While nobody enjoys a crisis, I’ve learned that hard times allow businesses to reflect, grow, and innovate. This has been especially true for fintech lenders during the COVID-19 pandemic. Many have had to innovate on the fly, adapt to the ever-changing market, and support the small businesses and customers in their communities.
In our recent Fintech Shares webinar, I talked to a few fintechs about how the COVID-19 pandemic sparked innovation and how they plan to move forward post-crisis.
The Influx of PPP
The Paycheck Protection Program (PPP) is an SBA loan that helps businesses keep their workforce employed during the coronavirus crisis. And when these loans became available, the impact (and volume of applications) was massive and required lenders to adapt and innovate like never before.
Community Reinvestment Fund (CRF) founded Connect2Capital—a marketplace that matches small business owners to CDFIs—and recently launched a new product called Spark. Spark is an online platform that processes complicated, government-guaranteed loans. It helps small business lenders manage each loan from pre-screen through disbursement.
“The real innovation of Spark is that it automates the compliance components around SBA lending,” said Patrick Davis, Vice President of Program Strategy and Development at Community Reinvestment Fund. “It’s not letting you push the package out to the SBA to get a loan number back until the package is perfect.”
The value of this new tool was huge for CRF when PPP came out. However, CRF was frustrated with how PPP was being allocated. Big banks were taking care of their largest customers first and smaller businesses were being ignored. So, the team at CRF developed an informal referral network with other community development organizations to help build loan packages for customers.
Innovation at scale
As New York City became a hotspot for COVID-19, Pursuit Lending’s phone lines started picking up. People were calling from more urban areas in Pennsylvania, New Jersey, and New York asking to defer their loans. Laura Kozien, the Senior Vice President of Marketing at Pursuit, said that the team had to figure out quickly how to deal with this influx of calls safely, securely, and at scale while working remotely.
Greg Ott, CEO of Nav, experienced a similar challenge. “Our call volumes went up almost ten times. We scaled to meet that,” Ott said.
The good news for Nav was that they already had completely digital systems to help their small businesses find financing. But, he soon realized that a mix of digital transformation and the human touch are the keys to the customer experience of the future.
“Trying to find that middle ground was really revealed in this crisis,” he said. “People want to be able to talk to people. We helped a lot of small businesses with eligibility, and now our people are helping them understand what forgiveness they’re going to qualify for. We can do all of that because we’re digitally integrated into all the checking accounts and the credit bureaus. That creates both a reduction in cost and a dramatically better customer experience.”
What’s next for fintech?
Jason Hendricks is the CEO of Alloy Labs, which is a consortium of 40+ community and mid-sized regional banks that work together to drive innovation and collaboration. He’s seen that this crisis has made the banks he works with better understand the ROI of new technologies for the future, like chatbots.
“Chatbots would have been a huge improvement to field the first order of questions,” he said. “You want to talk to a human, but when you get overwhelmed, what you really need is augmentation. We’re finding a lot more of the banks are changing their mindset. It isn’t about tech replacing people. It’s about tech supporting their people.”
And while PPP is still being distributed, fintech lenders are thinking about how they can help their customers move forward as economies start to reopen. Every lender I spoke with agreed on one thing: Just because economies are reopening, doesn’t mean the work is done.
For example, a few weeks ago, several CDFIs (including Pursuit and CRF) collectively launched the New York Forward Loan Fund, powered by Connect2Capital. The fund is “a new economic recovery loan program aimed at supporting New York State small businesses, nonprofits, and small landlords as they reopen after the COVID-19 outbreak.”
“We have to really start thinking about what the new normal is going to look like,” said Hendricks. ”A board member at one of our banks said, ‘never waste a good crisis as an opportunity to change.’ And so maybe this is some of the change we need to be seeing.”
To hear more from these fintech lenders, you can watch the full Fintech Shares webinar here.