Even before the COVID-19 pandemic impacted the world economy in early 2020, the financial sector was developing and deploying digital tools that would make banking faster, safer and more convenient for businesses. Through the pandemic lockdowns, commercial banks accelerated investments into their digital service offerings – and have continued to do so in the post-vaccine reopening of the economy.
JPMorgan Chase Executive Director for Middle Market Banking Aaron Ryan said he views the increased need for digital banking services brought on by the pandemic as “an opportunity to solve a real set of pain points” for clients by taking “a digital-first mindset.”
“Using client-centric design, we have worked to deliver personalized, data-driven solutions enabling our clients to achieve their goals and have an enhanced client experience,” he said. “We’re currently seeing that local businesses are building on digital banking solutions implemented during COVID and continuing to look for digital banking tools and services that automate processes and make their work life easier, making it imperative for us to seek better ways to serve clients through continuous innovation.”
Alan Prohaska, regional president and head of corporate banking for PNC in San Diego, pointed out that the move to digital in commercial banking was already happening before the pandemic, driven by a desire to reduce paper and streamline processes.
“However, many were accustomed to old workflows, and the human intervention and interaction involved with these processes, so adoption rates of new technology were lower,” he said. “The pandemic and disruptions in the labor market have accelerated the adoption of more sophisticated treasury automation tools, helping businesses operate more efficiently and reducing human errors.”
Jeff Friesen, president of the southwest region at Enterprise Bank & Trust, said the bank had developed “a great digital product offering” which clients were already using, but the pandemic accelerated its use when the branches shut down.
“It helped push further adoption of things like online banking, remote deposit and wires. We had relatively high digital enrollment by businesses before COVID,” he said. “In 2020, our number of online banking users increased 12%, business remote deposits increased 25%, and the number of wire transfers increased 40%.”
Investments in Innovation
Friendly Hills Bank President and CEO Nathan Rogge described digital banking services as essential for many businesses post-pandemic. “The rise in digitals tools has forced banks to make a large investment in technology,” he said, adding that fraud, risk and cybersecurity are top concerns for banks in the digital era.
For very large commercial banks, those investments can be in the billions of dollars.
“One of our key investments every year is digital technology, to keep us on the forefront,” said Cliff Cho, senior vice president and market executive for Bank of America in San Diego. “Over the past 12 years, the bank has dedicated more than $35 billion to tech spending, and in 2022 alone has set aside $3.6 billion to continue those efforts.”
The investment in digital capabilities – like real-time payments to and from accounts; AI-enabled forecasting of future cash positions; cashflow tracking on a single dashboard; and account management tools – has paid off for Bank of America, with increased digital sales up 20% year over year while more than 85% of Bank of America business clients use its digital channels.
In 2021, BofA client companies approved $384 billion of payments through the bank’s CashPro app, a 119% increase year-over-year.
“All of these types of enhancements help our clients streamline their businesses and get a better idea of cash flows, payments and projections – allowing them to spend more time on revenue-generating activities,” Cho said.
Ryan pointed out that JPMorgan has invested in “end-to-end digital experiences and technology solutions” that work to improve cost efficiency and streamline operations for clients, such as Chase Connect and J.P. Morgan Access, which offer cash management across a full integrated treasury and payments portal.
“As an embedded part of the innovation ecosystem, we pay close attention to emerging technologies and evaluate their value to our clients and to our business,” he said, adding that JPMorgan collaborates with companies to deliver fintech solutions like the bank’s Digital Bill Payment platform for customer engagement, bill presentment and payments that is powered by Paymentus, a cloud-based bill payment technology.
JPMorgan is also pursuing digital tools for commercial real estate clients that will empower landlords and operators to run businesses more efficiently, Ryan said.
Kris Ilkov, executive vice president and southwest regional director at Umpqua Bank, said the adoption rates of communication technology and digital payments in banking during the pandemic led to the financial sector establishing strong ties with fintech companies, which in turn led to “state-of-the-art advanced technology in everything from retail banking to corporate banking.”
“The use of AI and data analytics helped with delivery of service and in identifying client needs,” he said. “All of our treasury management solutions employ new technology, which can accelerate the cash collections for our clients and reduce their overall working capital cycle.”
One such technology at Umpqua is Rectangle Health, a payment solution for healthcare providers that allows patients to pay the provider through their phone while waiting to be seen by the physician. “This HIPAA compliant solution creates efficient, contactless and secure method of payment, while allowing for real time reconciliation, tracking and recording of the patient payment information,” Ilkov added.
Two innovative digital tools at U.S. Bank were created in direct response to pandemic-related restrictions.
“As employers across the U.S. sent employees home to work in the spring of 2020, U.S. Bank started to hear from corporate credit card clients who had a challenge,” said Manuel Rodriguez, commercial banking market president for U.S. Bank in San Diego. “The businesses needed to quickly provide many of their newly remote employees a way to make purchases – like home office equipment – without using their personal credit cards. At the same time, many on-site employees needed to procure PPE and cleaning supplies.”
Virtual Corporate Credit Card
In June 2020 U.S. Bank launched its Instant Card – a virtual corporate credit card that provides a way for employees, contractors and external consultants to make authorized purchases and support business continuity that can be set up on a user’s mobile phone.
Another U.S. Bank tool launched in 2020 is a feature called “cobrowse” that allows customers to share their screen with a banker so they can view and navigate online and mobile banking together.
Torrey Pines Bank offers a variety of digital treasury management solutions that optimize efficiency and effectiveness for its business customers and help prevent fraud.
“The majority of our customers recognize the benefits of online banking and even those who prefer to bank in person also utilize some digital services including Positive Pay, which adds an important layer of security to their bank accounts,” said Chris Grassa, senior managing director of commercial banking at Torrey Pines Bank.
Recently, the bank added new tools to its platform, including accounts payable automation, which allows clients to pay vendors digitally, eliminating paper checks and associated check fraud. Another new offering at Torrey Pines is API integration, which enables companies to connect their internal enterprise resource planning platform to the bank through APIs to create even more seamless workflows.
“These services are more accessible and affordable for small and mid-size businesses than ever before,” Grassa added.
Despite the large investments in and the increasing adoption of use-anywhere digital banking tools, the in-person branch office isn’t likely to disappear altogether, even if their numbers dwindle over time.
“We learned from COVID-19 that when business leaders are facing complex, unprecedented challenges, they want to talk to a human, and they want to hear from us often,” Ryan said, and pointed to recent Chase Small Business Pulse Survey data that showed 83% of small business owners say being easy to work with is an important attribute in a financial services partner; 82% want easy-to-use online platforms and 81% want easy to contact live support.
The report, he said, highlights “the importance of continuing to offer and invest in the in-person branch experience.”
Ilkov was less optimistic about the importance of branches, pointing out that their numbers are already decreasing and fewer will be needed “as the way people and businesses bank continues to evolve.”
“The advent of remote deposit capture, virtual vault and integrated payment solutions have certainly reduced the need for clients to go into the branch,” he said, adding that there will still be “some demand for in-person experience” but that banks will be “strategic” in which ones to keep “as a marketing tool and for ensuring brand awareness in communities. “
During the pandemic, Enterprise Bank & Trust saw its teller transactions reduced by around 20% as clients gravitated toward digital tools. Even with branches fully opened, in-person visits haven’t rebounded.
“We are currently about 10% below historical levels in terms of teller in-person transactions. Our business clients want and expect convenient digital banking services to manage their banking relationships,” Friesen said, adding that the bank’s branches are still being used by clients who need more than a transaction – “those who have questions, are looking for consultative services, or simply like and crave in-person interactions related to their banking needs.”
Rogge said business clients such as retailers with heavy cash flow still frequent branches to make deposits, but even when the pandemic subsided and allowed for in-person banking again, digital tool use did not subside with it.
“In fact, we saw the oppositive, as clients were quick to adopt our tools,” he said.
Prohaska said in-person branches will “continue to play a valuable role” for PNC clients, especially for holding important in-person financial conversations with bankers about major financial decisions such as mortgages, loans, small business needs, money management, retirement planning, saving and investing.
“We remain committed to delivering on our commitment of making a positive difference for our customers and communities, and to helping all move forward financially, and branches are an important part of this,” he said.
Although digital tools are often a replacement to visiting in-person at a bank branch, Rodriguez pointed out one area where they have been an asset to tellers and clients alike.
“One way U.S. Bank continues to see digital tools that really took hold during the pandemic have an impact on the in-person branch experience is the ability to set appointments,” he said. “It may seem like a small or simple thing, but prior to restrictions on in-person activities, a trip to the branch was often not the sort of thing you would schedule in advance. With an appointment, they stop in, and a banker is expecting them, has background on why they are there, and can more quickly get them back on their way.”
Grassa said that as a “relationship-focused business bank,” Torrey Pines Bank does not see in-person and digital banking as a choice between the two, but rather an opportunity to deliver both to clients.
“Some customers, particularly post pandemic, have mentioned they like visiting the bank to conduct their business in person as a change of pace. We’ve also heard from customers who discovered how much they learned to love digital banking services when physical bank locations were closed during the pandemic,” he said. “We believe it’s essential to have relationships with our customers so they can realize the most benefit from banking products and services – including digital products – that are customized for their individual businesses and needs.”
Mitigating Costs of Inflation
Today, the banking needs of businesses are increasingly about managing inflation, rising interest rates and dealing with labor shortages – and digital tools are helping.
“There is cost savings with digital and mobile technology that, for example, evaluates long-term cash flow, anticipates receivables and payments,” Cho said. “Digital tools can provide efficiencies and expand small businesses’ global footprint, especially with mobile tools that allow business owners to work from anywhere. This can help business owners retain and expand their global workforces.”
Ryan said digitization has helped JPMorgan clients lower their cost of doing business, even as costs are rising “across the board.”
“Our digital tools and services and investment in data initiatives have also enabled us to provide our clients enhanced solutions for credit and cash and treasury management, helping them to face, overcome and be better prepared for future market scenarios impacting their business,” he said. “Our digital tools and services, such as Chase Customer Insights, can also provide business leaders specialized analytics and trends on their customer spending behaviors and card sales, providing useful data to help them improve their operations, marketing and staffing strategies in challenging economic conditions.”
Ilkov said that while inflation and rising interest rates are a challenge for companies to mitigate, Umpqua Bank clients are adopting digital tools – such as tools that expedite receivables – to reduce the need for financing in order to support working capital and related borrowing costs.
“The evolution in blockchain technology in most industries and its adoption have also significantly decreased the traditional long trade cycles for many importers and exporters, significantly reducing inventory carrying costs and freight,” he added.
At PNC, Prohaska is advising clients to evaluate how they are conducting business today and “make shifts to reduce friction and redundancies.”
“Digital tools are a critical component to this, as businesses may be able to realize cost efficiencies through automation or simply just help them do more with less,” he said. “This is especially advantageous with the current state of the labor market.”