Inside Wells Fargo’s plan to ‘disrupt the disruptors’

Like most aspects of banking, small business loans are no longer just about the financial agreement between the bank and the customer, but the personal attention that comes before and after the service. That’s a recurring theme among online lenders, but it’s also the view of Wells Fargo’s Lisa Stevens, president of western region regional banking.

Last year, the bank launched its own online lending product, FastFlex, in response to not only new competition from the likes of OnDeck Capital and Bond Street, but to its own customers asking for ease of access to loans, ease of use and guidance. Now it wants to open that product beyond Wells Fargo customers.

Based on the latest Community Reinvestment Act data released in 2016, Wells Fargo extended 473,847 loans and $21.3 billion in total loan originations under $1 million to U.S. small businesses that year. It is the top ranking U.S. small business lender by dollar amount.

Tearsheet caught up with Stevens about how Wells Fargo approaches small businesses and what competition from alternative lenders mean for the bank.

Wells Fargo is the number one SBA lender in dollars. What’s your focus?
It depends on customers, what their need is at the time. But our focus has been about being where our customers need to be and making it easy for them. The business encompasses a lot because it’s about trying to see things from perspective of a small business owner versus the perspective of the institution.

What’s the perspective of the institution, historically speaking?
From the 2008 recession to a couple years ago we knew diverse-segment small businesses were struggling more than they had prior to 2008. We did a study with Gallup to understand what are the pain points for Asian-, Hispanic-, African-, women- and veteran-owned businesses and what could we do to help revitalize these businesses at a faster rate.

What did you learn?
Small business owners know everything about their businesses but don’t necessarily know what they need to do to make sure they put all the right financial instruments and advice into place. We created four initiatives and one was to help with credit coaching.

What does that entail?
We call people that get declined and walk them through what happened, why they got declined and what they need to do to get approved. When small business owners they get declined for a line of credit or loan they often don’t know why. At the time we were the only financial institution to do something like this. FastFlex was also an answer to what some in the market were looking for.

How so?
It was that ability to control your inventory or be able to move quickly on something when you have an opportunity and you need to get credit quickly. With FastFlex, we came together and made the decision to basically disrupt the disruptors, create a product we knew would be competitive and easy access for our customers with the capabilities we had. But we did it fast. We’ve got more piloting the line of credit right now. Now we’re looking to offer Fast Flex to new customers who don’t have a history with us.

Is your business threatened by online lenders?
It’s a competitive market but thats a good thing for small businesses. All the online products that have come out have been a positive thing for small business owners because it’s given them more choices and opportunities. And it’s allowed us to sit back and rethink how we’re creating the best tools and advice.

What about Amazon?
Companies like Amazon, Zappos — they’re all fantastic opportunities for us to understand what’s the experience we should be creating for the business owner or customers and to be able to learn from others innovating.

How do you measure success?
There are financial metrics, the number of customers we’re reaching, how we continue to innovate and be responsive to a world that’s changing so quickly. We also have surveys based on what our customers are saying. The anecdotal success is just as important.

How Wells Fargo launched online loans in 9 months

On May 10th, 2016, Wells Fargo announced the launch of FastFlex Small Business Loans. The company is pitching FastFlex as “an online, fast-decision loan” that can be funded as quickly as the next business day with a competitive interest rate to small businesses with short-term credit needs. Though incumbents might not have seemed as flashy as some of the marketplace lenders, LendingClub’s recent financial snafu is making Wells Fargo, with its brick and mortar branches and its sturdy legendary wagon, seem like an attractive alternative.

However, Wells Fargo has more than just the marketplace lending crisis to recommend it to small businesses; the bank has built up a sizable community of 3 million small business owners that use its services, and provides more loans to small businesses than any other bank in America. As Amy Feldman wrote in Forbes, FastFlex “is part of a broader push to attract entrepreneurs of all sizes,” and indeed, in 2014, the bank set a $100 billion lending goal for small businesses, and it’s already issued over $40 billion of new loans.

Wells Fargo has utilized the internet to develop its relationships with small business owners before; in 2014, it launched Wells Fargo Works for Small Business, a holistic platform that guides small business owners to financial security and success. However, FastFlex is the small business department’s first foray into cutting-edge technology, and the team has high hopes for this union: “We are innovating to fuse the largest retail distribution channel in the United States with industry-leading digital offerings to create an exceptional customer experience,” says Jim Seitz, Wells Fargo’s Small Business Communications Manager.

Transformative product requires company-wide transformation

Beta-testers have already expressed satisfaction with the product, citing the simplicity and speed of loan issuance. However, the behind-the-scenes cross-departmental cooperation that went into creating FastFlex suggests that the service will be just as transformative to Wells Fargo as an organization as it will be for its small business customers.

Though it was created entirely within the current business organization, more than 50 team members from a number of areas within Wells Fargo were involved in creating FastFlex. Given other organizational responsibilities, most of this group did not work full-time on FastFlex throughout its development. Three team members from Wells Fargo’s Business Direct team – a team that provides small business loans under $100,000 each – led design of the product.

In addition to the Business Direct Term Lending Product team, the cross-functional team that worked on FastFlex included team members from systems, operations, marketing, credit risk, compliance, legal, digital and Wells’ Innovation Group.

The fact that FastFlex is a product of so many different people coming together, coupled with the fact that the entire process was conceived and constructed in-house in just 9 months, demonstrates the impact that the drive towards technological innovation has had on Wells Fargo as a whole.

Heads down and innovating

Other financial institutions seem to be driving fintech innovation not out of choice but out of necessity. Takes Charles Schwab, for example. Like Wells Fargo, online broker Schwab was facing some competition from pesky startups. Instead of choosing to ignore the roboadvisor trend or to partner with a startup, in 2014, Schwab came out with its own roboadvisor called Schwab Intelligent Portfolios and, like Wells Fargo, developed its service quickly, rolling it out just 6 months after project kickoff.

Seitz couldn’t speculate on whether Wells Fargo would be replicating FastFlex’s online, fast decision loan model across its different departments. Nevertheless, it seems likely that if the service is as successful as the team hopes it will be, we’ll soon see similar services popping up throughout Wells Fargo.

Photo credit: JeepersMedia via Visual Hunt / CC BY