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kabbage buster
Tompkins Financial marries online biz lending with home-grown credit analysis By Steve Cocheo, executive editor
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ompk ins Fina ncia l’s a nnua l report bears the slogan, “Locally focused; A world of possibilities.” That was part of the $6.2 billionassets firm’s thinking when it adopted a web-based commercial loan application system this year called “Lightning Loans.” The company, with four subsidiary banks in New York and Pennsylvania, is a traditional community banking business. Yet, just as local retailers potentially compete with Amazon and Walmart.com, Tompkins and other commercial lenders face competition from Kabbage and other national, business-oriented online lenders, promising fast service with minimal hassle. Clients increasingly want the same convenience from local providers. Kabbage, for example, promises up to $150,000 in business credit in ten minutes.
At Tompkins VIST Bank, a $1.6 billionassets subsidiary, in Wyomissing, Pa., a new generation of clients has been rising to the top positions of local small businesses, according to Neena Miller, executive vice-president and chief credit officer. Miller says the new generation wants the convenience of modern technology from their local lenders, and the bank wants to provide faster ser vice while maintaining local connections. A year and a half ago, the parent company began evaluating web-based services that could help its subsidiary banks deliver what customers desired. It found a service that could integrate with existing systems and credit standards—as a pure technology play, not a substitute for the banks’ own lending. In January, it began rolling out Lightning Loans with Tompkins VIST. Miller says the new service has been well received. Customers can access Lightning Loans directly through the bank website and fill out the application on handheld devices and computers. “We’re still a community bank, and we are still working to be high-touch with our customers,” explains Miller, a 30-year banking veteran. 28
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Fit to need, not product Miller says the bank did not want an online version of the traditional paper application. That would have been cumbersome and not the faster experience customers wanted. Instead, the bank selected offerings from Mirador, a technolog y company ba sed in Por tland, Ore. Mirador streamlines the up-front aspects of applying for credit, and tailors its online process to the needs, policies, and credit practices of the client bank. Trevor Dryer, cofounder and CEO, says Mirador seeks to get away from the traditional structure of credit applications. One element of this is not giving customers the choice of what type of credit to apply for. He says customers usually don’t know what type—term loan, line of credit, etc.—would serve their needs. Mirador’s approach is to get customers to describe what and how much they need. The system adapts to fit those needs to bank products. Wherever possible, data—like IRS data— is pulled into the system electronically, and, where doable, from online sources. “Something we really appreciate is the ease of gathering information for our
October/November 2017
clients,” says Miller. Customers can typically complete the application process in about six minutes, she says. The bank’s website promises 15, but it is generally faster. The site promises decisions “in days. In many cases, even quicker.” Miller says the bank’s small business loans often fall within the range of credit that can be granted on an individual credit officer’s authority, so it is not necessary for online applications to go to loan committee. Of the some 100 loans Tompkins VIST had processed through mid-summer, she says, all were typical. “I don’t see the needs of our clients changing,” she continues. “This is breadand-butter community bank lending.” While Lightning Loans provides much of the speed promised by online lenders, Miller says there is an important difference: rates. Online lenders may offer speed, but pricing is often higher. “It gets very expensive for the borrower,” says Miller. “We’re still doing business in our community banking world. So we’re still charging traditional market prices.” A longer version of this article can be read at tinyurl.com/IdeaExchange1011
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Clients expect digital