Benjamin Franklin, once said, “When you are finished changing, you are finished.” This is great advice for any of the us regardless of our line of business or the markets we served. However, in lending that rings particularly true.
Now I know a lot of folks that say that the threat of the “alternative lenders” is passed for traditional banks or credit unions, with all the challenges that some of those institutions are having. Maybe it is the risk management side of me, but I never feel out of the woods and just because one threat is gone, it does not mean that another change (which can disrupt the business negatively or positively) is not right around the corner.
At Baker Hill’s 2017 Prosper, I hosted a panel with some great bankers. I was joined with Drew Wilkens who is an Executive VP from Bank of the Pacific, Gary Shaffer who heads up all the retail lending practices at Pinnacle Financial Partners and by Keith Cleary the Director of Business Banking at ESL Federal Credit Union. Let me share with you some of their advice as we hit on some of the top questions.
How are you targeting millennials in your lending strategies?
Partnerships was a key to everyone’s strategies to address the millennial challenge that many lenders are facing. These partnerships can come in the form of a technology provider that allows you to have access to that segment as they are on their mobile devices, or it can come in many other ways. One suggestion was to make sure you simply have millennials as partners in your strategy at the bank, by hiring and promoting them so that their voice is heard and then amplified outside of the institution to the rest of the market. However, one thing everyone agreed on is that it is not a market that can be ignored, even in an institution that was founded more so as a business and commercial lending bank.
How is FinTech / Alternative lending changing your market, your lending processes, or your customers’ borrowing expectations?
One in three bank customers are willing to switch banks for a more “fintech” like experience – so how do you address that issue? Balancing trust and technology is the trick to address the fintech challenge. The trust that mid-tier banks have in the marketplace because of their community involvement is huge. Keith pointed out a joint effort that ESL is doing with a long time favorite organization of mine, Kiva and how they are making micro loans in their market and what a positive impact that has not only to the bottom line, but the social bottom line. Bringing Kiva’s technology and ESL’s trust makes for a great balanced opportunity (shameless plug: if you have $25 dollars laying around you can join me and become a lender through Kiva and change the life of someone in the world - very cool!). In addition, everyone called out that transparency must be a new requirement in every initiative – that way old habits that are great are built upon and those that need to go away are called out.
In a recent survey, nearly 70% of bank executives felt that they did not adapt their processes fast enough to keep up with lending trends. So how did our panel feel about this and how do they address this challenge?
First, they employ an Agile methodology to their lending processes and keep the goals in sight. Banks and credit unions need to be willing to be open to risk and be nimble. When it comes to automation, banks just need to be willing to take a “nibble” and start small. In addition, when it comes to understanding the process there was great advice to remember that customers do not want the money - they want the car, or new business opportunity that comes from having the money. If we can keep that in mind, that can help us know how to operate differently.
Great advice from three organizations that are leading with success in their markets.
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