Small Bankers Eye New Technology

Implementing new branch technologies, just as in-branch iPads for forms and signatures, could before long be a leading strategy for community banks looking to improve their commercial lending lines of business.

The Boston-based think firm said community banks as well responded as "likely" or "in the extreme likely" to invest in the following technologies over the then and there two years: loan origination systems for commercial and small business loans, cloud computing and loan servicing and collections systems.

Aite Group said demand from small business loan clients, on which community banks rely to leverage their business banking platforms, has decreased since 2008. The firm found most community banks are zeroing in on the loan servicing and collection process as they strive to gain efficiency in the commercial loan application process.

"Lending to small businesses provides considerable payback in terms of customer loyalty and increased revenue from all manner of fee-based services," said Christine Pratt, an Aite Group senior analyst and co-author of the report.

She said the three areas in which small businesses expect community banks to step up their game are loan products, loan application processes and loan servicing.

Aite Group said increasing competition is a notable challenge for community banks in the commercial lending space. Large retailers, credit card providers offering microloans and other small lenders with government-funded products are all vying for small business clients, the firm said.

However, community banks have opportunities to grow their small business customer loan portfolios, Aite Group said. Based on the survey, 38% of community banks currently have loans outstanding to just 25% or fewer of their small business clients. Those that provide more than 50% of their small business clients with loans will be better positioned for profitable growth and attracting these clients and improving their experiences is key, the firm said.