Business Bankers Find The Long-Term Lessons Of PPP

Financial institutions (FIs) of all shapes and sizes say the Paycheck Protection Program (PPP), having presented a slew of challenges for many lenders, offered some valuable lessons about the importance of digitization and agility.

Key lessons learned from the federal stimulus package include an awakening to what small- to medium-sized businesses (SMBs) need, including online, streamlined interfaces that support a seamless experience when opening up a new account and securing a loan. Now that PPP is over, however, some industry leaders say there could be a regression among banks back to their old ways.

One of them is Carson Lappetito, president of Sunwest Bank, which announced the launch of its Sunwest New Account Portal (SNAP) earlier this month. In a conversation with PYMNTS, Lappetito discussed how the PPP initiative emerged at a critical juncture in Sunwest Bank’s own efforts to modernize SMB banking, and how it fueled preexisting plans to adjust the way the bank services SMBs that are shifting their banking needs.

Future-Proofing For SMBs

The SNAP digital business banking portal was the result of more than two years of planning and development as part of the bank’s future-proofing efforts. Lappetito explained that it all began when he sat down with the CEO of a local business and asked why the business was banking with a big box bank.

The response?

“‘Because it was the closest branch when I founded the company, and if I could have opened the account in my office, I would have,’” recalled Lappetito. “From that moment on, I said the banking industry has to be able to open business checking accounts wherever their clients are.”

It was a moment of recognition that for many SMB owners, having to physically go into a bank branch to open a new account remains a major point of friction and frustration, so much so that a business owner will simply go to whoever is closest to reduce that friction as much as possible. It also begged the question as to why FIs rarely support digital account opening for their SMB clients.

As Lappetito explained, account opening for businesses is far more complex than it is for an individual thanks to the fact that it is an entity, not an individual, that opens an account. And once that LLC or C-corp opens an account, the bank must also manage the “web of names” of the owners of the business, as well as the authorized signers on those accounts. All of this piles on complexity when it comes to compliance requirements and adds strain to banks’ back offices.

Automating data feeds that provide insight into all of the individuals surrounding a business, as well as the business itself, has enabled the FI to address much of the burden of digital onboarding for SMBs, Lappetito explained.

Propelled By PPP

While the SNAP solution was designed before the pandemic hit, the coronavirus crisis and the PPP initiative offered an opportune moment for the bank to beta test the solution. SMBs that used Sunwest to obtain PPP loans were also presented with an opportunity to digitally open an account at the same time, turning new, short-term customers into long-term clients.

Sunwest isn’t the only financial service provider to recognize the impact that PPP had on distinguishing the value of digital-first services for SMBs. Lappetito said there is “no doubt” that PPP ignited innovative efforts among FIs.

But there is doubt, however, as to whether those FIs actually stuck with those initiatives.

“How many of those banks that innovated in the moment and then went back to what they were doing before, I can’t tell you,” he said. “But I do think there is a bit of regression that’s going on.”

Today, requiring in-person interactions to open an SMB bank account may not be a red flag for all SMBs. Indeed, Lappetito acknowledged that there remains a portion of the business community that prefers to visit a branch and work with an advisor. But increasingly, business owners are demanding digital interactions.

Entrepreneurs will always want to know that a physical branch exists and is there, armed with experts and support, to meet their needs in person should they choose. But in day-to-day operations, he said, those businesses need digital-first tools.

It’s too early to reflect on the long-term impacts that PPP has had on the SMB banking arena. Whether FIs will implement the lessons learned from both their successes and failings of issuing PPP loans has yet to be seen, too. But Lappetito is adamant that it’s time for a modernization push.

“[PPP] forced banks to realize that they have to interact with their customers digitally,” he said. “They have to move more quickly. And I think it really pushed a lot of bankers to think differently — which our industry drastically needs.”