Over some extraordinary days in March and April, banks across the United States mobilized to accept small business loan applications from their customers under the Paycheck Protection Program (PPP). The short timelines and national pressures of the CARES Act and PPP allowed no margin for delay and forced banks to respond with a degree of agility and speed that many only aspired to previously. Banks that acted decisively were able to deliver value via digital channels to their clients and communities at a time of great need. Those that took the more traditional path to technology innovation – trying to “perfect” their solutions—often found their clients at the back of the line for critical funding or turning to other institutions.
The urgency of this situation pushed banks to completely rethink what’s possible. More importantly, it showcased what is possible. Banks now know that industry leaders can move quickly to mobilize new technology. Executives are beginning to recognize that they must shift to a nimbler mindset to compete under rapidly evolving market conditions.
Executives are beginning to recognize that they must shift to a nimbler mindset to compete under rapidly evolving market conditions.
As we move beyond the immediate crisis, it is important to understand that industry leaders aren’t pausing to take a breath. Instead, they are converting the learnings from these extraordinary circumstances to accelerate their ability to implement rapidly under more normal conditions.
Having helped more than 25 banks stand up PPP loan origination capabilities in less than a week, West Monroe had a unique view into this effort. While the experience is still top of mind, we felt this was a good time for reflection: What did we learn that can help financial institutions remain competitive as the pace of technological transformation accelerates? What capabilities must banks have in place to enable rapid implementation? And what are the best opportunities to tone and develop newfound “fast twitch” muscles in the coming months?
In many business scenarios, and especially in banking, there is a tendency to be perfect. Risk management and compliance considerations drive a desire to see every box checked. The effort involved is such that implementations tend to happen infrequently, typically with many new features consolidated into one “big bang.”
Here, however, we saw how a solution can be scoped rationally to meet urgent market needs while still managing risk. This was a textbook example of a minimum viable product (MVP), a solution that delivers the basics but doesn’t necessarily have all of the bells and whistles that stakeholders normally request. Many banks realized that out-of-the-box functionality provided most of what they needed at the time, and that brand and/or technology customization was not essential to the critical path of having a lending solution available for clients when the PPP opened. In this case, where speed to market was the most important factor, there will be time for customization later, as banks “industrialize,” or build out these capabilities to their full potential.
Notably, the concept of “small” applied not only to the scope of the solution, but also the size of the team involved. Small, cross-functional teams with a focused and clear vision – and the necessary autonomy – can move faster. They can work in rapid iterations, accelerating not only progress, but also learning. People tend to learn better and build “muscle memory” by doing the work in real time versus a training session.
This effort demonstrated that there is more institutional flexibility than many believed there could or would be. This is not to discount the importance or influence of regulatory and compliance risk management. That remains key. But in the economic sense, taking a test-and-learn/fail-fast approach can actually be less risky for a bank because it limits wasted resources and allows for assessment of efforts in manageable pieces. Banks are not technology companies, but we now know that some industry leaders are starting to operate that way, even in the community bank space.
The banks that acted fast under this pressure seized an opportunity to build a reservoir of trust and goodwill with clients that will remain throughout and beyond the current crisis. On a broader basis, consumers expect to increase their use of digital baking channels as a result of the pandemic. According to an April 2020 survey by FIS, 45%of those polled said they have permanently changed how they interact with their bank, and 31% of respondents said they will increase their use of online and mobile banking.
Further, bankers and client representatives felt energized and a sense of satisfaction by being part of the response and by flexing their muscles to help small businesses within their geographic reach. They have now seen what is possible and—like clients—will expect even more speed and digital proficiency the next time.
For the purposes of rapid implementation, this boils down to a few points:
We all hope that the extraordinary circumstance surrounding the CARES Act was a once-in-a-lifetime event. However, banks can benefit from the experience of having lived through it by maintaining the muscle memory they gained by innovating and implementing at a fast pace. Following are several other opportunities for rapid implementation:
Across industries, onboarding experiences and capabilities are evolving rapidly – as are consumer expectations. The deposit account opening process is often the client’s first experience with a bank. To ensure first impressions are consistent with the desired client experience, you will need to make sure your bank controls this process and can adapt it at will.
Under current contact-less conditions, capabilities such as wires, ACH transactions, automated loan decisioning, loan renewals, and account service requests are essential to remaining connected with and engaging clients wherever they are. As we ease out of the pandemic, banks will continue to rely on digital channels rather than in-branch interactions to grow revenue.
The ability to implement with speed and flexibility is particularly important to continuous improvement efforts, where teams will want to test and prove out concepts with minimal investment whenever possible. The more comfortable your bank becomes with the core concepts of rapid implementation, the more it can optimize operations without incurring major financial and personnel costs.
Banks have demonstrated they can move fast when they need to. Now it’s time to learn from and capitalize on this experience to drive competitiveness – albeit in a purposeful way and not under duress. The first step is always the hardest. With that now behind you, here are a few practical actions that can help you take the next step(s):
Debrief on the process of responding to the PPP. What worked well, and what could you improve?
Pick a small but meaningful project and establish a small, cross-functional team with a charter that reflects the ideals above.
Give that team the space to do its work: ideate, iterate, test, and repeat. In other words, provide the opportunity to test and learn. Take stock of what works and what doesn’t to help future teams improve upon the approach.
Measure and communicate the value the project is creating – financial and otherwise (for example, speed to market) – from the outset. This will help educate and build support within organization
Make sure you are maintaining a pulse on the needs of your clients and how those needs are shifting due to current conditions. This should include voice-of-the-customer and market intelligence activities, but also data and analytics provided by your transactional systems. This will provide critical input when deciding what to tackle next
Demand for digital interaction will only increase, especially coming out of the pandemic. These rapid implementation principles represent how digital works best. They allow you to shape your client experience and truly drive your own strategy. The good news is that you aren’t starting from scratch. Your bank gained important muscle memory responding to the PPP. Don’t let atrophy set in.