In the last few years, the Commercial Banking industry has undergone a dramatic transformation, turning the familiar landscape upside down. Inflation has driven down borrowing, while rising rates increased deposit flight. The CRE book continues to generate challenges as companies struggle to navigate the post-pandemic environment. Meanwhile, operational costs remain stubbornly high for both small and larger loans. And increasingly, banks are having to balance risk and growth in the face of industry consolidation and uncertainty. It’s a tricky time to be a commercial banker.

Despite the significant strides made in digital transformation over the last decade, manual processes continue to persist at many stages of the banking life-cycle. Chris McDonnell Head of Commercial Research at Coalition Greenwich notes that using “a digital interface and self-service capabilities still remains a top factor for banks’ digital platforms” even after years of investment. User expectations are increasingly driven by clients’ experiences in their consumer lives. More banks need to start thinking about customer effort in terms of the number of clicks required versus bank-centric constructs, like sales cycles and bank policies.

One of the most common areas where manual interventions persist is in underwriting and portfolio management, where we still see substantial manual data entry and regular chasing of customers for updated documents. While the promise of AI holds the potential to ease the burden, true success still requires granular data to make it work.

Unfortunately the current situation leaves nobody happy: not the banker, not the customer, and not the shareholders.

This is especially important when according to the Greenwich Market Pulse, “more than two thirds of businesses value speed of response to a loan request and transparency from banks’ digital lending/credit platforms.” Today’s rising rates and tightening credit terms do not make longstanding customers feel like their bank is sufficiently valuing their loyalty. In turn, very few small businesses place a premium on a long-term relationship as they chase the best rates, the fastest deal and the most relevant advice.

What is at the heart of the challenge? Data. It’s everywhere and nowhere all at once. Do you really know where your customers’ opportunities lie? Do you know how you can optimize their performance for the long term?

We see 3 ways commercial banks can take advantage of this moment:

1. Reflect on your best customers: Take a step back and think about your best customers. Identify which services are helping them grow, and how you can determine what fits them best. Talk to your bankers – they know who your best customers are.
2. Develop customer models: Create models of your best customers and examine their relationship lifecycle. Assess whether you have the products and services needed to attract and support these customers effectively?
3. Leverage real time data: Infuse these models with real-time data from your top customers. Devise a comprehensive plan to expand your relationships, based on giving them the best price and advice in the fastest way. Helping in their success will keep them customers for life – and they will tell their friends in the industry.

Getting started now will give the runway you need to stay ahead of the next credit cycle turn. You know it’s coming – and you can be ready to take advantage of the opportunity.