Do small banks have an advantage in lending?

A small lender is also more likely to be personally involved in qualifying for a mortgage. They're more likely to roll up their sleeves and do whatever it takes to get your mortgage approved. This makes the lending bank a kind of community to help SMEs solve other problems in their growth trajectory. Many community banks and credit unions have kept their doors open even when national banks moved to the city.

There is no one-size-fits-all approach that fits all banks and markets, but banks that rethink their SME lending businesses can increase their market share and promote profitable growth. These new megabanks took advantage of their size and full range of financial services to take advantage of rising home prices and the demand for mortgage bonds. A key element is to set the target customer segment and the value proposition so that the bank can grow profitably. Digitizing the performance monitoring not only of the portfolio, but also of the core models, the area of work of the relationship manager and the business in general allows banks to gain capital efficiency, make staff more efficient by reducing the time spent extracting and reporting on data, and reducing the number of breaches ensuring timely action, for example in relation to model corrections and customer performance.

Consider the case of a large European bank that saw both challenges and opportunities in the credit market as a result of changing customer needs, the disruption of financial technology and other competitive pressures. Previously, fintech companies and big tech companies were leading the disruption of lending to SMEs, but now more banks want to offer a suite of services, including, for example, billing and payroll processing. While large banks keep most of their high-level staff working in remote corporate headquarters, the CEOs of community banks and other senior officials work in the main offices located in their community. The recent wave of bank mergers has reduced the ranks of small banks, raising concerns that small businesses may have difficulty accessing bank credit.

Since there is no universal solution for credit models, banks and lenders must identify and design the lending process in a way that aligns with their business aspirations and objectives. Despite the opportunities ahead, banks often struggle to create the right credit solutions for their SMB customers and reduce the cost of their service.