Summer is fast approaching, but fintech certainly isn’t taking a vacation. Innovation in the financial services sector just keeps heating up. For the unprepared, innovation can lead to disruption, as old business models are upended and new competitors shake up the landscape. But for those who stay up to date, innovative new technological solutions can help streamline cumbersome processes, attract new customers, and boost the bottom line.
Here are four bank technology trends to watch this summer:
Fintech is removing friction from financial processes.
New technology is speeding transaction times and smoothing out clunky processes all over the financial sector. In the asset management world, so-called robo-advisors are making portfolio advice instantaneous and painless. In small business lending, borrowers now have the option to get loans quickly and easily online–and they’re not going to settle for less. According to a 2015 Cleveland Federal Reserve survey of small business borrowers who weren’t happy with the process of getting a bank loan, the top two reasons for dissatisfaction were cumbersome application processes and long wait times before they got a decision. Customers are increasingly demanding frictionless, pain-free transactions, even when it comes to complex processes like applying for a small business loan. According to a Barlow Research survey, more than one-third of small business owners would switch banks for a better online banking system–and the numbers are even higher for young entrepreneurs.
Marketplace lenders are struggling–and that’s creating huge opportunities for banks.
Alternative lenders like OnDeck, LendingClub, and Prosper, have been struggling for a while. The news has been full of reports of missed earnings, layoffs and even a scandal about altered loan applications that forced LendingClub’s CEO to resign. New York state regulators are already investigating LendingClub and have recently announced their intention to expand this probe to other digital marketplace lenders. Small business owners flocked to alternative lenders because they offered quick and painless lending processes. Traditional banks now have the chance to offer the same frictionless process–without the high fees and confusing terms. (This recent post Trouble for Marketplace Lenders Creates Opportunities for Banks – 3 Ways to Benefit explains more.) This is a huge opportunity for traditional banks to jump in and recapture the small business lending market.
Big data is finally becoming actionable for banks of every size.
You’ve probably been hearing about big data for a while, but we’re now seeing practical applications for big data come to market. Big data analysis can help small business lenders understand their customers better, improve marketing effectiveness and tailor products and experiences to meet their needs. It can help lenders find more creditworthy borrowers by expanding the measurable loan criteria beyond a simple credit score. An expanded breadth of data can even give lenders an early warning when a small business loan is about to go south, giving banks the chance to intervene early to stop a default before it happens.
Fintech is giving banks of all sizes the opportunity to enhance customer service.
Fintech makes small business lending less labor-intensive and more profitable, making it easier for banks of all sizes to establish and expand small business lending programs for their community. Financial technology helps automate the loan application process and makes ongoing servicing of loans easier, giving banks and credit unions the opportunity to offer an omnichannel experience to their customers. Giving customers a choice in how they interact with financial institutions casts a wider net in attracting new borrowers and gives lenders the opportunity to focus on providing stellar customer service to their customers.
For banks that seize the advantage, these trends are poised to make once-cumbersome processes like small business lending quicker, easier, and more profitable. Is your bank ready to change?
Join us for a webinar on August 11, 2016 at 10 AM PT/1 PM ET where we’ll dive into these topics in detail. See you there!