According to a research report done by Accenture Credit Services, “digital banking could help put roughly 35% of the mortgage share of traditional banks in North America up for grabs by 2020.” While much of the electronic mortgage business has historically been in the residential arena, internet sourced small business loans are increasing, and lenders need to adapt.
Digitization, automation and the disruptive impact of technology was the recent topic at a McKinsey & Company hosted panel at this year’s meeting of the World Economic Forum, in Davos, Switzerland. Business leaders, policy makers and economists all confirmed that “technology is affecting every single sector of the economy”. Every industry, “including financial services, now takes inputs and uses technology to drive much of what is does”, stated James Manyika, a panelist.
On a more micro economic level, one only needs to speak to their lending colleagues to confirm that business borrowers are becoming more comfortable with online banking, inventory control and other technology based applications. As competition for business borrowers increases, banks looking for new ways to grow their origination business and capture market share in 2014 will need to refine their digital capabilities.
What does this mean to the average community bank looking to market its loan products to small business borrowers? Lenders need to invest time and money as the industry moves from a document intensive world to a paperless technology-focused one. Those tech-savvy lenders willing to leverage the internet to source and originate new business will gain a competitive edge over those who chose not to pursue such a course of action. What will lenders gain from using today’s technology to help source deals? Benefits will include: (i) lower cost of customer acquisition, (ii) increase loan quality, and (iii) better data security and privacy compliance.