A client and I were talking about the struggles she was having with her bank. She struggled to get her PPP, and now, she was frustrated because she could never get her banker on the phone. This has become an unfortunate reality in 2020 when it comes to banking.
My client wanted to know what her options were. Great question. What were her options now in our "new normal?" Although I've been working in small business banking for years, I had to really think about what has changed and what hasn't. Before I could give her a full answer, I did some digging. In the process, I found some important points that I wanted to share with you.
Obviously, one of the first things to consider when it comes to banking in 2020 is the ways that Coronavirus has changed everything. Thankfully, banks are in a position to help when it comes to some of the more confusing moments of COVID. Amy Wright at BBVA put it well with the article "That Rainy Day Is Here. Now What?" We break down some of the main points below.
This is one of the first questions you might be asking yourself. Back in March and April, the PPP was the first thing offered. But now... well, what? Thankfully, some banks can help with the tough decisions you aren't sure about making in 2020.
The SBA was still offering aide when this was written, which you may be able to benefit from. Overall, the CARES Act was all about helping small businesses get through the hardest parts of the Coronavirus. But as that money starts to run out, you might ask yourself -- "What next?"
Banks can provide private lines of credit and the kinds of loans that you might not be able to get from the SBA. Similarly, bankers can offer easier routes to access some of the forms of fundraising I mentioned above. It's a shortcut to success, in a lot of ways.
According to a report by Ellen Shang from CNBC titled "Coronavirus crisis mobile banking surge is a shift that's likely to stick," there was a 200% jump in new mobile banking customers from March to April of 2020. This number shocked me for two reasons. First, it's rare to see such a major jump in people accessing technology of any kind, but second because I hadn't thought about how many people still bank exclusively in person. I've had access to mobile banking for a while, but I know that I have been using it a lot more since March. So what exactly will this mean?
When the banks all closed due to stay-at-home orders, it was a shock to financial systems. People needed to access their money, so many of them moved online to do that. Considering the direct deposit aspect of the stimulus check, even more people went to banks' apps and websites to make sure that the money hit their accounts. Some of that makes sense, but there was another statistic worth knowing: only 40% of people believe they will return to brick-and-mortar banks.
Banking needed to move to the digital age. That it took a significant upheaval of the status quo to get there isn't that much of a shock. The implications, however, mean something. Businesses work with bankers to handle their accounts and to make sure that nothing goes astray. They also need to keep their money on hand and in mind.
Running a business entirely in the digital landscape might not be easy to do. However, many of the day-to-day operations that you need to perform might be easier done online. Some, you simply can't. The key challenge that has yet to be solved digitally is what to do with a cash drawer? This was a major problem for essential businesses during (and since) COVID. My local bagel store couldn't get coins or smaller denominations bills for change, so he had a hard time serving his customers. Credit cards aren't the solution, as they charge a transaction fee of $0.20 or so, which is 20% off my $1.00 bagel. No small business can take that type of hit.
A great article from McKinsey & Company looks at the overall implications of COVID on banking. They start by comparing how banks are being treated in the last recession to now:
"The last time there was a global crisis, banks were widely perceived to be a big part of the problem. This time around, banks are central to the solution."
What does this mean? How will people look at banking for the rest of 2020 and beyond? McKinsey's article addresses our above points about online banking and COVID loans, but they make one excellent point worth discussing.
Namely, it will be more helpful to small businesses and banking customers to if banks treat the customers better. In times of crisis, it is essential to look to places that people are offering care. If your bank isn't helping you, it isn't doing its job. Bankers, right now, can help small businesses with their biggest issues. Bankers have skills that business owners and staff might not possess, which is critical. But beyond that, they can provide efficient and helpful solutions when other people might not know where to look.
Bank speak is one thing digital communication can't fix. In fact, it makes it worse. As banking becomes more digital, the successful banker will learn to adapt his or her style, but it won't be easy or quick. My client struggled with all the jargon. I told her, I'm glad we're friends, so I can explain it to you. I told her going to another bank isn't likely to fix it any time soon.
These are the main things that I learned in looking at what we need from banking in 2020:
The truth is, I said to my client, there really isn't much difference between the bank service. However, there is a big difference between bankers. She looked at me a bit puzzled, and I said, "Some are fluent in plain English. Some can speak only in Bank-speak". She smiled. I told her the key is the find the right banker, not the right bank.
Brian Cairns, CEO of Prostrategix Consulting. Over 25 years of business experience as a corporate executive, entrepreneur, and small business owner. For more information, please visit my LinkedIn profile
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