Banks’ Missed Opportunity: Digital Services for Small Business

The following is a guest post by Derek Corcoran, Chief Experience Officer at Avoka.

If you’re a small business and you want business checking, a business credit card, or a business loan, chances are the bank will ask you to stop what you’re doing and come into a branch.

That’s the finding of Avoka’s newly published 2016 State of Digital Sales In Banking report, which summarizes the findings of a recent study of the digital sales capabilities of the largest banks in the US, UK and Australia. According to the report, of 218 business banking products across the 10 largest retail banks in the U.S., only 17% of those products can be applied for online. (Equally if not more concerning, only 4% of business products are delivered in a mobile-friendly format.)

Translation: 83% of business banking products require a branch visit.

That’s bad news for small business owners, for two reasons. One, entrepreneurs are among the busiest people in the world, and simply don’t have time to waste sitting in a bank branch. And two, small business hours are typically the same as banks’. (According to the 2015 Wells Fargo Gallup Small Business Index, the average small business owner works 52 hours per week, and a typical bank with extended hours opens 51 hours per week. And they’re the same hours.)

The shortage of online banking services for business presents an enormous opportunity for banks. Those that choose to offer the convenience of digital account opening and loan origination for the small business community — so entrepreneurs can spend time on their business, not in a bank branch — stand to gain a hefty competitive advantage.

Typically, the biggest roadblock to offering digital small business banking services is inertia, in the form of legacy IT. Most of today’s commercial lending platforms and core banking systems for small businesses were designed for in-branch interactions. For banks that have the foresight and commitment to overcome the IT obstacle, the rewards can be significant.

How can banks begin offering digital services to small businesses? By first transforming the customer experience for account opening, loan origination, and other credit products — even if those applications are manually processed in the background. One financial institution, for example, recently created a digital application that bundled five products in a single on-boarding experience. The business customer enters name, contact details, business information, etc. just once, whereupon five separate PDF forms are generated and electronically delivered to back-office teams to manually create the various products.

Some might call it “smoke and mirrors,” but the results speak for themselves: The time required for customers to complete the combined application was reduced from 65 minutes to 15 minutes, and the average number of products per small business customer increased from 1.4 to 4.0. Those are impressive, bottom line-fattening numbers.

Small business owners work hard, and banks do themselves no favors by asking those entrepreneurs to come in to a branch if they want a new product. Banks offering a convenient and frictionless experience for account opening and loan origination will see their efforts rewarded by increased business from the hard-working small business community.