One of the key values community financial institutions have always leaned into is their relationships with their customers, but these relationships have been put to the test amid the coronavirus pandemic. Banks and credit unions have responded to social distancing measures by reducing hours, shifting to a drive-through only model, or closing lobbies altogether. Because of this, financial institutions that have implemented digital services are in a particularly favorable spot compared to the institutions that have not yet embraced those technologies. While the pandemic, as well as the rapid response, were not scenarios many were prepared for, it has provided a glimpse into what we can expect from our banking relationships moving forward.
What the Coronavirus Has Taught Us About Banking Relationships
- The coronavirus has propelled FIs and customers to embrace digital offerings
- Work from home schedules, sheltering in place, and urgent financial needs have changed customers' expectations of bank response times.
- The Paycheck Protection Program exposed the importance of digital offerings for customer retention and acquisition.
COVID-19: A springboard to digital banking
The banking landscape has been changing in recent years, with more digital offerings and technology available for financial institutions of all sizes to leverage – something once reserved only for big banks with big budgets. However, not all institutions adopted these new technologies and instead have stuck to traditional strategies. In a matter of days, communities around the country went from business as usual to sheltering in place and discovering ways to adapt to their newfound remote lifestyles, shifting perceptions of technology from nice-to-haves to need-to-haves. “We’ve always wanted customers, over time, to transition to more of our digital or electronic connections because it’s just such an affordable delivery channel,” said Tom Hershberger, President and CEO at Cross Financial, during a recent podcast with Abrigo. “Despite the fact that it’s been a very compressed timeline and extremely stressful, it has really helped push customers to more non-traditional channels.” Planning for the future is going to be critical, as digital services will likely become part of the “new normal” as we move forward.
Banking technology has long been associated with the preferences of Millennials, or Gen Z, but Dave Koch, Managing Director of Advisory Services at Abrigo, says that some institutions might have boxed themselves in with that narrow way of thinking. Customers of all demographics have had to adjust to the new methods of banking, and it is unlikely that we will return to all of our old behaviors after the crisis is over. “It’s not about the way we’ve always done our business that matters, it’s about how we need to do our business,” Koch said.
Banking relationships without “banker’s hours”
Among the many changes to traditional banking that customers and bankers alike have experienced is working from home. For many households, this means having parents juggling working from home with homeschooling and trading off “work” hours. “When they’re finally thinking about doing something financial, the bank isn’t open,” Koch said. Some customers have been frantically trying to secure a Paycheck Protection Program (PPP) loan, which has left borrowers and lenders working through the night and early in the morning to submit their applications.
Whether it’s working with lenders on PPP loans, asking for forbearance on mortgage payments after losing their income, or other financial services, customers are facing an unprecedented need to be in touch with their financial institution. The urgency of needing guidance and the adjustment to living and working remotely has changed customers’ expectations regarding response times from their institution. “‘Now’ doesn’t mean 8:00 am – 5 p.m. anymore. ‘Now’ means 24/7,” Koch said.
The PPP exposes importance of digital offerings for customer retention and acquisition
The coronavirus has had a devastating impact on the economy. As of May 7, more than 33 million Americans have filed for unemployment, according to the Bureau of Labor and Statistics. To help bring back and keep employees on the payroll, the federal government introduced the PPP under the CARES Act. When the program opened on April 3, hopeful borrowers flocked to their banks and credit unions – figuratively speaking – to apply for a loan, only to find that their financial institution was only going to lend to customers with a certain level of relationship.
This created a unique opportunity to acquire new customers – and bolster the relationship of less active customers – for community banks and credit unions participating in the PPP. The PPP has exposed many areas where technology excelled over traditional processes. Gone are the days where a borrower could simply walk into a branch to request the loan, bring in their paperwork, and sign documents. Innovative financial institutions leveraged online loan applications, online document storage, and e-sign capabilities to keep the process moving efficiently while maintaining social distancing measures. Financial institutions that acted quickly to help their community businesses during this challenging time were highly appreciated for their goodwill, while other banks became the subject of frustration when failing to deliver quickly (or at all).
Hershberger referred to PPP loans as a “bonding experience” between the borrower and the lender. “Anybody that got their PPP loan from their primary bank has just solidified that relationship that much deeper,” Hershberger explained. “Now, any competitor down the road that wants to steal that relationship is going to have to work that much harder to move that relationship.” So, what does “working harder” mean, exactly? For a lot of financial institutions, this is going to mean thinking about enhancing online and web-based information.
Current online banking strategies often focus on banking services or mobile banking for current customers more so than the acquisition of new customers. To retain current customers and acquire new customers, it will require financial institutions to make a conscious effort to deliver high-level service with remote delivery. Bank customers are becoming more “self-sufficient,” according to Hershberger. If a customer needs something, they will find a way to get it done. And if they can’t get it done with their bank? “They’re going to feel like their bank has a deficiency, and I wouldn’t want to be graded on that ‘deficiency’ when I’m in a market with competitors that might be ahead of me in that delivery – I don’t want to give them a competitive advantage,” he said.
Want more information on leveraging technology to bolster your banking relationships? Abrigo can help your FI digitize the PPP loan forgiveness process or automate the life of a loan at your financial institution.