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Why community banks need CRM to make more loan offers, now

Senior Business Analyst and Financial and Banking IT Consultant, ScienceSoft


Community banks have always heavily relied on lending activities, but with more fintechs and bigger players on the market, their loan portfolios are at risk. Still, community banks can protect themselves by using the right technology, and here’s how.

Traditional lending under threat

Banks do not sufficiently diversify risks, pinning their hopes primarily on interest-based revenue from loans to generate income. As stated in the National Survey of Community Banks, small business lending and mortgages for county citizens have long been the most prominent lending activities of community banks. But other businesses seem to have set their eyes on this long-established community banks’ privilege.

CRM for community banks to make more loan offers

Lending competition at full blast

1. Online lenders

Since the first online loan provider entered in 1985, digital lenders have been transforming customer expectations by offering easy access to loans. For example, Quicken Loans, specializing in mortgages and refinancing services, uses a smart slogan “Push button − get mortgage” to demonstrate just how simple it is. The New York Times even called this service “the new mortgage machine,” while J.D. Power in their “Primary Mortgage Origination Satisfaction” study, ranked Quicken Loans highest for the seventh consecutive year.

Square is another successful online lender with the primary focus on small business loans. As of September 2016, the company provided more than $1 billion in loans to businesses through its Square Capital program.

2. Banking and finance mammoths

While fintechs have essentially captured the alternative lending space, bigger banks and financial companies also enter the competition.

For example, Wells Fargo has recently announced the launch of FastFlex designed specifically for small businesses. FastFlex is an online loan tool with a real-time approval process. Loan amounts ranging from $10,000 to $35,000 can be obtained as soon as the next business day. With a competitive interest rate, this new online solution can meet the short-time credit needs of small businesses and become their preferable source of money supply. 

American Express also plans to debut with an online loan platform for small-business clients. AmEx’s Working Capital Terms solution will approve loans in just minutes for existing cardholders and later deposit funds directly into vendors’ accounts. This loan option may become attractive for small businesses due to its low interest rates (only 1.5% for a 90-day loan) and the ability to pay vendors that don’t accept any credit cards.

What is there for community banks?

With the appearance of numerous loan alternatives, the lending landscape is dramatically changing for community banks. One way or another, bigger banks and online loan providers are looking for a way to cut a piece from community banks’ lending pie.

Their primary goal is to offer better options for customers. Most companies try to leverage current technological innovations and in the result provide borrowers with user-friendly platforms, shorter approval times and in some cases lower interest rates. By carefully gathering information about borrowers, online lending businesses create an in-depth view on customer profiles and make their offers more targeted.

Community banks can get endangered if they just ignore all these insights and go on using snail mail to communicate with existing customers or send offers to prospects. With the current pace of information flows, such attitude is indiscrete. Since loans are going to stay the lifeblood of most community banks, they should either opt for new niche offers (for example, construction loans) or accelerate their loan portfolio growth with the help of the right technological tools, which customer relationship management (CRM) systems are.

How to deliver compelling loan offers with CRM

Banking CRM is traditionally used to manage customer relationships by accumulating all customer-related data in a single database. This database can help them perform various daily activities such as communicating with clients in a timely fashion, developing targeted marketing campaigns as well as visualizing multiple workflows. When properly tuned, a CRM can offer the following features helping community banks to advance their loan portfolio:

  • Segmentation. With a CRM solution, banking sales consultants can easily sort their customer base by demographic and other criteria to identify those who are likely to accept loan offers as well as define what sort of loans they need and when.
  • Targeting. Using in-depth data from customer profiles, sales consultants can match customers with relevant loan offers. Delivering targeted e-mails or extending promotions by phone, community banks can meet individual customers’ needs for loans.
  •  Follow-up. With the help of CRM software consultants, the platform can be smoothly integrated with a bank’s e-mail system, which opens up the possibility to automatically assign qualified leads to sales consultants, speeding up follow-ups.  
  • Analytics. A CRM platform can assist in conducting regular reviews of a bank’s loan pipeline by forecasting a loan’s potential to close. It also helps to determine whether current loan campaigns need any improvements.

This way, using a CRM system community banks can be sure their leads won’t get lost or contacted too frequently with irrelevant messages. Instead, a well-implemented CRM can help them create loan marketing campaigns that work and effectively track the most valuable customers.

The bottom line

Whether a community bank need a new CRM solution or simply search for consulting services to update their current system, CRM is the right choice to protect a loan portfolio against online lending companies and bigger banks. In contrast with the time-consuming manual approach to attract loans, CRM gives real-time visibility into customer information, which can be used to deliver compelling loan offers to a targeted list of customers with a higher probability of acceptance.

Need a custom or platform-based banking CRM? We bring 15 years of CRM consulting to solve your challenges!