Banks are (finally) improving the customer experience for small businesses

The modernization of finance has made its way to business banking. For the past three years banks have been focused on improving the customer experience for individual consumers and wealth management clients -- that includes account onboarding. But at the beginning of 2018, digital sales capabilities for business banking leapt to 30 percent from a measly nine percent at the beginning of 2017 and just seven percent at the start of 2016, according to a new report by Avoka. Marketing was the first thing banks made more digital; they create all the necessary content to allow them to do their research on a banking product before they actually apply for it. That should be where the sales begin, but for most banks, it's the point at which customers need to go offline and into a branch to open an account. Then, they digitized account servicing, letting customers access their account through a website or reach customer service with 1-800 number -- after they've opened an account, of course. "It’s the piece in the middle that transitions you from being a prospect to being a customer," said Don Bergal, CMO of Avoka. "That hasn’t really been the focus of the banks until the past two or three years. Getting you from the 'Apply now' page to being a fully onboard customers is where the action is." Thirty percent is low, but an 82 percent year-over-year increase is remarkable. Unsurprisingly, it’s the national banks that have showed the most progress, according to Bergal, while regional and community banks, which tend to rely more heavily on their branches to strengthen customer relationships, haven’t done as well. But as large banks already investing heavily in digital show that pairing those capabilities with a physical presence is critical to their customer acquisition strategy, community banks like Alpine Bank in Colorado are working on digital onboarding processes for new customers, realizing how crucial it is to marry their branch strategies with strong digital capabilities. “Two years ago banks must have put big money into developing these systems and testing them, and in 2017 they rolled them out,” Bergal said. Smaller banks “are seeing a much bigger gap in what they do and what the big banks do… It is clear that if you want to play the game you have to have digital sales,” or digital onboarding, “or you’re at a disadvantage. It’s no longer a luxury or ‘the future of fintech.’” In the U.S., only six of the top 30 banks offer digital account opening for small businesses: Bank of America, BB&T, Capital One, SunTrust, Wells Fargo and Zions — and they hold 30 percent of the deposits in the U.S. small business banking market, according to a February study by Javelin Strategy. Mobile banking has quickly become as ubiquitous as online banking experiences, Bergal said, and now banks are working to make the onboarding piece just as seamless on mobile. For example, last year, Bank of America upgraded its app to let small business customers apply for a loan or credit line between $10,000 and $250,000 — directly from the app. In his letter to shareholders earlier this month, Gordon Smith, CEO of JPMorgan Chase’s consumer bank, highlighted its online application for small business owners to sign up for one of its business products — deposits, credit cards and merchant processing. “We collapsed the three applications into one so customers provide their information once instead of multiple times,” he said. “We didn’t change the products — we just made it easier for customers to get the ones they want. The simpler application reduces the time it takes to apply for all three products by 45 minutes, and we saw engagement with new Business Banking households with both deposit and credit card accounts increase 25 percent with this change.” Half of the 10 largest in the country made “huge progress” this year, getting more than 60 percent of their products digitally or mobile enabled, he added. Avoka’s research found a 300 percent return on investment over a three-year period for digital account openings by individual customers. Bergal couldn’t share numbers for small business bank account openings but said it’s “much higher.” Of course, the business banking onboarding process is a lot more complex than consumer banking; there are more elements — such as multiple accounts, higher use of domestic and international wires, multiple users in multiple roles — and often higher security and compliance requirements. Banks have to do an especially thorough job of vetting the business and the customer, it requires more bank staffers be involved and more “paperwork.” But the profitability of those business banking customers is much higher than that of a simple checking account, he added. Digital account opening can also be a good marketing and customer acquisition tool that lets banks offer digitally-savvy business owners an easy experience — which demonstrates digital competency that helps strengthen customer trust — as well as a chance to save on relationship manager costs, according to Javelin. “Small business is a great opportunity for banks to differentiate themselves,” Bergal said. “Whether or not they can create an outstanding experience that’s so simple it captures small business owners as customers — that’s the big challenge for American banks.”