Small business lending is center of attraction for retail banks as a revenue stream in a competitive market. However what precisely do small businesses require from banks? The digital banking solutions are far above the ground on their listing.
Rising Digital Demand
Small businesses are big into digital in line with Accenture’s 2016 Digital Banking Survey of more than 4,000 customers in the United States and Canada, consisting of 254 small businesses. The branch remains essential to small business lending, however digital alternatives are rising as alternatives. Even as 39% of respondents got small business loan from a branch last year, 16% of respondents used online approach.
Small business owners mostly depend on online channels during the small business loan term. The survey outcomes show that 41% go online for product knowledge and education, 40% go online for rate shopping and 35% fill loan application electronically.
Millennial small business owners are more appropriate to go to digital channels as compared to other groups. Remarkably, small business owners of all ages are more tech-savvy as compared to common survey respondents, the use of digital equipments such as smartphones, tablets and wearables more frequently.
The Role of Alternative Lenders
Small business owners’ digital comfort level has added to market share gains among alternative, online lenders in current years. Lots of these companies entered the market throughout the recession when lending among traditional sources slowed. The online lenders continue to offer an attractive value proposition to small businesses: streamlined experiences, quick approvals and lower costs.
Tapping Untapped Opportunities
For the retail banks to contend with these lenders—or even better, beat them at their very own game—they cannot overlook clients’ digital requirements.
The good thing is that retail banks start with strapping advantages over online lenders. They’ve existing customer relationships, affluent purchaser data insights, and a branch network that carries one-to-one human contacts that customers desire for. Actually, 65% of the respondents say that they’re likely to go to their primary bank for a small business loan in the future.
However the risks are so high for the retail banks. The small business lending doesn’t create as much “relationship stickiness” for clients as different lending products such as home and personal loans do. For instance, only 44% of US small businesses purchased other banking services and products from their primary bank.
Big Decisions for Small Business Loans
More digital banking solutions could turn this around for banks. As they develop digital techniques for small business loans, banks should ask important questions:
Business Development: Do we put in an in-house small business lending platform?
Business Partnership: Will we partner with online lenders to leverage an existing platform?
Specialization: Will we develop targeted loan solutions for unique small business demographic segments?
Value: Will we extend the loan experience to include value-added services that improve education and/or convenience?
The importance to think digital in small business lending is clear for retail banks. With so many approaches to accommodate consumers’ digital banking demands, the right place to start with the right strategy.