One of the biggest shifts in banking that FinTech newcomers ushered into the market is the demand among customers for advisory services. With FinTechs offering clients a range of easy-to-use, sophisticated products, banks in 2018 were pressured to react to small businesses' demand for advisory services — not just data, and not just digital platforms.
What some financial institutions have come to realize is that collaborating with FinTechs can enable them to offer cutting-edge solutions while reserving resources to invest in meeting those advisory needs.
But 2018 was also a year of continued bank branch closures, which exacerbated the challenge for FIs of enhancing their advisory relationship with small to medium-size business (SMB) customers, some experts warned. JLL research published last year found that the 2.2 percent drop in the number of U.S. bank branches in 2017 “reflects the industry’s ongoing evolution to serve customers more effectively while reducing operating costs.”
Yet previous analysis from Avoka has found that less than a quarter of business banking services can be opened online, introducing a major challenge for small businesses that see fewer and fewer bank branches open nearby.
“Considering how busy a small business owner is and how limited their schedule [is] to visit a bank branch, this severely undercuts the ability [of] banks to capitalize on the lucrative business banking segment,” Avoka stated in its report.
It's going to be a significant conundrum for banks servicing small businesses in 2019: how to cut costs and invest in digitization, while maintaining a strong relationship with clients and providing the advisory services they need.
Bank technology provider nCino has kept this challenge in mind throughout 2018. The company secured a collaboration with Santander in July, enabling the FI to accelerate its small business lending processes with plans to enhance their partnership with SMB customer relationship tools and other features.
Earlier in the year, nCino's EVP of the Americas, Josh Glover, spoke with PYMNTS about what banks need first and foremost to help FIs balance the need for digitization and advisory services.
“There are a few things driving large financial institutions to think about digital transformation, but it starts with customer experience,” he said in April.
Glover spoke with PYMNTS again about how this trend will carry into 2019 and what technologies might be able to help banks strike the balance.
PYMNTS: Can you provide some insight into what technologies are affecting these markets?
Josh Glover: Speed and convenience remain paramount to bank customers. But as expectations evolve, customers across the board — from individuals to small businesses to large corporations — are also wanting banks to be a universal trusted advisor. Offering not only the best products but also a perspective for how they may best achieve their personal, financial and/or business goals.
Financial institutions today are increasingly understanding that digital transformation and an improved customer experience doesn’t just mean a front-end customer interface, which is only about 15 percent of the bank process. It also needs to include the middle and back office, too. This end-to-end digital mindset is driving significant investments in platform technologies that can streamline processes and provide the right tools to run a more intelligent enterprise. Technologies that increase efficiencies and improve customer insights, like analytics and AI [artificial intelligence], are becoming an even greater focus for banks as they prepare for the future. In 2019, it is about ensuring the FI has the right technology to differentiate itself in the market, streamline operations and processes, deliver a complete digital experience, and meet customers where they want to be.
PYMNTS: How will banks continue to interact or compete with FinTechs?
Glover: Financial institutions still have different perspectives when it comes to competing or collaborating with FinTechs. I have seen both approaches and think they can both be successful in their own ways. However, as the speed of innovation continues to increase, we’re even seeing non-traditional lenders and technology providers investing in banking solutions and threatening what have traditionally been banking services. This disruption will force banks to rethink their processes, but will also allow them to identify the partners and tools that will help them think broadly and crystalize a strategy for success.
PYMNTS: What services are small and medium sized businesses (SMBs) and larger corporates demanding from their FIs?
Glover: Regardless of their stage, size or need, customers want a smooth, efficient interaction, but they also still want the value of a relationship with their financial institution. Services that were previously reserved for large, corporate clients are now available to smaller businesses, thanks to technology — the great equalizer. When it’s all said and done, it comes down to that personal connection: being high-tech and high-touch. Financial institutions that prioritize building a scalable, digital framework that adds value for the customer beyond product fulfillment will see the best results.