what Amazon does right in
customers’ eyes could fill volumes, but ranges
from the company’s high level of customer
service, to its reliability, fast delivery and vast
product selection, all factors that placed
Amazon at the very top of the 2017 National Most
Trustworthy Brands Survey.5
The insurance industry, in contrast, is less of
a consumer favorite, with only 43 percent of
customers saying they trust their provider.
Negative trust makes it difficult for companies
to generate satisfaction, resulting in a massive
switching campaign as consumers hit renewals
each year.6
According to a study by IBM, 41 percent of
policyholders admitted to switching insurers when
an individual agent or carrier failed to meet their
high standards for service.7
In the modern age, customer obsession is vital to
attracting and maintaining customers, but what
can independent agencies do to develop and
deliver a customer-focused zeal in the age of
digital? Taking a look at the retail world where it all
started is a good way to gain some inspiration.
Taking a look at retail,
where new consumer ideals
started, could inspire
independent agents seeking
to infuse a customer-obsessed
zeal into their agency.
3
a BOLT company
Digital Is Prime, but so Is Customer Service
78%
of consumers want to
work with someone who
has a deep knowledge
about products
Associates with
deep product
knowledge and
digital interactions
top consumer wish
lists when working
with retailers, giving
insurers inspiration
on where they
should prioritize their
customer-obsessed
efforts.
37%
of consumers look at
websites for product
inspiration and
knowledge
The first important point to address is the fact that digital isn’t
driving the extinction of more personalized shopping channels,
such as physical retail stores—or in the world of insurance—the
independent agent. Instead, consumers are expecting a higher
level of service when utilizing these avenues.
Looking first at retail, global advising firm PwC, conducted a
study of over 20,000 consumers. Their findings reveal that 41
percent of respondents still patronize physical retail stores to
make purchases.8 A study of insurance consumers revealed
similar findings, with up to 62 percent still wanting that personal
connection with their agent.9
But consumer expectations are changing. When shopping in
retail stores, consumers want an improved, customer-centric
experience:
• 78% say that a sales associate “with a deep knowledge
of the product range” is the most important factor in
determining their satisfaction10
• 68% want store associates to be able to quickly check
product availability in other stores11
These two factors speak to consumers’ desire to quickly
locate and purchase the products they’re shopping for in the
physical environment, but shoppers are also demanding more
connections through digital channels:
• 47% rely on social networks for product inspiration and are
drawn toward retailers who use these sites12
• A similar number (37%) tune into retailer’s websites for
product inspiration and knowledge13
When retailers get things right, the rewards are tremendous,
with 61% of consumers sticking by the products and brands who
meet their high standards.14
4
a BOLT company
How Independent Agents Can Develop a Customer-Obsessed Focus
Consumers bring their preferences and expectations from the retail world directly into their
engagements with their insurance agent, demanding greater flexibility, more personalization, and
increased connections. Using the information about retail shopping attitudes, it’s easy to see where
agents can invest their resources to prove their customer-obsessed focus.
Play up your expertise: The simple fact is,
consumers often don’t understand their
coverage and make mistakes that could cost
them heavily when it comes time to make a
claim. For instance, 41 percent of consumers
mistakenly believe that flood damage is
covered under their homeowners policy.15
Consumers expect agents to clear
misconceptions like these and make sure they
understand what they’re getting with their
policy, but agents can exhibit a more obsessed
focus by getting to know each customer, and
then combining that personal knowledge
with their insurance expertise to recommend
products to cover gaps and ensure necessary
protection.
“It goes beyond asking a customer inquiring
about auto coverage if they have a home or a
boat,” says Tom Hammond, president of U.S.
operations, BOLT. “Consumers expect agents
to look for bundling opportunities, but when
an agent can track life events, calling the
consumer to educate them about the process
of adding a teenaged driver to their policy or
offering a new type of coverage that could save
them money, that’s when customer-obsession
kicks in.”
Meeting consumer expectations in the modern
age requires agents to merge their own industry
expertise with a greater understanding of their
customers to engage proactively, identifying
needs and concerns before the customer
knows they have them.
Have the Products They Want: The ability to
quickly access the items they want is a big
selling point for consumers when interacting
with retail stores, but that expectation doesn’t
end when they leave the retailer’s brickand-mortar building. They bring those same
preferences right to their agent’s doorstep,
expecting him or her to open a new world of
coverage options for their purchasing pleasure.
What it comes down to, is being able to meet
their needs, no matter how simple or complex.
“If a customer wants a traditional auto and
home bundle, you have to provide it,” says
Hammond. “If they want UBI coverage or ondemand insurance, you have to provide that.
The same if they want to work with a carrier
who uses drones in the claims process, or any
of a number of previously unheard-of options.
The agent’s ability to deliver is at the heart of
the customer-obsessed movement.”
Even more basic to customer acquisition
and retention, is the agent’s ability to meet
consumer price points. In a survey of over
32,000 consumers, PwC found that 50 percent
of respondents base loyalty with their insurer on
price.
Ed Wise, an independent insurance agent in
Texas, is especially price sensitive after several
weather events rocked his state in 2017. He is
noticing premium increases from carriers that
range from 20 to 40 percent.16
5
a BOLT company
Always looking out for his customers, he
encourages them to review their coverage to take
advantage of the least expensive options, but
advice like this is only applicable if the agent has
access to the lower cost coverage.
Sharing information on everything from
protecting home and assets to reducing the cost
of coverage, and even wishing followers a happy
holiday, promotes a positive relationship as well
as agency loyalty.
Now and into the future, customer-obsessed
agents will need to either strongly differentiate
themselves through factors other than the cost
of a policy, or gain access to a wider selection
of products to meet consumers’ price points, in
addition to expanding coverage needs.
When it comes to activating a social media
strategy, Zach Emly of inBuzz, an organization
dedicated to educating insurance professionals
on digital marketing, has some advice.
In the End, it’s about Engagement: Consumers
are looking for more frequent interactions with
their agents and awarding greater loyalty to those
who engage more often.17 It’s a challenge for
many agents when insurance has typically been a
see-you-at-renewals type of business.
“Big brands are spending millions to make
themselves look like your local shop,” says Emly.
“Think about Jake from State Farm. He is just
some guy in khakis waiting for your call as though
he is the friendly agent around the corner. The
cool thing about social media is that you can do
this for free just by being you, because you are
the local shop that is around the corner.”
Consumer retail statistics again give agents a
clue on where to start. Having a website is a
clear advantage for retailers that translates into
increased opportunities for engagement with
independent agents as well.
In addition to being yourself, Emly also advocates
using social media to communicate with your
current and potential customers. Responding to
the comments they make builds and sustains
relationships.18
Nearly 70% of consumers prefer to research
coverage online, and while few consumers
window shop insurance with the same frequency
as they do retail sites, agents who provide
online quoting are promoting engagement
opportunities.
“Agency management tools associated with
digital capabilities for agencies should track leads
that come from online channels,” says Hammond.
“This gives agents the chance to reach out to
customers who quote new coverage, to chat and
better understand their needs.”
Social media is another way agents are keeping
in touch with customers. Facebook and Instagram
are the clear winners, as they deliver the most
bang for the buck when it comes to marketing,
but agents should look at more than the ROI
generated from advertising campaigns.
Social Media Connects
agents more frequently with their customers,
demonstrating customer obsession in the
digital age.
6
a BOLT company
Insurance Buying from a Customer-Obsessed Perspective
Becoming customer-obsessed requires agents to sell products in a new way. Given Amazon’s
consumer appeal, let’s take a look at insurance buying Amazon-style, should the alwaysgrowing retailer start offering insurance.
Based on how Amazon sells retail products today, the experience would go something like this:
Step one: The consumer enters the website
and starts a search for the desired type of
coverage in the long oblong box at the top
of the page. To make it easier, they’ll use
Amazon’s search refinement parameters
to narrow down their options, including the
type of coverage like home or auto, and even
subtypes, such as UBI or on-demand.
Step two: The consumer then fills in some
personal details, such as name and address,
and receives a list of personalized coverage
options with associated pricing, some from
Amazon and others from participating
marketplace carriers.
Step three: Here, the consumer selects their
desired option, drops it in the shopping cart
and precedes to purchasing in a single click, or
selects additional products, all personalized to
his or her specifications.
If it sounds futuristic, it shouldn’t. With
the right market access and digital tools,
independent agents have the ability to provide
their customers with a similar experience
today, easily comparing a multitude of
product options and prices. Then, when it’s
time to purchase, rapidly binding and issuing
coverage, all with the added benefit of the
personal touch.
Independent Agents Can Be Customer-Obsessed Today
“Many independent agents are in a unique
position to deliver an Amazon-style shopping
experience because of the breadth of
insurance coverage they can offer,” says
Hammond. “And thanks to market networks
where independent agents can access
multiple carrier products without gaining
appointments, even smaller agents or startup
businesses can compete in the customercentric insurance age.”
multiple carriers and come up with the best
options in the rapid Amazon timeframe.
Speed, efficiency, and an expansive product
selection define customer expectations today.
When aided with digital proficiencies and
more of the products their customers need,
independent agents are well positioned to
demonstrate a customer-obsessed focus just
by being the friendly insurance agent around
the corner.
A broad product selection allows agents to
meet customer price points and coverage
preferences, but they’ll also need strong digital
capabilities too in order to swiftly research
For more information,
contact Superior Access at-
7
a BOLT company
About Superior Access, a BOLT Company
Superior Access, a BOLT company, is the largest insurance market access
provider enabling fast access to a variety of insurance products at competitive
rates. Through leading-edge online tools and a vast market network of products,
Superior Access helps insurance agents effectively find, quote and bind
business faster and more successfully than ever before. With a full-service team
of underwriters and seasoned, licensed professionals at the ready, Superior
Access is dedicated to expanding opportunities and improving business results
for independent agents. For more information, please visit superioraccess.com.
1
Paul Mah. “Forrester: The Power of Customer Centricity.” Questex Asia. CMO Innovation, Sept. 5, 2017. Web. 2“The Voice
of the Customer: Identifying Disruptive Opportunities in Insurance Distribution.” Accenture, 2017. Web. 3Klint Finley.
“What Tech Backlash? Google, Facebook Still Rank High in Polls.” CMNM Collection. Wired, Oct. 12, 2017. Web. 4ibid.
5
Daphne Howland. “Study: Amazon Tops in Consumer Trust and ‘Joy’.” Industry Dive. Retail Dive, Aug. 14, 2017. Web.
6
Lynn Kesterson-Townes. “Do You Trust Your Insurance Company?” IBM. IBM Watson Customer Engagement, Sept.
22, 2015. Web. 7ibid. 8“10 Retailer Investments for an Uncertain Future.” PwC. PwC Total Retail, 2017. Web. 9“The voice
of the Customer: Identifying Disruptive Opportunities in Insurance Distribution.” Accenture, 2017. Web. 10“10 Retailer
Investments for an Uncertain Future.” PwC. PwC Total Retail, 2017. Web. 11ibid. 12ibid. 13ibid. 14ibid. 15Jayleen R. Heft. “15
Surprising consumer Actions and Beliefs Relate to Homeowners’ Insurance.” ALM Media. Property Casualty 360, Mar.
28, 2017. Web. 16Ed Wise. Wise Insurance Group. Ed Wise blog, Jan. 15, 2018. Web. 17Henrik Naujoks, Tanja Brettel,
Harshveer Singh, Darci Darnell and Andrew Schwedel. “Customer Behavior and Loyalty in Insurance: Global Edition
2017.” Bain & Company. Bain & Company Business Insights, Sept. 14, 2017. Web. 18Zach Emly. “Social Media Ideas for
Insurance Agents.” inBuzz Group, Jun. 1, 2017. Web.
8
a BOLT company
MARKET COMMENTARY
Community Banks and Credit Unions:
Open for Business
30.2 Million
Small and Midsized
Businesses in the U.S.
Small- and Mid-sized Businesses (SMBs)
are growing across the U.S. According to
the Small Business Administration’s Office
of Advocacy (SBA), there were 30.2 million
small- and mid-sized businesses in the
United States in 20181. These small
companies made up 99.9 percent of all
businesses and employed 58.9 million
people2, amounting to nearly half of the
workforce in America.3
Considering the number of SMBs across
the country and the strong and thriving
workforce associated with businesses
in this category, there is a compelling
proposition for community banks and
credit unions to court this segment of
the market.
Finding the Opportunity in Small
Business Relationships
While breaking down the numbers on
the small business opportunity paints
a compelling picture, it does not fully
explain why community banks or credit
unions would want to entertain small
businesses. After all, many financial
institutions in this category are small
businesses themselves. Does it really
make sense for small local banks
or credit unions to target SMBs?
In a word, yes. Small businesses
remain a profitable contributor to the
overall economy. According to the
Small Business Credit Survey (SBCS), a
collaboration of the 12 Federal Reserve
Banks, 35 percent of SMBs reported
revenue growth in 2018, up from 28
percent in 2017.4
Optimism runs high at SMBs as well.
Nearly a third of employer firms are
growing and 53 percent have ambitions
to be larger than they are now5.
As companies grow, so does their need
for financial services. That is a message
that should interest community banks and
credit unions, especially considering the
array of products SMBs are seeking..
SBCS reports that year-over-year
demand for new financing has remained
consistent at around 40 percent.6
Consistency is good when 60 percent
of small businesses rang up average loan
values of $46,348 in the first quarter
of 2019 alone.7
SMB borrowers were not new startups
either but offered a proven operating
history with an average age of 7.43 years.8
Even better, the average Equifax business
credit score for SMB borrowers in Q1 of
2019 was 663.9
However, loans are not the only way
SMBs finance their operations. Half of
companies have access to a line of credit
and nearly as many rely on credit cards to
pay for expenses, opening more doors for
community banks and credit unions.10
Beyond lending, deposit accounts are
another opportunity for banks and credit
unions to engage with SMBs. Thanks
to growing optimism about the future,
23 percent of SMBs plan to open a new
business deposit account in the coming
year and 39 percent are interested in a
competitive interest checking offer.11
FINASTRA Market Commentary
1
Where SMBs Currently
Do Their Banking
23%
While not as lucrative as financing,
deposit accounts are often the gateway
to serving SMBs long term. According
to SBCS, 65 percent of SMBs selected
their loan provider based on an existing
relationship with the institution.12
Why Community Banks and Credit
Unions are a Good Fit for SMBs
60%
10%
4%
3%
Top 50 global banks
Regional Bank
Community bank
Credit union
Direct bank
When it comes to selecting a banking
partner, two out of three small business
owners opt for a large bank.13 Convenience,
branch location, perks and online availability
all come into play when selecting a financial
institution, but often it is the practicalities
that win the day.
Most SMBs responding to the SBCS
study obtained financing from a large
bank simply because they had an existing
relationship with the institution, or they
believed they would have a higher chance
of being funded.14
Unfortunately, this tendency to stay with
what you know doesn’t always pay off.
High interest rates made for disgruntled
business owners in 63 percent of the
cases surveyed by the SBCS.15
Beyond the practical concerns, small
businesses want the personal touch.
Most SMBs are owned by a single
individual or a family. They may know
their business, but banking and finances
are not their area of expertise. As a result,
they are looking to establish a personal
relationship with a banking partner.
To put this into perspective, 75 percent
of SMB owners want a dedicated banking
contact who knows their business and
can offer advice, and 40 percent would
switch banking providers if they found
another entity that would provide it.16
Building personal relationships is an area
where small banks and credit unions
can excel, because they are part of the
community. The branch manager’s son
may play soccer on the same team as a
small business owner’s child. They see
each other around town and interact at
community events. In short, they are
neighbors, and it is far easier to trust the
heart of your business to a friend than
a large institution.
FINASTRA Market Commentary
2
“
We know our customers and
we have a relationship with
them that is very special.
David Lacy
President and CEO,
Community Bank & Trust
”
Since 47 percent of respondents to
a recent survey say they place their
business accounts with the same bank
where they do their personal banking,17
this relationship building can go a long
way in supporting community banks and
credit unions as well. Small institutions
that interact with business owners on
a personal and professional front, from
family deposit accounts and wealth
management, to mortgages, car loans
and other financial products, receive
a very clear picture of the customer’s
economic health and habits. This level of
transparence pays off for both borrower
and lender when it comes time for the
SMB to secure business financing.
“We know our customers and we have
a relationship with them that is very
special,” said David Lacy, president and
CEO of the Community Bank & Trust in
Waco, Texas in an article published in the
American Bankers Association Banking
Journal. “We from time to time use our
discretion to loan money outside of a
box, and that is the fiber, the fabric of
community banking,”
It is a “you scratch my back, I’ll scratch
yours” situation where banks, credit
unions and local business owners form
a community network that can be
beneficial to both sides. For instance,
a local engineering firm may bank with
a community bank or credit union and
even secure a business loan through
the institution.
As a result, when it comes time to build
a new location, the financial institution
contracts with the engineering firm to
complete the site plan required for the
construction. It’s just good business
sense to do so as the they invest in
the community it serves as well as its
banking customers.
According to SBCS, small bank and credit
union community-building efforts are
paying off as 79 percent of SMB survey
respondents are satisfied with the lending
experience at their small bank, compared
to 67 percent of large banks and a trailing
49 percent for online lenders.18 SMBs
doing business with small banks tend to
report consistent satisfaction levels as
well, with the number of happy customers
rising from 73 percent to 79 percent.19
FINASTRA Market Commentary
3
How Small Banks and Credit Unions
Can Attract and Retain SMB Business
“
Individuals want the freedom
to interact with a business
when it’s convenient for them,
at any time day or night.
”
While small banks and credit unions
have several advantages when it comes
to attracting SMBs, they are often at a
disadvantage when it comes to
keeping them.
Online retailers have placed a premium on
immediacy and convenience. As a result,
individuals want the freedom to interact
with a business when it is convenient
for them, at any time day or night. For
bankers, that means offering the flexibility
of online tools, while still delivering on their
core standards of personalized service.
Meeting these standards requires an
orchestration between channels, allowing
SMB owners to engage with financial
institutions in multiple ways without
service degradation. An SMB owner
may stop in and chat with someone in
the morning about a loan but wait until
evening to fill out the application online.
For community banks and credit unions,
keeping pace with technology is like
keeping up with the Joneses. There is
always change on the horizon and the
push to be in on the latest development.
Selecting the right online tools and
capabilities also requires consideration
into more than the customer’s or
member’s needs. Community financial
institutions face many challenges when
integrating some aging technology into
new applications, not to mention the
specter of changing regulations, privacy
demands and cyber threats.
However, digitization investments pay
big dividends. For example, Accenture
predicts that banks could grow revenue by
up to 30 percent by 2022 by strategically
digitizing their payments ecosystem.20
To meet the needs of SMBs as well as the
institution, small banks and credit unions
can start by forming a digital strategy.
Small business owners want their bank to provide
omni-channel flexibility.
Despite a decline in branch-banking, face-to-face contact still plays a large role for
problem resolution.
83%
will do some of their
banking at physical
brand in five years
(-5 vs. 2017)
40%
want the option to talk with
someone in person is
there is a problem
51%
feel their bank needs to be
up to date with financial
service technology
Source: “Small Business Survey.” USBank, 2018. Web.
FINASTRA Market Commentary
4
Successful Digital Strategies Focus
on the Customer Experience
“
We have come to a moment
where banks want to partner
with Fintechs for technology
and for platforms without
developing it themselves.
”
Karen Mills
Author, Former SBA Administrator
Seamless customer engagement should
be the primary goal of any digital strategy.
Operational enhancements that improve
back office efficiency without thought to
the impact on customer experience will
only cost small institutions in the long run.
First, take stock of what your SMB
account holders want. Boston Consulting
Group says that customers are moving
toward a hybrid banking experience where
they seek to handle simple tasks, such
as a change of address, online. Personal
contact channels are reserved for more
complex issues or advice. 43 percent of
customers want a hybrid experience from
their financial partner?21
Consider a Digital Partner
Just as SMBs aren’t always able to
handle intricate financial decisions
alone, community institution executives
aren’t up to the task of developing the
technology tools and platforms that SMB
customers demand. For small banks and
credit unions, gaining access to the talent
necessary to create in-house solutions is
usually out of budget. That is why most
are turning to solution providers.
“We have come to a moment where
banks want to partner with Fintechs for
technology and for platforms without
developing it themselves,” said former
SBA administrator, Karen Mills, who has
just written a new book called Fintech,
Small Business and the American Dream.
Payments is another area where SMBs
are following the technology. Real-time
payment solutions simplify the accounts
payable cycle for small businesses and
their vendors by automating much of
the process.
From March to April of 2019, approval
percentages for small business loan
applications at small banks jumped
four-tenths of a percent.22 It is part of
a continuing trend and technology is
considered a primary reason for the hike.
After an invoice is loaded into the
business’ system, it is automatically
pushed through processing to payment.
Instead of tracking invoices and gaining
approvals, employees are freed to focus
on higher value tasks.
Online providers were the first to deliver
the improved loan application experience.
SMBs seeking financing simply entered
information via the web, where it was
rapidly cross-checked against thousands
of data stores for both accuracy
and eligibility.
In recent years, payment solutions have
become more specific and applicable
to small business but selecting the right
one can be a challenge for a time-starved
business owner. However, when SMBs
trust their bank or credit union, following
their advice on a payment solution makes
more sense than contracting with an
unknown vendor.
Access to financing remains one of the
main needs of SMBs. Business owners
are looking for competitive rates but also
simplified applications, faster turnaround
and more efficient processing. These are
all areas where a sound digital strategy
can improve the customer experience
and keep SMBs loyal to your bank
or credit union.
Recently, small banks and credit unions
have begun to partner with solution
providers to harness the same power
of data and analytics when processing
loan applications. The result is faster
approvals for the customer and higher
levels of loyalty.
Lower default rates for lenders are
another benefit of automation, as
applications are approved on a much
broader base of information, including
third-party data that is easily analyzed
by sophisticated analytics. Lower default
rates for lenders are another benefit of
automation, as applications are approved
on a much broader base of information,
including third-party data that is easily
analyzed by sophisticated analytics.
FINASTRA Market Commentary
5
Community Banks and Credit Unions
Helping Small Business
“
It is our local touch and
personalized customer service
that sets us apart from larger
national banks.
”
Jeremy Gray
Senior VP of Credit Administration,
Rock Canyon Bank
To support SMBs in the current market
and remain a vital contributor to the local
economy, banks and credit unions are
facing an evolution. Rock Canyon Bank in
Provo, Utah, understands this all too well.
The bank found that its customers
were suffering from an inefficient loan
origination and finalization process that
caused delays with loan closings. Instead
of continuing with the status quo, bank
executives recognized the need for
technological innovation.
“It is our local touch and personalized
customer service that sets us apart
from larger national banks,” said Jeremy
Gray, senior vice president of credit
administration at Rock Canyon Bank.
“We knew that by embracing online
eSignature capabilities we could reduce
paperwork for our customers and give
them faster access to our loan services.”
Often, it takes more than a single
capability for community banks and credit
unions to remain competitive and meet
the needs of SMB customers. Consumers
Credit Union in Michigan was lagging
larger institutions when it came to offering
the online services members needed.
Their core base was incompatible with
new products and systems, holding
them back from transforming operations
to meet modern consumer standards.
To maintain market share, the credit
union worked with a fintech partner on
implementing a new core banking system
to better fill the needs of members and
small business.
Lea County State Bank in rural New
Mexico also understands the value of
offering SMBs the tools they need to save
them time in everyday tasks. According to
Jerry Bell, senior vice president and chief
operations officer, the strategic plan for
the bank is highly technology focused.
Their goal is to provide SMB customers,
including many small businesses in
cattle, oil and gas, with online and mobile
banking tools that deliver anytime visibility
into accounts. The latest implementations
even allow SMBs to make payments
online by clicking a picture of the invoice
with a smart phone.
Community banks and credit unions
like these are finding ways to remain
competitive against larger institutions
by partnering with Fin Tech companies on
technology solutions. They’re increasing
internal efficiency while making the bank
a more appealing prospect to customers,
particularly small to mid-sized businesses.
Rock Canyon Bank found that loan
finalizations times were reduced by 46
percent when implementing e-signature
technology. Likewise, Consumers Credit
Union has grown its asset size from
$320 million to $1.1 billion thanks to
partnering on technological innovation.
Just as finding the right financial solutions
partner is an advantage to small and
mid-sized businesses, partnering with
the right Fintech company makes it
possible for community based banks
and credit unions to support the 30 million
SMBs in force across the country
and to remain vital contributors to
their local communities.23
FINASTRA Market Commentary
6
For More Information Visit
finastra.com
Telephone
-
1. “2018 Small Business Profile.” U.S. Small Business Administration Office of Advocacy, 2018. Web.
2. Ibid.
3. Ibid.
4. “Small Business Credit Survey: Report on Employer Firms.” Federal Reserve Banks, 2019. Web.
5. Ibid.
6. Ibid.
7. Priyanka Prakash, JD. “State of Small Business Lending: Industry Spotlight (Q1 2019)”. Fundera, May 21, 2019. Web.
8. Ibid.
9. Ibid.
10. “Small Business Credit Survey: Report on Employer Firms.” Federal Reserve Banks, 2019. Web.
11. Jeffry Pilcher. “How to Win the Small Business Banking Market.” The Financial Brand, June 13, 2017. Web.
12. “Small Business Credit Survey: Report on Employer Firms.” Federal Reserve Banks, 2019. Web.
13. Jeffry Pilcher. “How to Win the Small Business Banking Market.” The Financial Brand, June 13, 2017. Web.
14. “Small Business Credit Survey: Report on Employer Firms.” Federal Reserve Banks, 2019. Web.
15. Ibid.
16. “Dear Bank, Will You Be My Small Business Financial Partner?” Personetics, Mar. 21, 2019. Web.
17. Ben Ashworth. “Nav’s 2018 Business Banking Study.” Nav, Nov. 12, 2018. Web.
18. “Payments in the Digital Age.” Accenture, 2018. Web. “The Four Pillars of Digital Transformation in Banking.” The Financial Brand, Mar. 27, 2018. Web.
19.
20. Rohit Arora. “Small Business Lending Soars at Banks; Technology Is a big Reason Why.” Forbes, May 15, 2019. Web.
21. “What’s New with Small Business?” U.S. Small Business Administration Office of Advocacy, Aug. 2018. Web.
22.
23.
About Finastra
Finastra unlocks the potential of people and businesses in finance, creating a platform for open innovation. Formed in 2017 by
the combination of Misys and D+H, we provide the broadest portfolio of financial services software in the world today—spanning
retail banking, transaction banking, lending, and treasury and capital markets. Our solutions enable customers to deploy mission
critical technology on premises or in the cloud. Our scale and geographical reach means that we can serve customers effectively,
regardless of their size or geographic location—from global financial institutions, to community banks and credit unions.
Through our open, secure and reliable solutions, customers are empowered to accelerate growth, optimize cost, mitigate risk and
continually evolve to meet the changing needs of their customers. 90 of the world’s top 100 banks use Finastra technology.
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