This article originally appeared on CBInsight.com, May 2, 2017.
Advances in digital technologies and the mobile consumer’s expectations are shaping the future of banking.
That is why banks like Indiana-based Centier Bank ($3B in assets) and Florida-based FMB Bank ($400M) have strengthened their digital strategies by adding easy-to-implement technology, including digital lending solutions. These end-to-end digital lending platforms allow existing customers to submit an automated application online and completely set up a loan or line of credit up to $55,000—all in three minutes or less from any computer, tablet or smart device.
If embracing such technology seems to be only for pioneers, consider the Bank of America’s “Trends in Consumer Mobility Report,” which shows that millennials on an average day spend more time on their smartphones than they do interacting with anything or anyone else. This includes spouses, colleagues and their children. A study by Harris Interactive even suggests that U.S. adults are more willing to live without sex than to get rid of their mobile phones.
The Bank of America report illustrates that digital dependency of consumers who seek speed and simplicity is driving banking behaviors. For instance, more than 62 percent of Americans say digital is their primary method of banking, up significantly from 51 percent in 2015. They check their finances via mobile (typically once or more a day) more diligently than they assess their own health. And a majority of people (61 percent) say they are likely to adopt emerging payment methods, such as mobile wallets and peer-to-peer payments.
It’s obvious—consumers today seek easy, quick solutions. They use their mobile phones to accomplish a majority of their daily activities. And they will readily switch banks if they have a poor digital experience. In fact, 38 percent say they have reduced how often they bank somewhere because of a poor digital experience.
If those facts alone are not enough to kick start your institution into adopting digital solutions for today’s users, maybe this is: Financial institutions with the highest digital adoption scores grew their assets 16 times faster (!) than those less likely to adopt new digital technologies, according to a study by MagnifyMoney. Perhaps even more convincing, industry analyst McKinsey & Company stated, “Institutions that resist digital innovation will be punished by customers, financial markets, and—sometimes—regulators. Indeed, our analysis suggests that digital laggards could see up to 35 percent of net profit eroded, while winners may realize a profit upside of 40 percent or more.”
Digital lending technology is an easy solution to ‘dive in’ with. It is simple to install. It rapidly improves your institution’s efficiency. It appeals to the consumer’s ‘need for speed;’ and it allows community and regional financial institutions to profitably address the credit needs of small businesses. Seventy-one percent of small businesses have loans, but the majority of them are for less than $100,000 (with an average loan size of $20,000), according to a recent Federal Reserve Small Business Credit Survey.
Digital lending technology automates the entire loan process, from application through risk rating to ongoing monitoring, making these once unprofitable loans a proven source of new revenue. The technology is also branded to the institution, to ensure the consumer has a seamless and enhanced digital experience.
While most community banks have abandoned this market (including some of their own customers), digital lending puts your organization efficiently and profitably back serving the customers you have, while also attracting new ones.
You already have the stable, low cost of funds, the established customer relationships, and the documented compliance standards. All you need is the digital technology.