Executive Summary

Financial institutions and their business customers are increasingly at
cross-purposes in the digital age. Business stakeholders have sky-high
expectations from their banks because they’ve become accustomed to the
instant goods and services they receive from tech giants like Amazon and
Apple without the hassle of having to leave their homes or offices or to deal
with archaic forms or processes. And they want that same level of seamless,
friction-free service from their financial institution.

Banks, on the other hand, are still dealing with complex regulatory burdens
and often antiquated and clunky legacy technology as they try to meet the
evolving needs and demands of their business clients. They’re also fending off
fintech startups and challenger banks that are aggressively going after their
customers — 60% of new revenue growth is going to new entrants in the
banking space.

It all makes for frustrations and tensions for banks and entrepreneurs alike.
They’re miles apart when it comes to expectations versus deliverables. The
rate of abandonment in the financial services industry can be as high as a
staggering 75% as irritated would-be clients simply walk away when trying to
fill out forms or sign up for financial products online.

It’s clear that banks and financial institutions are facing a profound threat to
their very existence if they don’t figure out quickly how to retain and attract
new customers with the type of frictionless service they’re demanding. Banks
must close the expectation gap and give clients what they want when they
want it, without anyone ever needing to get in the car and drive somewhere.
Never before has the old adage “the customer is always right” been more true
for the financial services industry.

Business banking clients are always right. And the time is now for banks to
innovate, evolve and re-invent themselves to attract and hold onto them.


Business owners/stakeholders are like anyone else seeking goods and
services in this era of digital instant gratification. They want convenience,
customized service, scant paperwork, and as few hassles as possible — and
that’s true for their banking experiences, too. In terms of human interaction,
they want counsel and advice only from trusted experts, and at their

Their banking partner, in other words, will have to work hard to remove
geography as a barrier — bankers will have to come to them, and not the
other way around, which is still an expensive proposition in terms of time and
cost. Smaller banks will need to broaden their geographic footprint without
opening new branches. And they must endeavor to keep the relationship
with their small business clients front and center by adopting technology
that allows their employees to do more for their customers. And, critically,
they’ll need to differentiate themselves from their large competitors by
spending wisely on technology and innovation.

This whitepaper is Liveoak’s detailed look at what business owners need and
how financial institutions can best meet those needs. It’s informed by insights
from time spent on the front lines of banking conferences, in intensive
meetings with bankers and clients, and in steady consultations with
executives at financial institutions and those who helm small businesses
about what challenges they’re facing and what’s looming on the horizon for
business people and bankers alike.

There are additional layers of requirements on top of ease and convenience.
The business buyer’s selection of the right banking partner will determine
whether orders get filled, new clients get signed on, employees get paid and
operating costs are managed in a quick and efficient manner. Indeed, a
responsive and dependable banking partner is integral to the very survival of
many businesses, and banks should position themselves accordingly. Most
business owners also want to maintain control over their company’s finances,
and to know any and all of the firm’s financial data is safe and secure. As a
result, banks must ensure that trust is injected into the DNA of their relationship
with their customers and that their relationship managers consider customer
satisfaction one of their primary responsibilities.

Most banking apps make it easy to check balances, pay bills and transfer money.
But it’s much more difficult to conduct complex banking transactions
and multi-party account openings that often require clients to come to
branches or meet in person to complete forms due to financial regulations
and compliance demands.

Nonetheless, business buyers and owners are increasingly expecting the
same level of convenience that they experience from a one-click purchase at
Amazon – from their bank.

And unfortunately, commercial and business banking clients still often have a
harder time opening a bank account than the average retail client, mainly
due to the complex, fragmented legacy technology that’s still in place at
many banks. Banks are equally frustrated by the difficult and lengthy
onboarding requirements when bringing on new clients or meeting the
evolving needs and demands of existing ones. Some recent research
suggests customers could face waits as long as six weeks to be onboarded in
2020. That’s an unacceptable way of doing business — not to mention
expensive for both banks and banking customers alike.

This poor customer service is clearly the result of traditional labor-intensive
manual processes. Would-be clients often become so aggravated trying to
fill out clunky online forms that they simply abandon them mid-completion.
Abandonment rates, in fact, can be as high as 75% in the financial services

All of this leads to higher costs. And that’s put more pressure than ever on
banks to step up their game, including initiating cloud migration. At the
same time, customers want to bank the way they want, in ways that are most
convenient to them. If their branch is miles away and getting there involves a
long commute in heavy traffic, they expect and increasingly demand their
banker come to them.


Big banks have big innovation goals and big
budgets to pursue them. Community and
regional banks need to leverage technology to
extend the personal relationships that are their
competitive advantage. Banks need to deliver the
same high-quality, personal service without
making customers come into the branch.”

– Jason Henrichs, CEO of Alloy Labs, a
consortium of community banks driving
innovation and adopting new


The benefits are clear. Investing in new business banking technologies and
ensuring customers are rarely inconvenienced will lead to lower drop off rates
in account openings, increased close ratios for new business and a dramatic
improvement in customer service.



According to the U.S. Small Business Association  there are 30.2 million small
businesses comprised of 500 employees or less in the United States — a
mammoth 99.9% of all companies in the country. They employ 58.9 million
people, making up 47.5% of the total employee workforce. They, therefore,
represent a huge opportunity for savvy banking partners that are willing and
able to meet their needs.

The SBA reports that many of those businesses are in the professional,
scientific and technical services sectors, construction and real estate, rental
and leasing. The most entrepreneurial generation is older Gen-Xers and Baby Boomers,
followed by younger Gen-Xers and millennials. In other words,small businesses are
helmed by people who have grown accustomed to the Amazon shopping experience, and
they want it from their banks.Some other interesting factoids? Women own 12.3 million
of those small businesses, and women of color own 47% of all women-owned small
businesses. And immigrants have founded 55% of the unicorn startups in the
United States.

These business owners are courageous, industrious and innovative — and
truly are the backbone of the American economy. They want, need and
expect a trusted and nimble banking partner along with them on their
journey that will help them simplify their operations so that they can focus on
succeeding, thriving and expanding.

What Businesses Want

Businesses have a full range of banking needs.

They require basic services like checking and savings accounts, credit cards,
discounted employee checking accounts and online banking services. They
need lending services like lines of credit, term loans, SBA loans, commercial
real estate and equipment leasing.

Other needs include wire transfers, merchant services, payroll services,
retirement accounts and insurance. Business customers are also more
branch-dependent than retail customers, preferring a partner with whom
they’re on a first-name basis. And increasingly, they want those partners to
come to them, and not the other way around. Their time is too valuable.

A 2019 survey of 600 business owners
with annual sales revenues of $20
million or less, conducted by nonprofit financial consulting firm BAI,
illustrated some of their concerns — and their frustrations.

A majority of respondents said they visited a physical branch to open new
deposit accounts, apply for loans, request merchant services and set up other
financial services, but most reported wishing they didn’t have to. About 70%
of them said they’d rather open a deposit account online, while nearly 50%
said they wanted the option of taking out a bank loan online.

The survey also found that the Top 3 reasons a business owner would choose
a different bank are “lowest fees, best rates and understanding their business
needs.” As for improvements they’d like to see when it comes to banking? A
better “omnichannel experience,” customizable services and better tools to
respond to their financial needs, real-time help handling everyday banking
and transforming branches for better in-person experiences with experts to
help them achieve financial goals.

“One of the most important priorities we uncovered is that business owners
expect a smooth omnichannel experience, which they are not receiving
today,” said Karl Dahlgren, managing director of research for BAI, said in a
news release that accompanied the report. “Businesses need their financial
services provider to make their banking experience easy, so they can focus on
running their business.”

The J.D. Power 2019 U.S. Small Banking Satisfaction Study
found that 61% of small business customers now use their bank’s mobile app
compared with 53% in 2018. More importantly, that growing majority of mobile banking
users are reporting significantly higher levels of satisfaction than those who do not
use mobile banking. This is all critical information for banks determined to
win over or retain customers.

Another interesting tidbit: The age of small business owners is a factor when
it comes to banking. The J.D. Power study found that 71% of small business
owners under the age of 40 have embraced mobile banking offerings
compared to 54% of respondents who were 40 or older.

But the study also determined that digital-only customers are significantly
less satisfied than those who bank digitally and also use branches, meaning
there’s still work to be done to improve the digital banking experience, and
that there’s still a place for face-to-face banking in the omnichannel mix.
The BAI study also revealed that banks have a built-in advantage when it
comes to customer loyalty — it found that 79% of business owners bank at the
same institutions where their personal accounts are based. Banks therefore
have the clients, and those clients are loath to leave. And so it’s paramount
they reward that loyalty by ensuring the needs and demands of those
existing customers are being met.


How Banks Must Stand Apart
from the Crowd

Digital banking is becoming ever more competitive. Deposits in banks, and
commercial and industrial lending, are generally declining. And so banks
must work harder than ever before to attract new clients, hold onto existing
ones and increase wallet share.

A war is being waged for deposits
as a wide range of players that include big
banks, credit unions, fintechs and community banks offer high-interest
savings and checking accounts via apps and websites.

The No. 1 reason why clients switch from traditional banks to digital banks is
convenience, according to the BAI report, and 60% of new revenue growth is
going to new entrants in the banking space — startups, alt-lenders and big

The banks that are bucking the trends and winning new clients are doing so
by using technology, including cloud solutions, to enhance relationships, not
replace them.

Small community banks are also facing challenges as entrepreneurs look to
launch their businesses.

The approval percentage for small business loan applications at big banks —
those with more than $10 billion in assets — rose a tenth of a percentage point to
reach 28.2% in December 2019, according to the latest Biz2Credit Small Business Lending Index.
That’s a new post-recession high.

The 2019 fiscal year was also bullish for Small Business Association loans. The
approval rate at small banks, many of them SBA-approved lenders, climbed a
tenth of a percentage from 50.5% in November to 50.6% in December.
Smaller banks process tons of SBA loans, which reached record levels in 2019.
Lending at regional and community banks remains strong, but those smaller
banks must now compete head-to-head with their bigger competitors, which
are investing heavily in digital technology. Smaller banks therefore must
either partner with fintechs or spend money to develop their own
technologies. Indeed, the threats to their survival are plentiful.

Threats to Banks

According to a new PwC report on global banking in 2020, 81% of banking
CEOs are concerned about the speed of technological change — higher than
in any other sector. Successful disruptors are offering a better customer
experience and greater convenience at a much lower price, the report found.

Other top threats include increased regulation due to a rise in financial crime
and fraud, poor customer service due to low digital capability and operational
inefficiencies, and the loss of customers to those disruptive, digital-first
competitors. And many banks still admit to using fully manual processes for
collecting and managing data — 18%, according to a recent report.

That research also reveals that slow and manual onboarding processes could
lead to commercial and business banks individually losing $4.5 billion in
revenue in 2020 if they don’t bring their technology and systems up to date.
What’s more? Onboarding times rose by an average of three weeks over 2019.
If the trend continues, customers could face six-week waits to be onboarded
in 2020.

Commercial and business banks that rely on traditional processes to onboard
new clients are in real and present danger of becoming obsolete, especially in
the face of threats from challenger banks.

The Path Forward

As they hit the ground running in 2020, it’s clear financial institutions have a
lot of work cut out for them to cater to businesses since myriad research
suggests they’re not being properly served. Banks must work to ensure
businesses are getting the seamless digital services they need and are
increasingly demanding. Their very survival of many banks now depends
upon how fast and reliably they can innovate. Here at Liveoak, we’re working
to ensure that happens.

Our company provides a virtual business platform that enables enterprises
and their customers to conduct business without having to be in person.
We’ve created a secure online environment where banks, wealth
management companies and insurance providers can safely operate and
provide their customers with a convenient, virtual experience.

In 2019, we engaged with one of our large banking clients to roll out a virtual
banking experience for their small business banking customers. They wanted
to offer their customers the ability to bank however and whenever they
wanted, but they also had to solve two critical problems: They needed to
replace the need for customers to travel to a branch or have a banker come
to their office to do business, and they wanted to offer a white-glove service
that would make it easier to discuss and complete complex paperwork with
their clients in a virtual setting.

One Fortune 500 company with more than 3,000 branches and 75,000
employees is implementing new solutions in stages. The first stage was “user
experience testing” — crucial for gathering feedback on how, when and
where to implement new solutions across their customer base.

We visited the bank’s corporate headquarters and were invited into a
screening room to witness live user testing of Liveoak’s virtual business
platform. The screening room had two gallery rows of desks and a one-way
glass wall overlooking a small conference room. Business and product team
owners, innovation team members and bankers were in the screening room,
ready to engage with prospective customers in a Liveoak virtual banking

A mock prospect was sitting at a table in the adjacent room with a laptop, a
Liveoak virtual banking session open on their screen. Next to the prospect sat
a user experience proctor ready to record questions and feedback. The
setting was ideal to simulate a virtual remote banking experience.

This was a blind test; the small business banking prospects were using
Liveoak for the very first time to engage with a banker to discuss the bank’s
products and services. The bank recruited a list of real prospective customers,
and each test lasted approximately 45 minutes, including a Q&A session.
During the test, the banker leveraged various components of the Liveoak
platform (video, audio, real-time forms collaboration and e-signature) to
complete three banking transactions together: the opening of a new
account, an ACH transaction and a wire transfer.

Witnessing the unfiltered reactions was both fascinating and incredibly
useful. In fact, several insightful feature requests came out of the tests that
we brought back to our development team.

At the end of each session, the proctor asked about the experience with
Liveoak. Overwhelmingly, the prospective customers preferred the virtual
“in-person” experience to a phone call. And they also reported they’d rather
use Liveoak than come into a branch or have a banker come to them.
One participant also said it prevented him from abandoning the entire
process, or committing a dreaded “dropoff,” as it’s known in the industry:


“It was very good because it kept me engaged
and it pulled me through the application
process… had I been stuck and on my own, I
would have just disappeared (and not
completed the application).”


The biggest takeaway by far was that it helped us eliminate all the risks in the
deployment of new technology across the bank and resulted in
overwhelming customer adoption and engagement. This client-driven
information gave us both valuable insight into deploying our platform for our
banking client, and also laid the groundwork for expanding into new business
verticals inside the bank: wealth management, mortgage and remote notary,
to name just a few.


The past year saw a wave of challenger banks entering the market. How
those banks will differentiate themselves from their bigger, more established
legacy competitors will take centre stage in 2020. How they serve small
business customers who currently feel under-served or badly served will likely
be key to those endeavours.

Banks have a genuine complexity problem that includes confusing and
repetitive application forms, onboarding processes designed for the last
century and identity verification methods that force people to waste hours
commuting for appointments that may only last 15 minutes.

At the same time, banking customers are increasingly demanding
convenience in simple, quick and customized ways, much like when they
order a ride on Uber, choose accommodations on Airbnb or select a movie to
watch on Netflix or Amazon. They’re no longer willing to tolerate

Liveoak’s flexible cloud technology platform leaves these difficulties in the
past, marrying technology with a human touch when it matters most to
deliver a state-of-the-art digital customer engagement experience.
We minimize complexity and reduce friction and error. We enhance
everything that’s beneficial — and reassuring — about doing business
face-to-face. And we use technology to declutter, speed up and modernize
our clients’ customer interactions. It all enables them to exceed service
expectations and, crucially, attract more business.

Our cloud platform also fits seamlessly into our clients’ current technology
ecosystem and is designed to meet even the most stringent compliance, risk
and legal requirements of financial institutions. Every engagement moment,
keystroke, photo and electronic signature can be fully captured using our
trademarked Complete Audit™ system, and our technology is guarded by
some of the strongest, industrial-grade security available on the market today.

That’s why we’re trusted by some of the largest enterprises in the world with their
most important customer journeys.

Financial institutions can and must innovate to help their small business
clients thrive. Liveoak is ready and eager to help them do so.

Contact Liveoak

Please feel free to contact us through our website or directly via hello@liveoak.net .


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