How 2020 trends could give commercial banking a digital boost in 2021

A funny thing happened on the way to 2021. The world suddenly went digital.

Caught in the crosshairs of stay-at-home mandates spurred by a global health crisis, consumers turned to digital channels to conduct transactions and to engage with commercial entities.

To keep pace with demand and support growth, businesses evolved digital services and engagement channels at an estimated rate that was 20 to 25 times faster than before the crisis.ⁱ 

It wasn’t long before many of these same companies began to notice something. The services provided by their bank or credit union, always a little behind the times, were now completely out of date when compared to the business’ own digital capabilities.

Faced with the consumer evolution of the last decade, banks and credit unions have been slow to pursue the commercial sector. Nearly a third of financial institutions that provide business banking capabilities are doing so from retail platforms.ⁱⁱ  Lacking business-specific products, these banks are failing to make the grade when compared to the expectations of the newly-digital business entity.

As we look to 2021, financial institutions have some catching up to do. Rapidly evolving to business’ new standards will require swift access to new products and services, as well as a roadmap for plotting digital adoptions strategies.

Data Insights Drive Future Strategies and Opportunities

Data, always the lifeblood of the financial institution, began to meet its strength in 2020 as leading banks grew their digital capabilities. In April, as the true nature of the global health crisis began to reveal itself, seventy-eight percent of respondents to Protiviti’s Global Finance Trends Survey indicated that they were making new investments in data analytics.ⁱⁱⁱ 

It’s a simple matter of math really. Increased digital usage generates more available data. The more data a bank or credit union has, the harder it is to cut through the noise and distill down to the insights that have meaning.

As a result, leading financial institutions increased the usage of analytics to move the mountains of data into carefully selected insights. These insights were a key ingredient when it came to fine-tuning their digital strategies and meeting the needs of commercial clients.

“We’re transacting more and more on digital platforms, and less on brick-and-mortar platforms,” said Jeffrey Feinstein, the vice president of global advanced analytics strategy for LexisNexis Risk Solutions. “That has provided opportunities for banks to integrate data sets to really get more holistic programs to help identify the sorts of opportunities.”

As we move into 2021, data analytics can help banks and credit unions to meet another 2020 mandate, that of equality and inclusivity. Nearly seventy percent of people responding to a mid-year poll said that a company’s response to social inequality would have an impact on their willingness to do business.^iv 

Financial institutions can utilize analytics to address the prospects of social and moral change by expanding lending opportunities to disadvantaged businesses. An SBA survey indicates that sixty-eight percent of minority firms actually represent a low credit risk,^v  but when held to contemporary decisioning, Black or Hispanic-owned entities are half as likely to receive financing.^vi  The disparity suggests that minority business owners could benefit from more contemporary credit decisioning.

To look beyond the narrow credit criteria of the last decade, financial institutions will need to draw more targeted insights from their internal data and combine it with external inputs. For example, through peer assessments and analysis of the market at large, financial institutions can easily configure financial ratios that more accurately represent minority-owned firms.

Analytics will also play a role in supporting bank or credit union profitability. First, analytics applied to the lending data make it possible to review the bank or credit union’s exposure by size of credit, industry segment and geography, delivering additional perspective for taking on more risky borrowers. In addition, more detailed reporting on financial performance, as well as business adoption of products and services, will allow organizations to swiftly pivot in response to changing trends and market conditions.

It’s all About the Right Products

While 2020 was a whirlwind race to reach unimaginable digital heights for businesses, financial institutions should expect nothing less for their own transformations in 2021. To complicate strategies and conditions, the future is anything but settled. The unpredictable nature of the ongoing COVID-19 crisis could inspire changing digital needs as businesses adapt.

In this environment, banks and credit unions need a ready eye on the horizon and a strategy for rapidly evolving. Cloud-based platforms provide banks and credit unions with unprecedented functionality and agility. Utilizing APIs as a connection layer, financial institutions can support seamless omni-channel functionality to the banking products businesses want to use.

Cloud-based platforms like FusionFabric.cloud work because they provide a single view of all connected channels and products. This wide-horizon vision allows businesses to switch seamlessly from channel to channel and product to product, simplifying the banking environment.

APIs also invite innovation. Third parties can develop new products on the platform or financial institutions can partner to build their own products and services.

A plug-and-play environment makes it possible for banks and credit unions to rapidly scale up or down according to business demand.

In 2021, this level of adaptability will help financial institutions to meet commercial expectations for product and service delivery and provide the digital agility to meet emerging business expectations as commercial customers continue to evolve and grow their operations.

_{ⁱ  “How COVID-19 Has Pushed Companies Over the Technology Tipping Point—and transformed Business Forever.” McKinsey & Company, Oct. 5, 2020. Web.
ⁱⁱ  Christine Barry. “Meeting Small Businesses’ Needs Through a Consolidated Offering.” Aite, Oct. 2019. Web.
ⁱⁱⁱ  “Finance Priorities in the COVID Era.” Protiviti. Retrieved from https://www.protiviti.com/US-en/2020-finance-trends-survey.
^iv  Melissa Repko. “Hashtags Won’t Cut It.” Corporate America Faces a Higher Bar in a Reckoning on racial Inequality.” CNBC, Jun. 12, 2020. Web.
^v  “Alicia Robb, Ph.D., et al. “Minority-Owned Employer Businesses and Their Credit Market Experiences in 2017.” U.S. Small Business Administration Office of Advocacy, Jul. 22, 2020. Web.
^vi  “Alicia Robb, Ph.D., et al. “Minority-Owned Employer Businesses and Their Credit Market Experiences in 2017.” U.S. Small Business Administration Office of Advocacy, Jul. 22, 2020. Web.}