3 Things Banks Should be Doing to Compete with Online-Only Platforms

COVID-19 has effectively moved our entire economy online in what likely would have taken five to ten years to fully take effect. Though there is still a way to go for many organisations, this virus has cast a bright spotlight on companies, particularly banks, which have been lackadaisical with their digital strategy plans. Prior to March, only 17% of banks had a sound digital strategy in place. Many banks had plans to become more digitally native but did not feel pressured to do so until they were forced to make the leap to online practically overnight.

Until the virus hit, around 50% of customers were still banking in branches. Now almost 100% of customers must bank online purely out of necessity.

There are a few companies that had already made significant progress solely in online banking. Companies like Stripe, an online payments company, were early in their plans on contactless banking, and rightfully stated: “the COVID-19 crisis underscored the need for reliable, easy-to-use infrastructure for internet businesses”. In September, during their Series G funding round, Stripe secured $250 million and they recently raised an additional $600 million. “With more than $2 billion on its balance sheet, a capital-efficient business model, and a highly-diversified, growing, global user base, Stripe is in a position to both provide uninterrupted service to its users in a time of stress and invest in long-term improvements”, the company said.

Another example of COVID-19’s impact is new customer interest in Stash, an investment platform that just reached their million customer mark, and hit $1 billion in AUM in February. Branch closures have caused customers to look for easy to use online platforms. While Stash began offering bank accounts over a year ago, they have seen a 100% increase in weekly customer deposits in the past two months.

In this uncertain time, customers aren’t interested in scrambling to understand their options and they don’t want to worry about their investments. They want to ensure their banking experience is user friendly and the platform is trustworthy. Both Stripe and Stash check those boxes since they were already set up as a solely online platform and understand the urgently of meeting their customers’ needs.

Until the virus hit, around 50% of customers were still banking in branches. Now almost 100% of customers must bank online purely out of necessity.

Banks should be doing 3 things in order to compete with these online-only platforms, stay relevant and retain their customers.

Embrace a Tech-Centric Culture Focused on Customers

Financial institutions have to make the customer the centre of their business strategy, and technology is the path to get there. Customers need to be delighted with their experience, and proper technology is the conduit ensuring that stickiness with the customer base. Until now it has been very common for banks to partner with providers and implement their off-the-shelf technology solutions, but in order to truly survive this exceptional time, banks need to embrace technology as an integral part of their business. This means they need to customise tools for their customers’ specific needs and develop solutions that will work for both the bank and the customer. This is not going to be a one-size-fits-all solution for banks, but rather a collaborative effort across many facets of the organisation as well as key strategic partnerships. In keeping the customer at the forefront of their strategy, and recognising that right now people need access to liquidity for survival, banks must ensure the tech experience is optimal for the user.

Optimise Business Lending

On Thursday 16th April, the SBA’s rescue loan program hit its $349 billion limit. In our lifetime, we have never seen such a demand for loans. Banks were not prepared to handle the onslaught of applications for PPP and EDLI loans. Business owners were not prepared for the web of intricacies they are continuing to face. The largest complaint among small businesses is the confusing application processes, a notable lack of communication on application status, and generally the inability to get to the funds.

While it appears we may be close to extending funds for the programs, the pace at which the initial $349 billion program was exhausted showcases the severity that state-imposed business closures are having among retailers across the country. Over 70% of small businesses applied for loans before the application process was shut down. Assuming more funds are procured, banks need to quickly ensure they are 1) communicating effectively with customers who already have a loan in process and 2) ready for the second onslaught of applications. Financial institutions should be capitalising in areas where they don’t need to onboard a new SMB borrower as they have pre-existing data from that borrower’s existing banking relationships, which can expedite the process when it comes to AML and KYC. If banks don’t take care of their existing customers during this time, it is likely those customers will turn to other banks that can help them keep their businesses running.

Increase Personalisation and Communication

Now more than ever, customers need a seamless experience. They want to hear from their banks directly and should not have to seek out information on their own. To ease customers’ worries, banks should have leaders from their C-suites talking about what is happening in an authentic way. This means genuinely connecting with their customers by having multiple leaders in a real-time online forum, discussing what the bank is currently doing, answering customers’ questions, providing financial tips, and above all offering reassurance.

To compete in the era of COVID-19 and beyond, banks need to invest in online technology that customers can use easily, ensure that loans are processed quickly and provide straightforward answers to their customers’ most urgent questions.

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