Ebenezer Asumang’s thoughts Future of Banking …Banks and SMEs relationship is critical in COVID-19 era

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“A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.” – Mahatma Gandhi

Banks and other financial institutions have over the years become like mothers with many children in the form of small businesses. As expected of mothers or parents, the upkeep or wellbeing of their children is crucial in their everyday decision making.  It is no secret that many SMEs are in turbulent times as the wave of the novel coronavirus continues to sweep across the globe with unprecedented repercussions. These firms could benefit greatly from personalized attention from their financial institutions. The question is whether banks are prepared to offer the level of attention these companies need for relationships to prosper.

 

The reality is that, financial institutions are experiencing challenges of their own as the negative effects of covid-19 impact on their activities as well. Not only should the institutions manage their own earnings and financial challenges, but they should also respond to the financial and non-financial needs of consumers and small businesses. This requires re-imagining the way products and services are delivered and also the types of solutions offered. There is no breathing space in these “abnormal times”.

The behaviours of small businesses have changed significantly since the onset of the pandemic earlier in the year. Many small businesses have had to shut their doors entirely, while others have had to pivot to meet consumer desires to transact digitally somehow. Facing almost immediate financial hardships, small businesses have looked to their financial institution partners for help in forgoing loan payments or securing reasonable moratoriums, while hoping for assistance in taking advantage of government initiatives such as the stimulus packages for businesses. Beyond financial events that have occurred, many small businesses have also needed to take steps to ensure safety of patrons and workers going forward. This is at a time when many businesses are teetering on the potential of complete closure if the impact of COVID-19 can’t be reduced or eliminated in the near future.

Financial institutions must get creative in the way they partner with small businesses or risk losing large numbers of small business customers forever. The lasting impact could be devastating. Despite the significant challenges faced by most small businesses, financial institutions have not been as responsive as small businesses would have expected.

 

Before the pandemic, financial institutions were aggressively trying to build stronger relationships with small businesses that were experiencing extended periods of growth. The competition was fierce, not only between traditional financial institutions, but also with non-traditional players. Once COVID-19 impacted negatively, communication with the same businesses have not been the same. It is more important than ever for banks to engage with the small businesses that need help the most. Even when small businesses are not asking for help, they want to know their financial institution “has their back.” Business advice, planning support and financial relief could not only save a relationship but could save a business.

 

Overall, financial institutions have to put in more to help boost small business` fortunes.

and this can be done in many innovative ways.

 

  1. Reinventing Customer Experience:

 

Banks as a matter of urgency repackage and innovate to improve customer experience for small businesses in these unprecedented times. The economic consequence of the coronavirus has increased the need for banks to improve efficiency and the customer experience. They can do so by enhancing digital self-service as well as by making operational trade-offs. Digital servicing and sales are less expensive than branch and phone-based approaches. The problem for many banks is that too few customers use digital offerings because they find them unfamiliar and intimidating. To address this, banks can, for instance, reframe calls to the contact center to teach customers how to use digital channels in addition to addressing the reason for the call. Understanding what leads to a superior customer experience also enables banks to make thoughtful and efficient trade-offs. For example, if positive experience for a bank’s customers is grounded in trust, they might double-down on clear communications, achievable timelines, and status updates; and so reduce investments in speedy service. To improve experience and efficiency at the same time, many banks will need to reset their customer-experience priorities in general, and their approach to customer-experience measurement in particular.

Some banks do not know which parts of their digital experience work well or not, have little sense of which actions help customers learn how to use digital tools, or do not know where the opportunities for operational trade-offs are. In other words, they lack an interpretation of what matters to their customers and what drives behaviour. Too often banks track interactions rather than journeys and thus are unable to make the connection between a single bad interaction and a customer’s future behaviour. In addition, they rely on surveys few customers fill out, and they therefore take a one-size-fits-all approach to customer feedback rather than responding to specific customers and business objectives. To achieve simultaneous improvements in experience and efficiency, banks can use the following feedback and measurement approaches:

  • Structure customer-experience measurement around journeys, not single-point interactions.
  • Ask questions relevant to specific business objectives, such as digital self-service.
  • Link measurement results directly to the potential impact on efficiency.
  • Introduce predictive analytics to determine how to be successful with the vast majority of customers who do not fill out surveys.
  • Set goals based on how experience and efficiency move together.

 

  1. Strategically redirecting Customers to go Digital and Remote.

In the current crisis, there are immediate actions banks can take to help retail and small business customers; in particular, they can support the use of digital channels so that customers can bank from home, and they can provide extra support to borrowers in distress. Many banks struggle to increase digital adoption among their customers.

In normal times, many customers struggle with the transition to digital but this must change in “abnormal times”. Effective approaches will include easy-to-find and clear communication, segment-specific campaigns, remote coaching and advice, and coherent experiences across each journey (for example, written and video explanations for how to accomplish specific digital tasks, along with ways to try them out, rather than a one-size-fits-all tutorial disconnected from the tools themselves).

 

 

  1. Introducing new experiences for distressed Businesses.

In times of crisis, customers’ priorities change. Banks can play a significant role in easing financial distress, so that customers can spend more energy on their families’ and their own health and well-being.

Preexisting financial vulnerability plus new stresses from COVID-19 will make it harder for banking customers to navigate complexity or make the best financial decisions. For example, research suggests that financial scarcity takes a significant psychological toll and leads to more myopic decision making

The key design principles for serving distressed customers are awareness, simplicity, transparency, clear expectations, and frequent status updates.

Services and experiences that are likely to be increasingly important to consumers in distress include:

  • Pausing loan repayments
  • Enabling businesses restructure existing loans
  • Refinancing other loans to provide near-term liquidity;
  • Resetting budgets to reduce spending
  • Small businesses taking advantage of new government programmes that have been introduced to increase access to capital (many are likely to be intermediated by banks).

 

Good examples of initiatives by banks globally include a leading Singaporean bank which rapidly introduced a comprehensive solution for small and medium-size enterprises (SMEs), including six-month property-loan principal deferments, temporary bridging loans, fee rebates, new digital account-opening services, and next-day and collateral-free business loans. The bank complemented these initiatives with an online “SME Academy” to help business owners navigate the new context.

 In China, one leading corporate bank quickly introduced a new online-only short-term corporate loan with a simple application, fast approval time, flexible payment options, and near-instant fulfillment.

 

 

 

 

About the Writer:

The writer has worked extensively in mainstream Banking & NBFIs. He is a Chartered member of the CGIA Institute, USA, a Google Certified Digital Marketer and an Author.

 

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