What the Post-Pandemic Banking Landscape Will Look Like

The Paycheck Protection Program (PPP) could prove to be transformational for the US banking sector, according to an analysis from audit and consulting giant PwC.

As the US economy recovers from the COVID-19 pandemic, some banks and financial services companies are in a strong position to adapt their models and identify product and growth opportunities, said PwC’s US financial services advisory leader Julien Courbe.

Small lenders – those with less than $1 billion in banking assets – were responsible for more than 20% of PPP approvals, according to data from the Small Business Administration. This is despite these banks holding just 6% of total industry assets.

Financial technology providers had also benefitted from the crisis by introducing new services, automation and data to “the far corners of the small business market”, Courbe said.

“As bank leaders look to drive their transformations and rethink their operating models, the inclusion of fintechs into the financial system and the reliance on automation and end-to-end process structure could be a barometer for how the industry will likely operate,” he said.

Courbe highlighted the need for banks to embrace and accelerate digital developments started during the COVID-19 crisis. Enforced remote working and social distancing rules have forced banks of all sizes to improve their online offerings, and post-pandemic demand for such services is likely to remain high.

Fintech companies such as payments firm FIS, credit management software provider GDS Link, and lending platform Funding Circle all launched new or expanded services in the past two months to help banks and other lenders process PPP applications.

These and other services helped to automate onboarding processes in order to accelerate loan applications. They also helped lenders add new small business clients efficiently, Courbe pointed out.

“One gauge of success in the PPP was the ability to quickly modify operations to deal with new requirements,” Courbe said. “Pandemic or not, this requirement is needed more and more – not just for business agility but also resiliency.”

He also emphasized that a “critical differentiator” for banks in the future would be how they were able to integrate technology into their operations to provide more services such as payroll or supply-chain financing.

“Digital services remove traditional boundaries, and that in turn makes it easier to expand the addressable market,” Courbe concluded. “But this should be done carefully and where there’s a natural link (e.g., accounting, payroll, lending, cash management).

“Institutions that expand their proven business model into new related markets will likely see greater retainment and broader data sets, potentially leading to creative new product opportunities and sustainable growth.”