Mobile business lending is emerging as another step in the expansion of digital banking, allowing small business owners to apply for financing directly from their smartphones. With customers already using mobile devices for activities ranging from bill payments and check deposits to account opening and P2P transfers, financial institutions are looking for opportunities to extend mobile convenience into more complex banking products.
Bank of America is betting that small business loans can make that transition. Its mobile lending experience gives business customers the ability to apply for financing while away from a branch or desktop computer, potentially making access to credit more convenient for entrepreneurs who increasingly manage their businesses on the go.
Business loans on your mobile device. Is it progress or a solution looking for a problem to resolve?
If you’re like most people these days, you probably do a lot of business on your mobile device. Whether you’re using it to check email, conduct research, or stay in touch with clients and customers, chances are good that you’re spending more time on your mobile device than you are on your desktop computer.
No one can argue with the importance of mobile banking, mobile bill pay, or P2P payments on a mobile device, but will business loans on mobile gain traction? Bank of America thinks so, it will be interesting to watch.
• “Our new small business mobile lending experience delivers a convenient, on-the-go solution to meet the needs of today’s busy entrepreneurs,” said Sharon Miller, head of Small Business Banking at Bank of America. “Our high-tech, high-touch approach provides our 3 million small business clients the capability to bank how, where and when they want – including applying for financing anywhere, at any time. This is another way we are providing a competitive advantage for our clients.”
Will the market rush towards borrowing on their mobile devices? There are plenty of mobile use cases across the banking spectrum.• In 2016, mobile banking customers logged into their accounts nearly 3.8 billion times.
• During that same period, customers made more than 25 million P2P transfers and 105 million mobile bill payments, a growth of 64 percent and 28 percent, respectively, over 2015.• Customers also used their mobile devices to deposit more than 103 million checks, receive nearly 1.1 billion text and push alerts, and access their free FICO scores 15.6 million times.
• More customers are opening new accounts through mobile, with sales increasing by 38 percent over the past year.
But, as Groucho Marx once asked: “Will it play in Peoria?” as a measure of acceptance in middle America. Taking a loan, personal or business, requires thought, planning and market knowledge. Bank of America may have a winning product for businesses that require convenient borrowing. The app will certainly be easier than a branch visit, though we will have to see if it outpaces the standard desktop pc.
The rapid adoption of mobile banking demonstrates that consumers and business owners are comfortable using smartphones for a growing range of financial activities. However, applying for a loan differs significantly from checking a balance, depositing a check, or sending a payment. Borrowing decisions often require customers to consider rates, repayment terms, cash flow, and the broader financial needs of their businesses.
That does not mean mobile business lending lacks a compelling use case. For small business owners who already conduct much of their work through smartphones, the ability to begin or complete a loan application without visiting a branch could provide meaningful convenience. Mobile access could be particularly useful when financing needs arise while an owner is traveling, meeting with customers, purchasing inventory, or otherwise away from a traditional workplace.
The question is whether customers will prefer smartphones over desktop computers for a financial decision that may require more time and consideration. Bank of America’s offering provides an opportunity to test that behavior at scale.
Ultimately, the success of mobile business lending will depend less on whether the technology works and more on whether it matches how small business owners actually want to borrow. If customers embrace the convenience, mobile lending could become another important component of the increasingly digital small business banking experience.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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