Oct 30 2020

MoneyFest 2020: How Digital Banking Saved the U.S. Economy

Without robust online experiences, banks couldn’t have processed the billions in emergency loans to small businesses under the Paycheck Protection Program.

When the pandemic caused businesses to shut down across the U.S. in March, Congress created the Paycheck Protection Program, providing $669 billion in emergency loans to affected businesses. While the PPP was a lifeline to the U.S. economy, the program landed like a bomb inside the American banking industry, forcing banks to all but abandon most of their normal commercial lending activities in order to learn the complex new program, receive and process applications, and disburse funds within a few weeks.

“I will tell you, it was the most complicated thing I’ve ever been part of,” said Kala Gibson, head of business banking for Fifth Third Bank, speaking this week at MoneyFest, a virtual event sponsored by the financial services industry organization Money20/20 that concludes today. “I used to have a lot more hair, and it was black. I probably aged five years during this process.”

It was the actions of banks that, in large measure, kept the American economy afloat during its darkest days of 2020. To make it happen, banks created online portals for customers to apply for funds. Bank of America, the second-largest bank in the U.S., was the first to begin processing applications through its portal, said Sharon Miller, the bank’s head of small business.  

Miller said her institution approved more than 345,000 PPP loans, totaling $26 billion. “We focused on businesses and communities that we knew needed the capital the most,” she said.

Banks Digital Experiences Must Include a Human Touch

The creation of digital experiences was what made it possible for banks to process millions of transactions in such a short period. But Gibson said that Fifth Third committed to providing both a digital and a human experience.

“We had to create a framework, and we had a mission to not leave any customers behind,” he said. “We did that by making sure that all of our customers had a banker experience, that everyone — big or small — actually had a conversation with a banker.”

In fact, that concept of marrying the personal with the technological is what informs much of the digital banking strategy at both institutions. “We think of it as high-tech and high-touch coming together,” Miller said.

Vivian Merker, a partner with business consultant Oliver Wyman, noted that her firm’s research found that, pre-pandemic, small businesses had mixed views of digital banking, splitting down the middle on whether it was preferable to open new products online or in person. While the business closures this year have forced many businesses to go virtual, Gibson said many still prefer a personal approach — and the most effective digital solutions are hybrids.

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“One challenge we have is that some customers still view a digital relationship as not a ‘real’ relationship,” he said. “We know that’s not necessarily true. The key, for us as an industry, is to make sure that when we’re creating digital products, we do a couple of things: one, that it’s not just the online opening of a product. There also has to be advice that they can get digitally and proactive solutions that we can send to those customers. And most important is to combine the digital with a human experience — to augment the digital experience with human interaction.”

The depth of banks’ relationships with their customers will matter greatly in coming weeks, as small businesses undergo the second half of the Paycheck Protection Program: the loan forgiveness portion, which requires businesses to demonstrate that they did indeed meet the program’s requirements to retain workers who would otherwise have been laid off due to the pandemic. Those that fail to demonstrate that sufficiently will have to pay the money back, perhaps devasting some of them.

“We’re continuing to monitor it,” Miller said. “Will there be additional stimulus coming out? And of course, we’re working with our clients to get through the loan forgiveness portion of the PPP. That’s where we are in the cycle.”

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