By Matt JohnnerMuch to the surprise of many banks, Google recently announced its entrance into the banking space with checking accounts for consumers that help them budget, save and more. Though many details of what these accounts will be like are not exactly clear, the message behind the announcement is. Google’s move reflects a shift that other well-known brands and outside players have been making into the financial space.
Household names like Walmart, T-Mobile, Facebook and even Apple have all recently announced or even launched their plans to move into an area of financial services. And the onslaught of outside players entering the industry highlights a few things that have been true for a while:
- Experience is everything
- People want a name they can trust
- Retail banking customers are always the first to get what they want
Looking at this through the lens of commercial banking, you’ll see a lot of opportunity opening up. That’s because these non-bank competitors have ultimately left a gap when it comes to businesses—a gap that traditional banks are able to fill. By looking at these alternative banking announcements, banks can learn a few things that will help them take their commercial banking to the next level in order to better reach the segment of customers left behind by Google and others.
Experience is everything
First, these announcements are a reminder that experience is key. Google’s announcement in particular reinforces the notion that those who offer the best experiences will win. On the one hand, that is what can make these announcements so troubling for banks. As one of the most successful and influential brands when it comes to experience, Google’s announcement has some banks worried that its offering might snag retail customers.
On the other hand, commercial customers often do not have the same access to online and mobile solutions that retail customers do. Where retail customers can easily shop around for the best banking experience, businesses have relatively fewer options and sometimes they might not have any options at all.
Many everyday business banking functions, like lending and payments, are still paper-based. While retail customers are swiping their Apple cards or letting Google track their budgets, most businesses are still writing checks and using spreadsheets. Using paper rather than digital processes is neither safe nor is it convenient, especially for businesses.
The people who run these businesses have access to a multitude of digital tools and exceptional user experiences for their own personal banking. But when they go to work, go back to pushing paper to deal with finances. This disconnect creates the perfect opportunity for banks to step in and give their commercial customers digital tools that help close that gap and make experiences more consistent across all types of customers.
Trust is necessary in banking
Outside players entering the banking space pose a threat not only because of the superior experiences they offer, but also because of the well-established brand recognition they already have. Consumers already know names like Google, Apple and Facebook and might trust them more than a bank they have never heard of.
Once again, this highlights opportunity for banks to step in. When it comes to commercial banking, a wise business is unlikely to give its money to an outside player in the infancy of its banking days. And because of the large amounts of money businesses deal with, they are not likely to make large payments through something like Venmo or Apple Pay. Furthermore, they cannot take out multi-million dollar loans with just anyone.
To mitigate risk and protect themselves, businesses are more likely to stick with banks. Traditional financial institutions are the more trustworthy option for business banking. When they are able to pair that trust with a great digital experience for commercial customers, banks will have the edge over non-bank competitors.
Commercial customers need more options
With all this in mind, the solution seems simple: provide better experiences for commercial banking customers. But what does this look like? For some banks, their commercial banking approach might need some updates and for others, it might require an entire overhaul.
Banks need to provide online and mobile access to their business accounts, loan info, payments tools and anything else they need to support their businesses day-to-day. On top of that, their mobile experiences cannot be clunky or outdated—they must rival those available to consumers.
Retail banking customers are typically on the forefront of every bank’s priorities, which also keeps them on the forefront of innovation. The downside: commercial banking customers may be left behind with relatively less access to innovative digital tools. Consumers can be quick to switch banks if they feel like they can get a better offering elsewhere—which leaves banks ready to jump at any chance to grab consumers.
It is far more difficult for a business to switch banks, but that does not mean banks should not be prioritizing these relationships. Businesses often comprise a bank’s most profitable relationships. Strengthening those relationships through digital tools not only helps with retention, but can also create new opportunities for fee income or new deposits.
To create digital features that compete with those of Google and others, banks might need help. Finding the right partner to help create these experiences is crucial and can be the very thing that makes the difference between a superior experience and one that misses the mark.
Whichever way banks decide to create these experiences, the key is to give commercial customers what they need—but in the way they want it. Digital experiences are not enough if they do not rival those enjoyed by retail consumers. At the end of the day, businesses are run by people who have the same expectations for their business banking as they do for their own personal banking.
While outside players entering the banking space might be daunting, banks have more opportunities than threats. They key is to examine these new banking offerings, find what is missing and fill the gap.
Matt Johnner is president and co-founder of BankLabs. The mission of BankLabs is to reimagine banking products for the future through community-oriented technologies that create new fee income, attract deposits, expand loan opportunities and differentiate the financial institution from competitors. BankLabs believes that community banking is a way of doing business, not a size, location or traditional definition.