The launch of the Canada Emergency Business Account (CEBA) last year was remarkable. In a few short weeks, Export Development Canada and financial institutions across the country stood up entirely new loan products and processes. The successful launch of CEBA was made possible by the agility of the commercial banking arms of financial institutions large and small.
This agility may have surprised some industry observers. Over the last 10 years, most of the digital investment made in financial services in Canada has gone to the retail side of the industry.
From a high level, there are two reasons for this. First, the number of customers in retail banking is an order of magnitude higher than in commercial banking. This makes the immediate returns on digital efficiencies higher in retail banking. Second, the biggest deals in commercial banking are created through personal relationships and result in completely custom banking products.
This has caused digital investments in commercial banking to lag their retail counterparts—though many commercial banks had started investing in core digital capabilities before the pandemic.
Now, there are signs that the digital momentum generated during the pandemic will persist in commercial banking even as COVID-19 leaves us.
Examples of digital transformation in commercial banking
For proof, look no further than Vancity’s recent revamp of its commercial lending operations.
In late 2020, the West Coast credit union, with help from Accenture, completed an end-to-end upgrade of its commercial lending system. Vancity now runs its commercial loans through the cloud-based nCino platform. This has allowed it to cut its commercial loan turnarounds, which could have run to 60 days pre-nCino, down to just a few days.
Similar credit transformation projects are underway at financial institutions across the country. A large regional bank in Canada, for example, has implemented a fully digital loan origination system for very small commercial loans and is currently scaling up to transform the medium and large corporate segments. The “Big Five” Canadian banks are also all launching commercial credit transformation programs.
But credit transformation projects like these are just the tip of the iceberg when it comes to the potential of digital change in commercial banking. As my colleague Jarred Rorrer pointed out in his look at the most important trends in 2021, the digital revolution in commercial is only getting started.
New areas of digital innovation
There are two areas of digital potential that really stand out for me.
The first is customer relationship management systems, or CRMs. Digital investment here can put powerful insights in the hands of relationship managers at just the right moments, so they can be more relevant and proactive in their relationship with customers. The biggest deals will continue to be highly tailored, but there is huge upside for digital investments in the processes that get you to that point.
The second is advanced analytics. There are two sides to this. One is using digital tools to better clean up and leverage data already inside the organization. Some commercial bankers are working on this now. The second side is aggregating data from multiple sources, including public ones, to get personalized insights on clients.
Combining both internal and external data in a single analytics platform is where we see transformative upside. For instance, imagine a relationship manager in charge of all small businesses in a region. An advanced analytics platform could make it easy for this RM to see any client or potential client’s market challenges, their competitors, what banks they deal with, and much more useful information for managing loans.
Few commercial lenders in Canada are doing this right now—which creates huge opportunities for those willing to lead the charge.
To discuss how digital change can drive success at your commercial banking operation, please reach out to me on LinkedIn.