Fintech companies have a unique vantage point from which to view the COVID-19 pandemic and crisis.<\/p>\n\n\n\n
Technology leaders are working long hours to help banks go remote, fill in customer service gaps and meet unprecedented loan demand. They\u2019re providing millions of dollars in free services, and rapidly releasing new products. They\u2019re talking to bankers all day, every day, and many of them are former bankers themselves.<\/p>\n\n\n\n
Bank Director crowdsourced insights about banks\u2019 pandemic-fueled tech initiatives from 30 fintech companies and distilled their viewpoints into five observations that can help banks sort through the digital demands they face today.<\/p>\n\n\n\n
\u201cNice To Have\u201d Technology Is Now \u201cMust Have\u201d<\/strong><\/p>\n\n\n\n Online account opening, digital banking, financial wellness, and customer service are garnering fresh attention as a result of the COVID-19 crisis.<\/p>\n\n\n\n Before the pandemic, these areas were thought of as \u201cnice to have,\u201d but they weren\u2019t at the top of any bank\u2019s tech expenditure list. COVID changed that.<\/p>\n\n\n\n Account opening and digital banking are essential when branch lobbies are closed, and customers are looking to their banks for advice in ways they never have before in times of widespread uncertainty.<\/p>\n\n\n\n These new demands have created a unique opportunity to push technology initiatives forward. Ben Morales, who had a 24-year tenure in banking before founding personal loan fintech QCash, observed that bank leaders shouldn\u2019t \u201cwaste an emergency. Now is the time to push bank boards to invest.\u201d<\/p>\n\n\n\n Bank boards are already talking about COVID as a potential inflection point for tech adoption, says Jon Rigsby, a former banker who co-founded and now is the CEO of Hawthorn River Lending. He notes that this moment is different from past crises. \u201cIn my 27-year banking career, I\u2019ve never seen bankers change so fast. It was quite phenomenal.\u201d<\/p>\n\n\n\n Customer Service, Financial Wellness Are Taking Center Stage<\/strong><\/p>\n\n\n\n Consumers are increasingly seeking guidance from their banks, inundating call centers. As a result, communication and financial wellness tools are getting their moment in the sun.<\/p>\n\n\n\n Boston-based fintech Micronotes has witnessed exponential growth in demand for their product that helps banks initiate conversations with their customers digitally. Micronotes introduced a new program that\u2019s purpose-built for pandemic in mid-March. The Goodwill Program helps banks proactively communicate with their customers around issues like relief assistance and the Small Business Administration\u2019s Paycheck Protection Program (PPP). Inbound interest in the firm from banks was nearly eight times higher two weeks after the program launched, compared to the two weeks prior to launch, Micronotes reports.<\/p>\n\n\n\n Banks already equipped with digital communication tools are seeing an uptick in usage. Kasisto, a New York-based fintech, reported that several clients have seen a 20% to 30% increase in the use of KAI, a virtual assistant that can converse with customers and lessen the burden on call centers.<\/p>\n\n\n\n Financial wellness initiatives are also seeing liftoff. Happy Money, a personal loan fintech that uses financial and psychometric data to predict a borrower\u2019s willingness to repay a loan, launched a free financial stress relief product for its bank partners\u2019 customers. And SavvyMoney, a fintech that provides credit information to borrowers alongside pre-qualified loan offers, is seeing an influx of inquiries from banks that \u201cunderstand the need to provide their customers with tools so they can better manage their money during uncertain financial times,\u201d says CEO JB Orecchia.<\/p>\n\n\n\n Due Diligence Can Move Faster, When It Has To<\/strong><\/p>\n\n\n\n Several fintechs have noted that banks are speeding up their vendor due diligence processes immensely \u2014 but not by relaxing standards.<\/p>\n\n\n\n Vendor onboarding programs can sometimes stretch to fill an entire year, according to Rishi Khosla, CEO of London-based digital bank OakNorth, but they don\u2019t have to. OakNorth developed its own credit underwriting and monitoring solution and recently spun out a technology company by the same name to provide the tools to banks outside of the U.K.<\/p>\n\n\n\n Khosla has a unique perspective given his dual roles as both a banker and technologist. He says some banks have created \u201cunbelievable processes\u201d that, when cut down, actually only amount to 10 to 20 hours of work. In this environment, he says, a commercial bank partner can get 20 hours of work done within days. They\u2019re in \u201cwar mode,\u201d so they can take a dramatically different approach, but with no less rigor.<\/p>\n\n\n\n \u201cIt\u2019s not like they\u2019re taking shortcuts. They\u2019re going through all the right processes,\u201d he says. \u201cIt\u2019s just they\u2019re doing it in a very efficient, streamlined manner without the bureaucracy.\u201d<\/p>\n\n\n\n Approach Existing Partners First<\/strong><\/p>\n\n\n\n Banks now wanting to adopt new technology may find themselves at the end of a long waitlist as fintechs are inundated with new demand. Fintech providers are prioritizing implementations for existing customers first \u2014 just as most banks prioritize existing borrowers for PPP loans.<\/p>\n\n\n\n To get the technology they need fast, some banks are getting creative in rejiggering the tech they do have to meet immediate needs.<\/p>\n\n\n\n Matt Johnner, a bank board member and the president of construction lending fintech BankLabs, got a call from a bank client a few days after the rollout of PPP loans. The bank wanted to customize the BankLabs construction loan automation tool to process PPP loans. Johnner says the bank \u201ccalled because they know our software is customizable \u2026 and that we go live in 1 hour.\u201d<\/p>\n\n\n\n Because of the exponential rise in digital demand, a bank\u2019s success with technology during the pandemic has been based largely on what they had in place before the outbreak, according to many fintechs.<\/p>\n\n\n\n \u201cSome banks are innovating through this and are thinking near and long term, especially those that have made good investments in digital banking and have a solid foundation to build out from,\u201d explains Derik Sutton, VP of product and experience for small business solution Autobooks. \u201cThe most common response we get [from banks] is \u2018We wish we had done this sooner.\u2019\u201d<\/p>\n\n\n\n Resist the Urge to Slash-and-Burn<\/strong><\/p>\n\n\n\n There are typically three ways that banks respond in a crisis, according to Joe Zeibert, who started his banking career as an intern at Bank of America Corp. in summer 2008. He recently joined pricing and analytics platform Nomis as managing director of global lending solutions after an 11-year career in banking and believes history can be a useful indicator here.<\/p>\n\n\n\n \u201cSimilar to the financial crisis, we see some banks rushing to innovate who will be ahead of the curve when they get out of the downturn. Others are playing wait and see, and then others are slashing tech and innovation budgets to cut costs wherever they can,\u201d says Zeibert. According to him, the more innovative banks came out of the last crisis better off than their peers that cut tech spending. \u201cThey came out of the downturn with a 5-year innovation lead over their competitors \u2014 a gap that is almost impossible to close,\u201d he says. Banks now should resist the urge to slash and burn and, instead, focus on investing in technology that will help them emerge from the crisis stronger.<\/p>\n\n\n\n Most technology companies are reporting an influx of inbound interest from banks, and strong momentum on current projects. Fintechs appear to be rising to the occasion, and one sentiment they all seem to share is that it\u2019s their time to give back; to help banks and, as a result, the nation, weather this crisis together.<\/p>\n\n\n\n <\/p>\n\n\n\n