Adjusting to the new normal

Adjusting to the new normal

How banks can bring the human touch to digital banking  

By Philipp von Girsewald

When small businesses needed help to secure funding to keep their people employed, community banks heeded the call. In both rounds of the U.S. government’s Paycheck Protection Program (PPP), community banks in every state provided outsized support for small business clients, effectively punching above their weight.

The recipe for success was proactivity, dedication and putting the client first. A lot of the banks proactively alerted clients to the PPP’s existence. They processed loan applications on a first-come-first-served basis, rather than prioritizing their biggest clients. They worked grueling hours and prepared as best they could, despite difficult conditions. Community banks did what they excel at — they provided exceptional service to their clients and, of course, to their communities.

According to the Wall Street Journal, in the first round of funding, banks with less than $10 billion in assets approved about 60% of loans. And banks with $1 billion or less in assets (which account for just 6% of all U.S. banking assets), together with small specialty lenders, approved nearly 20% of total loan dollars.

A Texas-sized response to PPP

Texas’ response to the PPP was one of the strongest in the nation. Early on, Texas led in funding secured through the program (California ultimately secured the most), helping the state’s 2.7 million small businesses keep their lights on and their 4.7 million employees employed. The state’s collective set of banks approved a whopping 356,757 loans.

Community banks delivered not just loan approvals, but service, compassion and a uniquely human touch. We learned of the example of the team at one Houston bank that worked weekends and Easter Sunday, protecting an estimated 5,500 jobs. When the SBA system crashed, the team at a bank in Central Texas processed 200 applications anyway, waiting to submit them to the system. These were not anomalies.

With Texas well into its reopening, Texan banks can now transition from mitigating crisis scenarios and following business continuity plans, to thinking ahead, ideating and executing business development strategies that will keep them successful.

Even with states reopening, social distancing will likely remain the norm in some form or fashion. Stay-at-home and work-from-home practices, though not mandatory, will remain more common. Community banks will need to ensure that they stay in close, if not personal, touch with their clients and invest in new supporting infrastructure.

But what exactly can this look like? One quick fix is increased drive-thru service to fulfill physical interactions. However, that, of course, cannot be the be-all-end-all. Digital banking experiences, for example, hold incredible potential that, when implemented effectively, can provide customers with great services and experiences similar to those they expect from in-person interactions.

COVID-19 ushered in many societal changes, but the impact on banking was not necessarily new. Rather, I believe that COVID-19 accelerated fundamental changes we already were experiencing regarding the way business and banking is done.

Banks pivoted quickly to meet client needs, but there still is more to be done to help make banking available under all circumstances. These changes, however, will be long-term advancements rather than short-term, band-aid solutions.

Supplying a human touch in a digital world

If we look back upon the past several years, we have seen a boom in mobile and digital banking adoption. Technology, such as remote deposit capture and the ability to complete person-to-person money transfers, are two incremental advances that have changed the way people think about banking. But what’s important to note is that these offerings may lack the human element that individuals were used to before the challenges brought by the global pandemic.

Looking at other industries can provide salient inspiration for the banking sector. The healthcare industry is even more personal than banking and requires a lot of human interaction. It is also a prominent leader in showing how new technologies can proliferate in usage following the advent of COVID-19.

Prior to the global pandemic, telemedicine — the usage of software apps and video software to seek care from a healthcare professional in lieu of an in-person visit — existed but was seen as more of a hopeful concept, rather than an effective solution for patients.

But as we simultaneously stretched healthcare systems and sought to limit human-to-human contact, the concept transformed into a widespread necessity, adopted by providers and endorsed by both the Centers for Disease Control and the World Health Organization.

The weeks of March and April showed rapid surges in telehealth “visits” throughout the United States, according to The Commonwealth Fund. If an industry that so heavily relies on in-person interactions can innovate to an effective digital platform, what does this say about the future of banking?

Video banking is not a particularly new idea, but it sings to the same tune as telemedicine in that it provides customers with the ability to speak directly with a human being who will solve problems and answer questions. The interesting aspect of this innovation is that the banking employee can also serve the customer from home. This approach creates a completely new mindset when we think of what is possible in banking, keeping both the customer and our employees top of mind.

Nonetheless, human touch will of course be needed in some capacity. Telehealth visits can make sense for routine visits, prescription refills or check-ins, but certain medical visits, of course, need human interaction and analysis. In healthcare as in banking, digital tools can free up resources to focus on those who need care. Technology in these cases is not looking to replace or compete against existing mechanics; it is used to support and advance what we can do as humans for humans.

Looking at the trends and advancements in other sectors is a solid starting point to understanding how banks should reassess their service offerings. But we still need to answer the implementation and “how” question of it all. For that, banks can incorporate a business model that considers “in-sourcing” — utilizing third-party vendors to provide products and services that enhance existing business operations, but also offer customers what they demand.

Adjusting to the new normal is not just about creating a digital banking environment, but a digital environment that aligns with the customer’s experience with their community bank.

Open architecture as a gateway to a better digital experience

Great customer experience is key to banks’ ability to be in touch with clients — this is true for both the physical and the digital form of banking. The digital experience is the area where “challenger” banks have led the way. Community banks can keep up, even those that do have an older infrastructure and platform, and do not need to fear having to build everything from scratch.

To close the gap and provide multichannel, customer-focused access, banks instead can leverage an open architecture approach partnering with fintechs and other third-party infrastructure providers.

The benefits of open architecture are immense. It’s all about acknowledging and harnessing the strengths of different partner organizations as well as your own, which you can then focus on. Open architecture promotes collaboration among the financial services industry. This leads to better products and services, improves accessibility for customers and increases cost efficiencies.

Building a successful digital banking model does not happen overnight. But by taking advantage of open architecture, and partnering with third parties, banks can quickly and efficiently accommodate the accelerated demand for multichannel banking access and keep in touch with their community.

Adjusting to the new normal is not just about creating a digital banking environment, but a digital environment that aligns with the customer’s experience with their community bank. Digital banking should augment a high-touch human experience, rather than rival it.

With the right partners, banks can create digital ecosystems that align with their brand promise and what the customer was used to. In fact, by relying on digital banking to facilitate some services, bank representatives can focus on clients that want the additional human touch and still service those who don’t. First-hand human interactions will never be fully digitized, but with the right tools and partners, they can be replicated and scaled.

Philipp von Girsewald is CEO of Deposit Solutions LLC, where he is responsible for launching and scaling this European open banking franchise in the U.S. Prior to Deposit Solutions, he spent 20 years at Deutsche Bank AG in various senior capacities, including partner at The Digital Bank.