We can all agree 2020 was nothing like what we expected. Case in point: TIME magazine proclaimed 2020 to be “the worst year ever.” And rightfully so. The COVID-19 pandemic threw everyone for a loop, and there were more twists and turns than most of us would have liked. The implementation of CDC guidelines for social distancing and indoor capacity limits placed a spotlight on the cumbersome and manual processes imposed by outdated technology. In order to adapt and survive, many businesses had no choice but to adhere to modern practices.
Out with the Old, in with the New
The pandemic exposed flaws in industries that did not invest in digital. This was particularly evident within the financial services industry. Banks, credit unions, and independent mortgage lenders who took steps to invest into their digital lending and digital banking fared better during the pandemic. Conversely, lenders without proper loan origination systems or account opening systems were left vulnerable to losing customers due to their lack of digital lending and online banking options.
Thanks to 2020, financial institutions have been forced to change their outdated systems. In their place, they are creating systems with automated tasks lists, reducing the need for face-to-face interactions and complicated processes. Today, modern account opening systems will allow for better integration with loan origination systems, as well as automated tasks resulting in significant process improvements and an improved consumer experience.
Digital is Standardized
Additionally, COVID-19 has opened the eyes of many lenders to the value and urgency of digital lending capabilities. Financial institutions who were hesitant or did not see the importance of digital lending and digital banking left their customers at a significant disadvantage this year. Furthermore, lenders who had partial online loan applications also failed their customer base with their lack of digital lending offerings. Institutions that wanted to grow and expand their organizations worked on investing in true digital lending technology this year. Many focused on increasing technology that could integrate with the loan origination system and the account origination system. MeridianLink was able to convince many financial institutions to adopt a broader end-to-end digital process this year, helping thousands of consumers in the process.
Contrary to popular belief, originating accounts and loan origination digitally is not risky, or expensive. However, until COVID-19, most mid-market banks hadn’t attempted the transition to digital banking channels. When MeridianLink did a market analysis in early 2020, pre-pandemic, we discovered that less than half of US banks under $25b assets had any ability to digitally onboard a new personal deposit account and only a startling 5% could open a new business deposit account online. On the lending side, only 28% have the capability to do an online/mobile personal loan and a miniscule 3% can make a business loan online.
In spite of all the commitments and good intentions, the numbers listed above have barely budged post-pandemic, which is an unfortunate trend for the future of mid-market banks. As they slowly make their way through analysis paralysis, the biggest banks, credit unions, and fintech’s are going all-in on new technology to take share away from smaller institutions. And they’re winning.
SBA PPP to the Rescue!
Small businesses suffered a great deal due to mandated closures and shelter-in-place orders nationwide. In July 2020, the US government enacted the Paycheck Protection Program (PPP) and offered small businesses loans to keep their workforce employed. To help business owners apply for this loan, the government worked with banks and credit unions nationwide for the application and distribution process. CreditUnions.com, powered by Callahan and Associates data, reported that more than 1.1 million jobs were saved through the Paycheck Protection Program.
To help banks and credit unions that have insufficient digital lending capabilities, MeridianLink created a SaaS cloud-based Fast Track software for Small Business Administration Paycheck Protection Program (SBA PPP) digital lending that can be deployed within 48 hours. This tool enables banks, credit unions, and lending institutions to accept SBA PPP loan applications online using 3 simple steps. This technology enables financial institutions to accept digital loan applications from small businesses seeking SBA PPP relief.
The Great Digital Lending and Account Opening Transformation
Jim Marous, owner and publisher of the Digital Banking Report, shared his knowledge and profound learnings on all matters related to digital banking. Recently, he and his team produced the 2020 Digital Lending and Account Opening Review, within which he proclaimed that “the key to successful digital banking transformation will be the ability to support transactions and engagement seamlessly, across platforms, with the fewest number of steps. Ease of use is the new digital differentiator.” Marous’ statement ought to resonate profoundly with financial institutions everywhere. An over-arching problem many financial institutions are facing today is outdated manual processes, which will no longer support modern digital lending. It’s important to realize digital lending and account opening transformation needs to happen as soon as possible to remain competitive. Legacy banking organizations must replicate what non-traditional fintech lenders have been able to do for years. This may require internal innovation, partnering with fintech firms, even purchasing the proper capabilities.
If you enjoyed reading our 2020 summary, be on the lookout for our 2021 forecast—where we ask industry experts for their take on what’s in store for collections, consumer, mortgage, and more!