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What local banks & credit unions can learn from COVID-19
As a community banking executive, you’ve likely faced the harsh reality that local businesses are increasingly choosing the big banks. With giant spending on web technologies and online services, the big banks offer conveniences that you may not, leaving business owners questioning the value of neighborhood institutions like yours.
But the COVID-19 crisis has been a wake-up call on numerous fronts. For many business owners, this includes the sudden realization that when things get tough, hometown banks and credit unions are often best positioned to help. There is a shared interest in the wellness and stability of the community and local banks have a more immediate understanding of who needs what.
This is a major perspective shift that changes your value proposition to the business sector.
Since the COVID crisis, local banks and credit unions across North America have leaped to help business owners secure urgently needed government loans, assisting to preserve local companies and jobs.
Of course, the big banks are doing their part in the COVID response too, but it’s harder to be nimble to meet the diverse needs of individual communities when you’re a massive global player. The big banks tend to direct their focus to their most profitable customers: giant multinational corporations.
For neighborhood banks, local businesses are often their biggest, most profitable customers. Because of this, they’re keenly in tune these companies and the communities they serve.
Take Middlesex Savings Bank for example, which jumped in to commit $1 million to fund Covid relief efforts in Boston. Or Fargo’s Choice Bank which immediately reorganized its operations to devote almost half of its staff to work on COVID-related loan applications.
According to the Wall Street Journal, Chicago’s Marquette Bank facilitated fast emergency loans for two local medical practices that were not even customers of the bank previously, helping to save 31 jobs. One of those loans was approved by text in just eight minutes.
At Western Union Business Solutions, we’ve heard stories of small banks sourcing and delivering medical masks to hospitals and working with shelters to make sure people are fed – way beyond the obvious support and services you might expect from a bank.
It’s stories like these that cause businesses to reevaluate what they need and want in a banking partner, particularly in a world that is changing so much and so quickly. Business owners may start weighing a broader set of factors when choosing where to bank, including how committed that bank is to local interests and how fast it can move when crisis hits.
As a leader of a local bank or credit union, emphasize your agility. You have the liberty to consider intangibles when making decisions about loans and lines of credit. If you know a business owner’s track record and specific circumstances, you might be more inclined to approve applications that might be immediately turned down by a bigger bank.
Large national and multinational banks usually can’t invest the time and energy to make nuanced lending decisions. A business meets the specified loan criteria or it doesn’t. Lines are drawn firmly and dispassionately, often counting out companies with modest assets.
Also consider that now more than ever, you need to emphasize your international services. Just because you’re a local player, you shouldn’t be limited to domestic services. The pandemic has reinforced how profoundly interconnected our world is – economically, socially and culturally.
If you’re not already offering online international payments, it may now be imperative – and that’s where we come in. Whether it’s a small business client or an individual with global needs, Western Union Business Solutions can help better position your bank or credit union against the fintechs and big banks. Adding our online global network to your product mix can offer foreign exchange and international payment services.
And then there’s the matter of human connection. For many years now, the banking sector has touted the wonders of technology, promoting that customers rarely (if ever) need to go into a branch. This impersonal model can work well if a customer’s needs are predictable and straight-forward, and they don’t want dialogue or advice.
But when life throws a curve ball on a daily or weekly basis, like we’ve all been experiencing in recent months, having a real-life human to call can make a massive difference. With credit unions and community banks, business owners are more likely to have a relationship with an account manager, and in some cases, maybe even the CEO. This means access to advice, information and support that may make the difference between survival and bankruptcy.
As a local banking leader, you have a powerful new story to tell the business sector about the importance of banking locally. Because if there’s one thing that COVID-19 has taught us, it’s that perhaps more than ever, community matters.
By Stephen Kuhl, CFA