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Rethinking the Digitization of Commercial Banking

Digitization of Banking

We sat down with Ben Smith, a Client Partner for Banking at Unqork, to unpack why digitization is so challenging for commercial banks.

The novel coronavirus pandemic has forced companies in nearly every industry to adopt contactless and paperless operations to accommodate customers, but some organizations have had an easier time making the transition than others. Startups and enterprise tech companies have gone digital with ease, and some small businesses have managed to follow closely behind. Brick-and-mortar commercial banks, on the other hand, continue their years-long struggle to make digitization work. Why?

According to Ben Smith, a Client Partner for Banking at Unqork, it isn’t because commercial banks are perpetually behind the curve—it’s a little more nuanced than that. Here’s his take:

Why do you think commercial banks struggle with digitization?

Ben Smith: The first issue is that, historically, commercial banking has been a people-led business. It’s easy for industry leaders to convince themselves that hiring several relationship managers (RMs) is a shorter path to revenue than investing in a digital solution. However, while RMs do create revenue, it is a tougher path to operating leverage. I think leaders in the commercial banking space have been late to embrace digital because it’s easier for them to see how people will resolve their pain points—from a risk perspective as well as from a payoff perspective—than it is to see how digital will.

The second issue has to do with the way commercial banks are set up. In the past, RMs have always been aligned with customers and fought banks on customers’ behalf. This makes it harder to go digital because the value of having someone who knows the credit person or knows the treasury management pricing person is very important. That said, the beauty of digital adoption is that we’re delivering the products and services you need through the use of technology and analysts in a way that ensures everybody wins—you don’t need to know somebody who knows somebody. This approach runs counter to how commercial banks have operated for a long time.

"The idea that banks are just slow and behind the curve isn’t quite true. It’s not that banks don’t believe that technology is important—they most definitely do. Actually, banking was one of the first industries to embrace massive technological transformation 40 years ago. The problem is that all the things that made banks essential in the past—bank balance sheets, interpersonal relationships, access rights to payment rails, etc.—are now gone or can be done through your screen." 

Many people believe that banks are slow to digitize their paper-based processes simply because they’re behind the curve. Do you think that’s true?

The idea that banks are just slow and behind the curve isn’t quite true. It’s not that banks don’t believe that technology is important—they most definitely do. Actually, banking was one of the first industries to embrace massive technological transformation 40 years ago. The problem is that all the things that made banks essential in the past—bank balance sheets, interpersonal relationships, access rights to payment rails, etc.—are now gone or can be done through your screen. Banks must change the way they operate to keep up, but the benefits of moving forward with digitization haven’t been entirely self-apparent until very recently.

Do commercial banks have different needs when it comes to digitization than, say, credit unions or private banks do?

I think much of the value statement of each commercial bank is incredibly similar, but the underlying processes and workflows, and most importantly, customer experiences of these different banks are completely different. When it comes to digitization, commercial banks, in particular, are dealing with major secular and cyclical trends.

The narrower secular trend is simply that banks need to play catch-up and move away from manual processes on three distinct fronts: cost, control & efficiency, and customer experience. The broader cyclical trend is that in a low- to zero-growth environment where interest rates are flat and will continue to be flat for the foreseeable future, the real way for commercial banks to grow is through client acquisition. For banks, I believe that existing client growth will take a backseat to acquisition and that overall loan and fee growth will be the focus of investors. This will require a much more modern approach to client onboarding as well as evolution of the client service model. 

What processes would you recommend banks digitize first?

Client acquisition and onboarding, definitely. A lot of banks believe that the only path to client acquisition is through a high-touch model in which many people are hired to push paper through the onboarding process. Clients still want someone on the other end of the line when there’s a problem, but they expect self-service functionality for the majority of their banking needs through on-line / mobile portals. I think the same can be said for treasurers and CFOs.

Ben Smith was one of the thought leaders featured in a recent webinar exploring Unqork's partnership with Experian and how it is transforming SMB lending.

What makes no-code the best choice for banks looking to embrace digital transformation?

The days of a multi-year development cycle are long gone. COVID-19 has accelerated a trend that was already in place around digital, and banks are going to have to figure out a completely different way to develop their applications in order to demonstrate value and complete digital transformation initiatives as quickly as possible.

An enterprise-grade no-code solution opens up the universe of development to a much wider technical audience and speeds up time-to-market. In commercial banking, what drives value is your ability to create better customer experiences using a faster methodology more than your ability to develop something entirely new on your own. With no-code, you can take the time you would’ve spent developing and focus on areas that will set you apart.

Want to learn more about how no-code can be used to accelerate digital transformation? Schedule a personalized demonstration with one of our in-house experts. Also, sign up for the Unqork newsletter to keep up-to-date on the latest in the world of no-code.