The pandemic has changed a lot in the world—the banking system is one as people transition to going online instead of going to bank branches. How do banks reward borrowers and depositors for positive borrower behaviors? Merrill Chandler explores going digital to make everything easier, faster, and better with the personalized banking experience. He also shares how banks are creating new landmines that could destroy your fundability. Let us dive deep into the digital relationship-building strategies of banks and ways we could protect our cash flow and fundability.
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Radical Changes In Banking: How New “Banks” Are Creating New Landmines That Can Destroy Your Fundability
In this episode, we are going to be talking about some very important changes that are happening among lenders. Everybody is trying to get on board. Walmart and Google are getting on board. FinTechs are all trying to crowd the consumer banking space. They are offering complete crap in order to entice borrowers to spend money or to get their debit cards that report to bureaus or that are junk cards and ultimately ruin your profile. When we come back, everything I said is going to make sense and a whole lot more. Be prepared because your fundability is being threatened on every side if you don’t know what to look for and if you don’t know how to avoid these landmines. I’ll see you on the inside.
As I promised, we’re going to be talking about some fascinating trends that are going on in the market. We touched on some of these in the various news updates that we do weekly. The trend is so powerful and it is headed in one direction only that I needed to make an episode about it. I needed to inform everybody in my tribe and bingeing this show of what to look for and what’s happening out there among lenders. The bottom line is COVID has inspired everybody to drive to electronic banking and masterfully create relationships through electronic or digital relationship-building strategies.
First of all, we’ve had a huge number of beliefs over the generations. You walk into your bank and there you meet with a teller. The teller may know your name if you visit often enough. Even if you’re a private banking client, one of the private bankers or the branch manager may know your name. It’s designed to create a personal experience so you feel comfortable leaving your money there. That’s generally the experience. In COVID, I remember the letter that we received. One of the banks for my QFE is Wells Fargo. Wells Fargo sent a letter saying, “We’re going to be shutting down a number of the branches in your area. Here’s the closest branch to you.” They knew my home address and they gave me the closest branch. They shut down several of these branches during COVID.
One of the things they learned is there were massive savings for them. We’re publishing this in July 2021. They’ve posted second-quarter earnings of $24 billion between the top four banks, Citibank, Wells Fargo, JPMorgan Chase and Bank of America. That’s $24 billion in profits compared to 2020, which is $6 billion between them. They thought they were doing well at $6 billion in 2020. More capital was coming because fewer people were qualifying for lending. Remember we talked about the target. The lender target is wide in prosperous times. We optimize so that your ability to borrow, regardless of how small the lending target is, you’re able to get approved. That’s the entire purpose of fundability and credit optimization.
They‘ve posted $24 billion in profits between the four of them. Why? There are several reasons. They are aggressively lending but they’re chopping off billions of dollars in overhead every single month by ramping up their online customer experience and ramping down their hard assets, their buildings, the management, and paying people to come to work instead of doing online banking. Online banking started as a subtle thing. If you remember back in the day, the first real online banking is where you could take a picture of your check and it will be deposited by phone. Do you guys remember how revolutionary that was a few years ago?
Everything has been driven by COVID to create more of this online customer experience like the trade magazines, the webinars, and the symposiums for lenders that I attended. I got a ton of resources for us. Everybody talks about the banking CX, customer experience. What they learned in COVID is, “People are still willing to bank with us. It’s convenient for them if they can do it at home. We don’t have to have as many offices.” Sure, we want to have enough in a community so that somebody can come and say hi to a human being. We don’t want to get rid of it completely. One of the articles that I read says, “Citi didn’t want to go skinny.” That’s the trade term that they’re using. Going skinny is reducing the number of branches and the hard assets that they have. They’re putting up more ATMs so that you can make a deposit. If you need to go somewhere and not do a physical deposit, you can swing by and drop it in an ATM. That’s the trend that we need to be prepared for in fundability. I am so happy about this because it means everybody is shifting to automatic underwriting.With the world going digital, everything is moving to make it easier and faster and better for us. Click To Tweet
Every one of these things that I’m going to list or repeat to you is from an article, a white paper or a symposium that I have attended or read. It’s so much fun to see what’s happening. White paper, the future of customer experience in banking is personalized. We were accustomed that the threshold of a good customer experience is based on walking into a branch. Everybody is trying to figure out what is the best way to replace the in-branch experience and keep it online.
One of the ones was embracing full-service video banking. You’re banking with a banker at Zoom. Many of these banks are exploring, doing alpha and beta tests on having Zoom calls available instead of a phone call. Imagine when you’re calling your bank, you look at the back of the number and you call that bank. Imagine having another one that says, “Here’s a video link. Click or type in that.” I have my personal URL that goes straight into my meeting room. It’s as fast and easy as that. Imagine you’re going to Chase or Wells Fargo. You type in a link on your phone or otherwise. It identifies you and makes sure that the account information is all there. Now, you are video banking with somebody at a branch or in a call center. That’s where we’re going.
In my personal experience, we used to do everything by phone. When we split out because of COVID and we moved all of our people to home officing, we flipped on the switch, and now the vast majority of our client conversations are over Zoom instead of a phone call so we can continue to build. I’m pleased that we’re ahead of that video nurturing curve but that’s one of the symposium presentations. You got to start embracing video banking. All of this is becoming so much fun.
The next one is a white paper, five steps to build a profitable digital borrower experience. Everybody is teaching. The banking support industry, as well as the banking decision-makers themselves, are all-in on creating a better experience. Digital account opening in under ten minutes. That was a white paper. That was one of the massive holes that were discovered as a result of COVID because people were like, “You can’t open an account for me because I got to go into the branch?” That was a massive fail of Wells Fargo.
Our clients have to open up several banking accounts for their funding strategies. They got to open up business banking accounts, and some of them weren’t able to do it because no one was at the branch. It was a massive fail on the bank’s part. What do they do? They respond in kind. Now, the banking support industry is supporting how to open up a checking account in ten minutes. Does that make it cool and fun for us? Absolutely, because either we have to leave our house or we get to limit our exposure. Imagine if you open an account in ten minutes and have a Zoom call with a banker who then gets to give you that personal experience, that’s where bankers are going. You heard it here first because there are so many cool things that are going to automate this process.
Everybody is getting into the banking business. Walmart has been selling prepaid debit cards for years. I listened to a symposium on how Walmart is converting their prepaid cards into checking accounts. As I’ve announced in one of our previous updates, if you haven’t heard it, Walmart is going to be installing banks branches, Walmart financial institutions in many of their stores. Talk about a distribution chain, they’re a big bucks store. They already have tens of thousands of people coming through their doors every month. The Walmart demographic is an easy place to say, “I bank with Walmart too.” This is insane.
There is a rush for FinTechs, Financial Technology companies, to get into the retail banking business rather than just the loans. The Marcuses, SoFis and Kabbages of the world are now looking at retail banking. Being able to open checking accounts and offer credit cards. The good news is if we maintain our awareness of the tiers, what is a good credit instrument, and what instruments create a negative drag on our credit profiles and our borrower capacity, we don’t have a problem.
If you get sucked in, there are green dots. Walmart and all FinTechs are tier four, which means any credit instrument they offer are not a valuable contribution. Think of it this way. If you want a business line of credit, do you think that Chase, Wells Fargo or any of the big powerful business lenders are going to give you a $100,000 business line of credit on your Walmart credit card reputation? It’s not going to happen. We’ve got to keep the awareness. While everybody is coming in, it’s going to get noisy and messy. You heard it here first and I’ll continue to give you updates in both our weekly financial updates on our Get Fundable Facebook group, as well as being able to see more attention given in the different episodes that we’re going to be producing over the months and years.
I’m telling you another one here. Add form processing to your financial application. Form of processing is another means of auxiliary data collection. You have your standard application and here are all the data points for that application. They’re adding form processing so that they can collect a copy of your driver’s license through a photo, verify your identity, and collecting other data about your spending habits. They’re beefing up what their applications are looking like. There was even a white paper on how to support your customers. Remember, these are all banks and financial institutions.
White papers to the C-Suite level folks, the CEO, CFOs, CTOs and CMOs. How to support your customers with a skip-a-payment program? What COVID has taught FICO and the lenders is that offering a skip-a-payment program or these deferrals did not cause a massive loss of revenue. It increased the interest subtly for the number of payments that were skipped or deferred. That interest was put onto the total so that those interest payments were being collected and had to be required to get to a zero balance. You had to pay off that extra interest but the default rates have not significantly increased.
Now, this paper is saying, “How do we reward borrowers and depositors with a skip-a-payment for positive borrower behaviors?” Between you and me, we want nothing to do with that because that’s going to add interest. If we’re offered a skip-a-payment and we take advantage of it, unless we need it, I’m all in if it significantly improves your financial cashflow position. When it comes to fundability, we don’t want to take advantage of those skip-a-payment or deferrals because we’re sending the message of, “Times are tough and you need to watch me,” then we end up in the risk department.
There are a couple of other things that I wanted to address for our Millennials and Gen Z readers. There’s an article about four ways banks must change so that Millennials and Gen Z’s will love them. When I reviewed the article, guess what the preponderance of those four steps is? Go digital, make it easy on the phone, and let them have a face-to-face connection. This is crazy. Everything is moving to make it easier, faster and better for us. Two final points, one is amazing for me and the other is amazing for you. One of the big push is opening up checking accounts electronically, reviewing account information, and having video access to our bankers electronically. Everything is moving towards automatic underwriting as a must for all applications.
Some of us especially the Boomers and old-schoolers, nobody has ever said this but I’m going to pretend that it’s true for somebody, “I like getting out my taxes, my financials, and all my checking account records for the last year and putting them manually on a banker’s desk.” The point is the trend over the last several years has been going to automatic underwriting, but it’s been limited significantly to tier 1, tier 2 and a few high-level tier 3s, the USAA, Pentagon, Credit Union, Navy Fed, etc.
Now, even the community banks and the local credit unions are going berserk because to keep market share, they have got to speak to people’s health and wellness issues and the “I haven’t got time to go to the bank” issues. Even the smaller institutions are going to automatic underwriting. That is brilliant for you because the second you know what the criteria or what the 40 checkboxes are that you need to check to get approval, that puts you in charge of your approval. You just got to check those boxes. That’s my mission. It’s to help millions of people understand how to be fundable, how to check those boxes and get approvals through automatic underwriting.
All the banks are going there even more. They’re depending on automatic underwriting software. The skills to be fundable have never been more important. You have to be fundable now. Before 2021 is out, there are going to be dozens even hundreds of smaller institutions who are going to start grading you by software algorithms rather than hard copies of your documents. We have got to become fundable. As we say, you got to get fundable because the banks are not going to have a mechanism for proof documents. For the next 24 months, the requirements to provide proof documents are going to diminish significantly.Automation of the process in banking systems helps us limit our exposure to viruses and make us comfortable in our homes. Click To Tweet
What are you going to do to be prepared? What are you doing with your profile so that you know all the checkboxes? You can get funding by sitting at your damn desk, opening an account with a video banker or filling out an application, knowing exactly what they’re looking for, and having all the databases that they paying all match up perfectly. Your data is synchronized perfectly and everything that you’re doing qualifies you for funding.
It’s happening. Every single white paper I read and every single presentation, banking institutions and Fannie and Freddie are all going to improve their customer experience. They will give access online to forms, applications, account openings and even a banker. I guarantee you, we’re going to video banking fast. This is a massive win for millions and a fulfillment of my dream.
One of the presentations was called Mission Failure: The Banking Industry’s Approach to Financial Health. What that presentation outlined was that there is a massive failure. Financial literacy is failing and it is just the definition of what’s a checking account and what’s a credit card. It’s just the bare minimum. Nobody but us, nobody but our show is engaged in borrower education. Do you see the difference? Financial literacy and borrower education. We did an episode about the difference between financial literacy and borrower education.
We’re developing now an entire borrower platform of education, it is likely to be ready by end of 2021 so that banks can send their depositor’s ways to improve their fundability, send non-profits that are working with folks who are either credit invisible. They’re not fundable or they don’t even have any credit. Also, train them on how to become fundable. One of the benefits of being an employee of the Fortune 2500 is to receive weekly strategies, tips and techniques to help them become fundable, which will drive them to greater opportunities, and to become educated so that they are no longer stepping on the damn funding landmines that are blowing them up.
Consequently, while we’re developing the borrower platform so that we can make it right, there is no true borrower education right now. While we’re developing that, the banks are all moving to automatic underwriting. We’re going to be meeting in the middle. We’re training borrowers how to meet those automatic underwriting guidelines, online applications, online checking accounts and video conferencing with their bankers. These two are meeting and 2022 is going to be the marriage of millions of people learning how to become fundable with lenders and financial institutions who now can drive, inspire and build that customer experience that they’re talking about. What good is a smiling happy face if the borrower, the checking account or savings account opener doesn’t know what they want to get that next car, the right kind of credit card, and qualify for a home? That’s where those are going to meet and I’m so excited about what is happening.
Thank you for joining me. Keep bingeing, like, love, review, share, get this word out so that everybody knows how to continue to build relationships with the banks. We call it relationship-building but imagine that it’s an algorithm on how to fall in love. That’s what’s happening in the banking industry. How we can be amazing, be the perfect borrower, and give us the perfect banking experience. That is what we’ve got coming for us. We’ll see you next time.
- Get Fundable – Facebook Group
- Article – Four Ways Banks Must Change Before Millenials & Gen Z Will Love You
- Mission Failure: The Banking Industry’s Approach to Financial Health
- Financial Literacy vs. Borrower Education – past episode