JP Morgan CEO Jamie Dimon says the banking goliath should “absolutely be scared s—less,” about the rise of fintech and digital payment processors.
Growth in the fintech sector is accelerating. New, faster and easier options for processing payments online are swallowing up spaces historically occupied by traditional banks. But Dimon warns that the threat posed by these new payment processors extends beyond the global, big-bank market—they can jeopardize community lenders as well. If JPMC is scared about the growth of Fintech, your community bank certainly should be, especially when it comes to business lending.
Fintechs are changing the rules of the game and forcing financial institutions with more traditional small business lending practices to evolve. Here are a few ways in which fintech is affecting the business lending landscape for community banks.
More efficient lending practices
Small business owners rely on loans to get their businesses off the ground, stay afloat, and scale. Community banks and credit unions are a long-established source of those loans. However, as the marketplace prioritizes speed and efficiency over low interest rates, traditional financial institutions are falling victim to new fintech lenders that offer quick and easy lending processes.
Despite digital gains, approving and transferring funds at some financial institutions still remains painfully slow. For many smaller banks and credit unions, the process can take anywhere from a few days to multiple weeks. In today’s competitive marketplace, where fintechs and payment processors are promoting their ability to make instant decisions, waiting a few days for funds to transfer can be a relationship deal-breaker.
Better customer experiences
Improving the customer’s digital experience is currently the number one priority for banks around the world. Customers expect the same speed and simplicity from their financial service providers that they get in non-financial sectors. It’s up to community banks and credit unions to deliver satisfying customer experiences in every channel, whether that’s in-person or online.
This is easier said than done. Loans require more oversight than purchasing an item online. Again, customers are now accustomed to expecting quick and accurate service in all of their online transactions. As fintech spreads its reach into all areas of business, community banks must implement strategies to keep customers happy from point-of-application to funds disbursement to repayment monitoring.
How can community banks and credit unions level the playing field?
Fintechs need not pose the doomsday scenario that Dimon speaks of. When viewed with the right perspective, fintech can be a major source of inspiration—spurring innovation as a means to drive greater efficiency, business growth, security, and customer satisfaction.
With their deep community ties and local knowledge, community banks and credit unions are in a unique position to meet their business customers’ demands. New technological solutions help level the playing field.