The ability to offer a menu of business banking services is critical for financial institutions in today’s competitive lending environment. In prior generations, people fostered relationships with only one bank or even one banker. However, the ability to now obtain loans from a variety of non-traditional sources, such as internet lenders, creates a much more competitive market. In fact, according to a 2014 Harvard Business School report on the state of small business lending, the outstanding portfolio balance of online alternative lenders is doubling every year. Advances in technology and a stronger economy have leveled the competitive playing field with these peer-to-peer players. As a result, banks are now finding themselves relying more heavily on customer service representatives (CSRs) to step into sales roles to market and cross-sell additional financial products and services to business borrowers.
For this strategy to be successful, banks must ensure that these CSRs are equipped with a detailed customer profile and a list of products relevant to the needs of their customers’ individual businesses and are able to provide these customers real-time information and quick credit decisions.
As customers shop around for credit, the first step toward attracting them is to deliver several commercial and small business lending products. According to the 2013 Gallup U.S. Retail Banking Survey, which surveyed 9,000 financial services customers, those who are “fully engaged” with a financial institution are much more likely to buy an additional product from the bank than those who are just satisfied. For example, while less than 45% of satisfied customers surveyed by Gallup said they would consider their bank the next time they needed a product or service, that consideration increased to 83% among customers who were both satisfied and engaged. Furthermore, customers who are engaged said they were more likely to open a new account, add ancillary products and services, and/or obtain planning advice than those customers who are merely satisfied.
For customers to be fully engaged with their financial institutions, a CSR needs to have access to all of their account information to accurately recognize what they need, when they need it. Ensuring that all parties within the bank have access to a 360-degree view of that customer will allow a CSR to uncover their customer’s specific banking needs. Whenever possible, most borrowers would prefer to not only obtain loans for their small business, but to also have the same trusted institution serve as their lender for other needs such as cars, real estate and more. Once bankers stop looking at a loan as just a loan and see it as a relationship, they can determine where the best opportunities lie. Siloed data and disparate systems prohibit bankers from seeing the full picture of a customer’s portfolio, hindering them from suggesting new products. An aggregated and holistic view of customer data is essential to engaging that customer and maximizing the relationship.
While equipping CSRs with this pertinent data is critical to keeping customers engaged, investing in solutions that improve the speed of lending operations is equally as important. Lending has traditionally been driven by disparate software systems and manual processes that can often prolong decisions. The typical commercial loan, for instance, requires anywhere from 50 to 75 separate documents to be submitted, on average. Instead of searching for information in various locations and going through stacks of paper files, managing all data electronically within one system can facilitate quicker and more accurate credit decisions, which are vital to boosting and improving a lending operation, as well as retaining and attracting new customers.
With the hyper speed of today’s digital age, loan officers can no longer rely solely on relationships to close business; a lender’s speed-to-close and the overall experience provided to customers will sway the customer’s borrowing decisions. Even more established business customers are less willing to sacrifice speed when it comes to getting the funding they need, so banks must ensure they are equipped with the proper tools to provide quick decisions in addition to strong customer service.
Unlike some alternative lenders who often look at deposit rates only and take a one-size-fits-all approach, banks can utilize today’s technology to take additional niche industry considerations into account to maintain more personal relationships with customers, as well as to intelligently underwrite loans based on the special circumstances of their particular industries. For instance, a lender who has access to aggregated industry-specific data, such as healthcare or trucking, has an advantage to better help small business owners understand how they compare to their peer group. Banks that harness such industry data can stay competitive with alternative lenders.
Although it may seem like an easy task, offering customers relevant products and services at the right time requires investment in user-friendly systems that support front-line sales efforts. Rather than targeting a customer with irrelevant products at unsuitable times, bankers need to look beyond merely making a transaction, and really understand their business customer’s position in their specific market, as well as their specific banking needs. By employing a targeted business lending strategy, a bank can evolve its borrowers into more profitable customers.
Mr. Glover is senior vice president of Sales, Community Financial Institutions, for Wilmington, N.C.-based nCino. He can be reached at Josh.Glover@ncino.com.