Attracting and acquiring business customers who want to borrow is critical, and improving the small-business customers’ loan-application experience has become a key focus, according to a report from Aite Group that analyzes commercial-loan-technology challenges at U.S. community banks.

Community banks rely on the small-business loan customer to anchor the bank’s business-banking platform. Traditionally, these customers have rewarded the institution that grants them loans by adding other revenue-generating products, but demand for loans started to plummet in 2008.

To improve financial performance, many community banks reviewed the commercial-loan-application process for additional efficiency gains, and found that most functionality improvements to date have concentrated on the loan servicing/collection process. Going forward, opportunities for community banks lie less in process improvement and more in growing small-business loan portfolios.

When asked “What is the likelihood that your bank will invest in each of the following technologies over the next two years?” responses of “likely” to “extremely likely” were as follows:

•    New branch technologies (i.e. forms signatures via iPad)—39%.

•    Loan-origination systems for commercial/small business loans—27%.

•    Cloud computing—26%.

•    Loan servicing/collections systems—14%.

“Lending to small businesses provides considerable payback in terms of customer loyalty and increased revenue from all manner of fee-based services,” says Christine Pratt, senior analyst with Aite Group and co-author of this report. “Failing to provide services to small businesses will result in painful losses for community banks. There are three areas in which small businesses expect community banks to step up their game: loan products, loan-application processes, and loan servicing. Many community banks have recognized the technological challenges and opportunities in these areas, and are committed to investing for successful growth.”

The report is based primarily on a May to July 2011 Aite Group survey of 100 U.S. community banks that have less than $5 billion in assets.


http://www.aitegroup.com/Reports/ReportDetail.aspx?recordItemID=872