3 Areas Small Banks Should Prioritize to Succeed Post-Pandemic

Over the past couple of months, small businesses and individuals alike have turned to smaller financial institutions (FIs) as they experienced major challenges in accessing essential stimulus funds. This article by Kevin Olsen, senior vice president of payments solutions, VSoft Corporation, discusses three ways smaller FIs can not only keep new customers but build a competitive advantage against larger counterparts, including offering faster payments, reduced fees, and modernized mobile banking.

Since the onset of the pandemic, smaller financial institutions (FIs) have experienced an uptick in new customers from small businesses and individuals alike. For small and medium-sized businesses (SMBs), small banks stepped up in terms of quick access to paycheck protection program (PPP) loans — which acted as a lifeline for many during strict lockdowns. 

On the other hand, unbanked and underbanked individuals, which included 55 million Americans at the start of 2020, turned to community FIs to mitigate major challenges in accessing essential stimulus funds. And, this resurgence in community banks and credit unions isn’t remissed. 

The value of smaller financial institutions is clear. However, many still face the age-old issue of operating on legacy banking systems such as COBOL and have struggled with digital efficiencies since the outbreak of COVID-19. To continue supporting their enlarging customer base and build on their recent competitive advantage against larger counterparts, these FIs must prioritize digital transformation now and ensure modern offerings in the below three areas specifically. 

Learn More: Can Advanced Behavioral Analytics Put an End to Financial Frauds?

Faster Payments 

While innovation is slowly happening in the payments industry, full implementation of faster payments has not yet occurred across the industry. According to VSoft’s research, 62% of small businesses agreed that payment processing times are a big priority. Additionally, 94% of small businesses say they are more likely to switch to a smaller bank if offered faster payment/check processing times. It is a typical assumption that the ability to offer faster payments falls on businesses when in reality, it falls on financial institutions. 

As the banking industry continues to turn toward faster payment options for customers, organization-wide digital transformation is critical for the most streamlined/low-cost outcome possible. While it may seem trivial, it’s critical that tech professionals within financial institutions understand how real-time payments differ from traditional methods and what should be included in their tech stack to best equip customers for success.  

Learn More: How Does Interconnected Banking Maintain Compliance and Accelerate Digital Transformation?

Reduced Fees 

As time goes on, customers are becoming less and less tolerant of additional and unnecessary fees. This rang especially true as the pandemic hit and affected many small businesses and consumers financially. By adopting digital banking technologies, smaller banks can give their customers a more comprehensive set of financial service solutions that they can utilize at a lower cost. 

While fees are an important revenue source for financial institutions, they’re not the only revenue source. For example, lost card fees, inactivity fees, and miscellaneous checking account fees can be reduced or even eliminated as a result of automated reminders for customers and decreased workload on bank tellers that digital banking offers. 

Learn More: Top Five Ways To Ace Your Next Remote Investor Pitch

Cashless Payments

Even before the pandemic, cashless payment options were on the rise. Now, with the uncleanliness of cash and cards, they’re more than just nice-to-have, they’re a must-have. Most small business owners feel that contactless payments are a large priority. Additionally, when it comes to banking services, most small businesses are more likely to switch banks if offered products that help avoid handling cash.

While cashless payments are a popular demand, they are not being adopted due to the cost factor of the cards, but not all cashless platforms require this additional cost of the card. Smartphones offer various platforms that most consumers already have and don’t cost FI’s additional money.  

Ultimately, the pandemic has highlighted areas where it’s imperative for financial institutions to be digitally proficient. Businesses and individuals lean on their FIs for support and advice, even more so during times of crisis. While small banks and credit unions offer a strong sense of support to their customers through customer experience, it is important to improve upon all areas to support customers even better. 

As society continues to move toward a post-pandemic economy, the finance industry must work together to simultaneously provide modern solutions and enable financial inclusion in a contactless world.  

What do you think about the shift to smaller financial institutions? Let us know your thoughts in the comments below or on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We would love to hear from you!