Pub. 10 2020-2021 Issue 5


How CFIs Can Remain Relationship-Focused in a Digital World

A relationship-based, community focus in a digital world

Banking technology and digital offerings have long been associated with millennials and Gen Z’s preferences, but the coronavirus has quickly reshaped banking behaviors. Since the coronavirus outbreak, almost half of banking customers have reported changing how they interact with their financial institutions, leveraging new channels like online and mobile banking, according to an FIS survey. These findings are true among all generations surveyed. Community financial institutions, which have traditionally leaned into relationship-based banking and in-person interactions, are now trying to solve how to maintain their hallmark community focus in an increasingly digital world.

“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 podcast with Abrigo. Without the ability to have face-to-face branch interactions due to the coronavirus, it became imperative for financial institutions to serve customers effectively through digital channels. In today’s environment, digitalization isn’t just a nice-to-have — it’s a necessity.

Balancing digitization and personal service

Community financial institutions must strike the right balance between digitalization and personal service. This is fairly new territory to many institutions, however. In Abrigo’s 2020 Business Lending Readiness Survey conducted in late Q4 2019, community financial institutions revealed numerous ineffective, poorly automated areas within their banks or credit unions, including manual data entry, re-keying customer information innumerable times, and using Excel spreadsheets to manage the borrower pipeline.

One reason some community financial institutions may be reluctant to adopt more digitalization is due to the belief that it leads to a more impersonal customer experience. However, as we saw in the Paycheck Protection Program (PPP), digitization allows community financial institutions to automate many lending areas that bog lenders down. It enables a quicker turnaround to get money into the borrowers’ hands faster. The PPP exposed many areas where technology excelled over traditional processes, freeing up lenders’ time spent on manual processes for more value-added services for clients. Financial institutions that acted quickly to help their community businesses were highly appreciated for their goodwill and swift action during this challenging time.

Community financial institutions’ experience with PPP technology also translates to other areas of lending. While it may take a while to return to “normal,” financial institutions can use this time to determine ways technology can create efficiencies in their current lending processes and reimagine customer interactions moving forward.
Capitalizing on PPP innovations for a better experience

One reason some community financial institutions may be reluctant to adopt more digitalization is due to the belief that it leads to a more impersonal customer experience.

Capitalizing on PPP innovations for a better experience

To reduce the need for face-to-face engagement during the initial PPP application window, some community financial institutions leveraged technology that enabled their bank or credit union to develop a “digital branch.” These institutions used customer-facing innovations such as online loan applications, electronic signature capabilities, and remote document upload features to allow borrowers to complete PPP applications online at their convenience. Furthermore, technology on the back end of PPP lending enabled financial institutions to streamline underwriting and decisioning the deluge of borrower applications by eliminating duplicative data entry and automating key processes. The efficiency gains from the PPP technology allowed borrowers to access their much-needed funds more quickly. While this might have been the first time many community banks and credit unions have seen returns on a digitization investment, these same automation and efficiency gains can be found in other end-to-end lending solutions.

Many financial institutions recognize the important role technology plays in weathering the current crisis and driving future growth. For example, in June, Celent’s Corporate Banking Digital Channels Survey found that 41% of corporate banking executives are increasing investments in digital channel solutions, and 29% are accelerating projects. Technology is vital for an expanding institution, said Andrew Reid, executive vice president and chief credit officer of The Bank of San Antonio, to Abrigo in a recent white paper.

“If you want to grow, you’d better have it,” Reid said. “Banking’s pretty black and white; it’s about loans and deposits, and if you’re making loans and deposits, you’re growing, and if you’re not, you’re not growing. And so what distinguishes banks today is service and technology. We built this bank around service with technology and being able to deliver, and technology-wise we can compete with anybody.”

By having the digital capabilities to serve customers, financial institutions can be better positioned to accommodate the cases in which customers need to visit a branch while continuing to speedily process online applications. Going forward, financial institutions will have to make a conscious effort to deliver high-level service with remote delivery. True relationship banking relies on institutions providing what customers want and need, whether online or in person.

For more information on the ways that financial institutions can build relationships and drive growth during these uncertain economic times, read Abrigo’s latest white paper, “Beyond PPP: How Savvy Financial Institutions Can Propel Growth and Profitability with Technology.”