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The value of community banks and credit unions during COVID-19: access to international support

Since cases first began to spread around the United States several months ago, the COVID-19 pandemic has had unprecedented consequences across nearly every industry, including financial services and the areas they serve. Community banks and credit unions are playing a central role as a critical source of support for both personal and business banking customers during this challenging time. Afterall, these financial institutions are often a key provider for small businesses, who are among some of the hardest hit by this crisis. Of the nation’s approximately 30 million small businesses, nearly 7.5 million small businesses may be at risk of closing permanently over the coming five months, and 3.5 million are at risk of closure in the next two months.

Small banks and credit unions need to stand out, particularly now, as customers are seeking a great deal of support from their partners.
Small banks and credit unions need to stand out, particularly now, as customers are seeking a great deal of support from their partners.

The big impact of small banks during the financial crisis

In some ways, the current situation is reminiscent of the 2008 financial crisis, where struggling companies often looked to smaller banks for support. During this time, larger financial institutions shuttered branches and limited funding to many of their operations and community banks and credit unions became a refuge. This time, they were quick to offer the Small Business Administration’s Paycheck Protection Program loans to owners, even to those without a history of service with their bank. This people-first approach is one of the reasons these financial institutions have such high customer satisfaction rates and why, once again, they will likely play a key role in helping businesses survive this downturn.

Changes since the 2008 recession: the international factor

One change between the last recession and the current period of uncertainty is the international factor. Global trade has grown substantially in the past decade and small businesses are a notable part of that increase. Nearly all US exports – 98% – are managed by small companies and organizations across the country work daily with overseas vendors, suppliers, staff and more. This statistic is a surprise to many, though it should not be. Such practices can allow for cost-savings, newer markets and opportunities for growth. It also means that while community banks and credit unions work to support customers during this tough time, they cannot forget that international component.

How community banks and credit unions are responding to the pandemic

Local banking institutions were quick to respond to the growing crisis, taking steps to help protect both their employees and customers. Though actions vary by institution, many closed branches or introduced a new system of cleaning. Others were able to offer payment deferments, discounts and other forms of financial support. Interestingly, a large number also directed their users to their online and mobile banking systems. Though such behavior was also adopted by the big banks, it is significant because smaller providers are often hesitant to push customers towards a technology solution, as much of their business model focuses on person-to-person interactions. Yet, as COVID-19 made this near-impossible in many cases, organizations were forced to rely on alternative methods to continue to serve their customers.

A new opportunity

Moving towards a digital solution doesn’t have to be temporary for community banks and credit unions. Though personalized service is a big part of their value proposition, the two functions aren’t necessarily opposing. An online offering does not have to be unwelcoming and in fact can help enhance their institution. Allowing customers to complete transactions from their home gives a level of convenience that many bigger banks have long presented and if other financial institutions do not follow suit and embrace digitization, they could risk losing their customers to someone who will.

Small banks and credit unions need to stand out, particularly now, as customers are seeking a great deal of support from their partners. A potential solution is to combine the need for both online banking and international transactions. Several institutions offer global payments and other foreign exchange services, but they sometimes make these transactions dependent on an in-person or over the phone conversation. Because these payments can be critical to small businesses, it is important to consider moving them online. Though the task may seem daunting and time-consuming (not to mention costly), it is possible to partner with an established payments provider to begin the process quickly.

The international payments space is growing and as the US economy works to recover from the COVID-19 pandemic, international trade is expected to play a significant role. In 2018, estimated C2B and B2C cross border revenues were $37 million and $18 million, respectively.

Key takeaways and next steps for banks and credit unions

As COVID-19 continues to cause closures and challenges for businesses of all sizes, community banks and credit unions are serving a vital function: supporting the smaller businesses in their own communities. These organizations are being hit particularly hard by this crisis and, much like in the 2008 recession, banks are in a unique position to help companies manage and survive. Many are offering different options for their users to provide service during quarantine, including directing customers to online resources. While such actions are not always typical of small banks, it is significant as digital transactions are increasingly important for customers. International transactions are also growing as small businesses are more involved with global partners now than during the financial crisis over a decade ago.

As such, community banks and credit unions have the opportunity to assist their customers on both fronts. Offering international payments and foreign exchange services digitally can help businesses maintain their operations during quarantine and help build their future success. This shift does not have to be costly or complicated but could be extremely valuable for both customers and organizations.


About Western Union Business Solutions

Western Union Business Solutions enables companies of all sizes to send and receive cross-border payments and manage foreign exchange. With deep expertise in moving funds around the globe, access to over 130 currencies, and a global financial network spanning more than 200 countries and territories, we help companies spend less time managing international financial transactions and more time growing their businesses.
 
We have extensive experience working with clients in a variety of sectors, including import and export, wine and spirits, agriculture, mining, and non-profit. We also offer customized solutions for legal, financial and educational institutions.
 
Western Union Business Solutions is one of the world’s leading providers of cross-border business payments. Western Union Business Solutions operates through locally licensed affiliates in more than 30 countries.
 

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