Commercial Lending Software: Can You Be Great Bank Without the Right Tools and People?

Mitch Woods: Welcome to this episode of Lending Made Easy.

Today we’re gonna tackle a pretty fun concept: what makes a good commercial bank today? 

Banks have this reputation of being slow to implement and adopt change. If we’ve learned anything over the last two to three years, it’s that everything has changed. And, the banking industry hasn’t been immune to these changes. 

With that being said (and with the changes that we’ve seen from the last few years—and even looking back prior to that), the question really is: today, what makes a good commercial bank?

Banking experts Brian Peckinpaugh and David Catalano join me for this conversation about financial institutions and commercial lending software. They have seen a thing or two in the digital lending space. 

David, we’ll start with you. In your mind, what makes a great commercial bank today? 

David Catalano: It’s all about the commercial customer experience.

If you’re a commercial customer and you go to your bank and you just continue to say "wow" then that’s a great commercial bank.

Now, how do you get there?

From my perspective, you get there by empowering your employees to make their work easy, to make their work fast, to make their work efficient. The way I would go about doing that is I would consider the following questions:

• What is my policy?
• How do I underwrite these loans?
• Do I underwrite all of my loans the same way?
• Do I segment my loan portfolio?
• Do I have a niche that I’m really good at that I know really, really well?

Then, I would look at my process. I would think about how do I get my loans through that process from the origination part (where I’m just talking to the customer) to the underwriting, documenting, funding, servicing, caring, and feeding post-closing.

What commercial lending software do I deploy to facilitate all of those steps? 

I would think about simple things, such as how many times do I re-key the same information? And, through the adoption of new policy processes and technologies, I’d start optimizing everything. 

Technology, like commercial lending software, is just a tool that you use to optimize and run extremely efficient processes. Taking these steps will create real “wow” experiences for your commercial loan customers. 

If you think about it, if I’m borrowing $4 million, there’s not a lot I have to do relative to all the work required to get a commercial loan done. Right? So the borrower doesn’t have much to do in that process.

It’s really empowering the employee through optimized process, optimized policy, and then deploying the right technology.

Brian, what are you, what are your thoughts? 

Bryan Peckinpaugh: I agree with everything you said, but I’m gonna actually come at it from a slightly different perspective.

I think what makes a good commercial bank today is the same thing that has always made a good commercial bank and that’s the people. They’re your differentiators. They are the driver towards a lot of what you talked about, David.

You mentioned what’s a specific niche that I’m good at? The reason I’m good at a specific niche is that I probably have a handful of people on my commercial loan team who really, deeply understand whatever that niche is and how those customers’ businesses operate.

They know it better than people at our bank’s competition. So that’s why I’m able to serve customers in that niche better.

I’m differentiated by having revenue management that provides, as you said, that “wow” experience. It’s their interactions and engagement with the customers that they’re selling. That’s the real differentiator.

People still buy from people they like, right? That’s the same as it’s always been. It’s about the people—and this gets right to your point, David, about loan origination.

A great commercial bank’s focus, therefore, needs to be on how do we empower our bank teams to bring that value every day? How do we keep them happy so they don’t go to work for the bank down the street? How do we put value in an echo chamber? How do you take what might be in one person’s head and drive that through the entire organization?

That’s where you get the compounding value out of the solutions, like commercial lending software, that you’re talking about. 

You need those people that know the process and the procedures to sit down and talk about it. To partner with others in the industry from a vendor perspective or other partners to the solution sets to maximize, right? Because the vendors will know other aspects. 

How do you bring that together to modernize and maximize? To do you, you always have to keep an eye on your people because they are the value of the organization.

They are who knows what drives the institution forward. They are what brings the business in. We’ve gotta be using the technology to empower them as much as possible.

David Catalano: Yeah, I think that’s a really good point, Bryan. It is the people and every time we go to a bank and they’re doing really well, the people are awesome. Have you noticed that? They really are, the people are the differentiator.

Bryan Peckinpaugh: It’s interesting, right? Especially in the commercial bank, because this is different. If you start thinking about a commercial bank, you can get away with really bad process. I can get away with disjointed systems and massive re-keying of data because I can rely on the white glove service that my RM or loan officer (or whatever your institution calls them) is responsible for the experience the borrower has.

I can get away with a lot of bad in the back if my front is really, really good—and, that’s unique to the commercial experience.

When I start going into retail or even small business, the systems start to matter a whole lot more because the end client is interacting with those systems a lot more where we need to focus is on why do those high performers stay? They stay because the process isn’t terrible, and the technology is really good. That’s where I need to focus on you mentioned that “wow” experience. 

It’s all about providing the loan officer with a “wow” experience and your really good underwriters with a “wow” experience—making sure they like the systems they use, feel empowered by their commercial lending software so that they use it.

Make sure that they don’t leave you for the bank down the street, giving that bank your real competitive advantage: your bank’s people.

David Catalano: Yeah. That’s a really good point about adopting commercial lending software as a retention tool. 

I think that’s a cultural thing.

The really good people are going to be attracted to work at a bank with a really good culture and that culture’s going to want to empower and improve its people. They’re going to want to optimize processes and work conditions.

As we get older and older, more and more workers are gonna come into the workplace having always had a piece of technology in their hands—always.

There have been consumer companies out there that make that technology really hum like—like Apple, Google, Amazon, and other technology players who have invested heavily in technologies.

When you come to work, you don’t expect to have a paper-dependent process where you’re entering the same information 10 times to get something done.

You want to work somewhere more efficient than that—otherwise you’re gonna see that as not the type of place where you want to work.

Bryan Peckinpaugh: Yeah. It’s also, kind of leaning on prior episodes where we’ve talked about AI and other commercial lending technology concepts.

This is where you start to institutionalize and productize that knowledge that sits in people’s heads. You should sit down with is Susie, who maybe is an expert in nursing home lending. You should sit down with Bobby, who’s an expert in ag lending. You need to go on down the line of your commercial banking team to really start to understand the business.

David Catalano: Mm-hmm.

Bryan Peckinpaugh: You have to ask yourself, where can I start to put that knowledge into the technology? And this is where you can get a lot of power out of things like AI and machine learning. What types of products go together in this space?

David Catalano: Mm-hmm.

Bryan Peckinpaugh: Where should I be bringing in a treasury services referral? Based on the solution set that I have with a financial institution, where does that fit based on process, based on the industry we’re serving based on the products that we’re offering?

Institutionalizing the knowledge that your people have really identifying what they do inherently and have the system do that too.

When Susie or Bobby retire or move on, don’t lose that information with them. Make sure the next generation has that commercial lending software technology and that they’re used to it and leveraging those insights to make their next loan decision.

It should be second nature to them. You’ve gotta make sure you don’t lose those insights during the next transition. From a generational perspective, this type of information is built up over 20, 30, or more years and rest with your top performers. 

The right commercial lending software solution can make sure that that valuable information ends up in your systems and driving insights to the next crop that comes through.

David Catalano: Yeah, so that reminds me of an anecdote. We’re actually working now with a $2 billion bank right now and there are a few people there who don’t want to change their loan process. They think their current process isn’t broken so why should they change it?

But there’s a lot more to digital lending than just that the two or three functions that those folks are talking about, right? There’s a lot of other constituents at that bank for whom using the commercial lending software technology would make their lives a lot easier.

It’s situations like that where—if you decide not to move forward because a handful of people are happy with the status quo—it can really turn off new people coming in. 

And, this is hard on those people at your bank who haven’t been there as long. They may people that don’t have as much power because they’re newer, but they’re adding a lot of value.

This is why it’s so important—from a leadership perspective—to understand where you are with respect to other opportunities for key employees, especially your new employees that have high potential.

Mitch Woods: We see this kind of change management situation discussed in a lot of commercial banking articles. It seems like every other story coming out right now talks about the next generation of bankers replacing employees that are leaving or retiring. 

Clearly this is a really important concept related to what makes a commercial bank great. 

You all mentioned how it’s really a bank’s people and its culture of innovating, sharing ideas, and institutionalizing knowledge that makes a difference. 

I guess the final question here for both of you is this: if you are a CEO of a community bank, what should be the steps that you’re taking right now to either implement commercial lending software? What are you doing to create a strong culture? How are you marrying both to these together to prepare for the future and fight against what people in the banking industry are now calling “a war for talent.” 

Bryan Peckinpaugh: It’s people, people, people—right? It’s going in and sitting with your teams and understanding what are they like, what are they not like, what do they desperately want?

Going out and when you look for talent, not just looking for talent, but also looking for what do they expect? What would it mean to switch to a new digital lending platform? What are you not willing to lose? What tools are you using—is it a CRM? Is it a commercial loan origination solution? Is it a treasury platform? What are those things that have you anchored?

Because even if you don’t get that talented person to join your staff, during the interview process you can still get their insights into if I do these things will you drive retention and get more out of what I have.

It’s engaging with those people.

Culture start from the top down. If you express interest in those areas, you’re also going to show that you care about loan origination tools and how your financial institution spends its innovation dollars. 

David Catalano: Yeah, I would also want be very careful to make sure your employees don’t think you are going through an efficiency process just to rid yourselves of several head counts. That’s really not the optimal way to go.

You need to make it clear that what you’re trying to do is create capacity so you can do more as a team—in the same time or potentially less time. 

You need to make sure they understand that the drive for efficiency gains isn’t about reducing your head count (because that’s really not the right way to get get the right response out of your employees to get the best out of them).

You just have to be really careful managing perceptions about what you’re trying to accomplish because really what you’re trying to do is make their lives better and get them home on time (versus staying late). 

You have to be careful about how you send this message. 

Mitch Woods: Absolutely.

Well, Bryan and David, thanks so much for sharing your insights today. 

We discussed a lot of great topics, and it really is about the people and really empowering employees through the use of technology and culture. 

Thanks so much for sharing your insights about commercial lending software and commercial banking. Thanks, too, to everyone for listening in to this week’s episode of Lending Made Easy.