Banks and credit unions are at an inflection point.
With the Paycheck Protection Program wrapping up, financial institutions need to start thinking about how they’ll operate in a post-PPP world and under this “new normal” of social distancing and fewer face-to-face interactions.
In our constant communication with the field, we’ve seen lenders stake out a number of different positions in their approach to the new normal.
Some are focusing exclusively on managing their existing portfolio, with particular care to asset quality and loan modifications. Others are planning on achieving growth by expanding their base through cross-selling methods. And still others see a third path forward through the aggressive pursuit of new business, seizing on the opportunity to build off of PPP for new customer acquisition.
Any of these paths would be difficult to pursue in good times. But in the middle of a pandemic with an economy rapidly shifting to digital-first services, these are paths that can only be successfully pursued with the help of technology.
Before financial institutions can decide what kind of technology and vendor is right for them, however, they first need to identify and understand their technological needs. Answering these three questions is an important first step:
- How have your customers changed during the pandemic?
No matter where you are in the country, life is considerably different from what it was at the beginning of this year. You really just need to look toward your own personal experience as a consumer to see what your business customers are likely going through. Many of us took our first zoom meeting, made our first online grocery order, or arranged our first curbside pickup at the start of this pandemic--they’re firsts that seem distant now that our lives are more digital. And the data is there to back it up. A recent PYMNTS survey found that 36 percent of consumers now buy goods online compared to 29 percent doing so in mid-April, when many shutdowns first took place. Online ordering from restaurants is also on the rise, increasing to 21 percent from 13 percent in mid-April. As businesses owners go through these changes in their personal lives, they’re bringing these habits into their business lives as well, meaning their expectations of their financial institution could be materially different from what they were just a few months ago. Banks and credit unions need to understand how this behavior has changed and consider what technology will be needed to meet these new expectations moving forward.
- How has your institution changed during the pandemic?
Like consumers and business owners, banks and credit unions are also in a different place than they were at the start of April. Consider when PPP first rolled out forcing many institutions to fundamentally shift resources, some dedicating entire branches or regions to processing these COVID relief loans. Many within these institutions were forced to adopt new skills and competencies, and lenders should be considering how they can leverage these new resources to their advantage moving forward. Not all changes have been positive, of course. Some branches remain closed under strict state-wide shutdowns or under new social distancing guidelines. Further, foot traffic to these branches has been significantly curtailed due to customers unwillingness to make extra visits outside of their home. This is all to say that financial institutions have already been forced to adjust to a new normal throughout the course of this pandemic and it's important that they understand what can go back to the way it was and what changes need to become permanent. Understanding this will help you understand what technology will best help make that goal a reality.
- What challenges have you had to overcome during the pandemic?
The pandemic has been a crisis for everyone and every industry, banking included. And when a crisis hits, institutions need to do what they must to survive before they can recover and return to growth. Not everything goes right when you’re in survival mode, and mitigating risks is often the goal. That said, banks and credit unions can learn from things that “broke” during the pandemic and technology can help ensure they’re more resilient when the next crisis inevitably rears its ugly head.
With PPP Forgiveness officially underway, the time to pivot toward the new normal is fast approaching. As such, lenders are actively exploring their options and accelerating tech adoption strategies as they try to give themselves an advantage in this quickly changing market.
Answering the questions above will help institutions in this pursuit, but we’re always here for your institution if you need further guidance.