Tech lessons from a financial crisis

By the time you read this, the collapse of Silicon Valley Bank will be old news. I watched everything unravel with the unique perspective of having worked in both banking and tech for my entire career — including with venture capital-backed companies. 

It might be easy to say, “That was a big bank, and we’re community banks. We’re different.” And while that’s true, there are certainly some aspects of the SVB failure that apply to banking across the board.

Online account opening is critical

The run on SVB caused deposit money to suddenly flood the market as account holders looked for new banks. Bloomberg reported that Bank of America ended up with $15 billion in new deposits. I saw a neobank, partnered by a community bank, immediately running a Google Ad inviting SVB depositors to open new accounts. And the CEO of account opening platform MANTL wrote on LinkedIn that some of their institutions had a 300 percent increase in deposits raised week-over-week, with the majority coming in over the weekend following the SVB collapse.

While a future SVB-like frenzy is unlikely, it emphasizes that an abrupt change in events can cause depositors to immediately seek a new bank. When that happens, deposit product information needs to be readily available on your bank’s website and the account opening process should be swift and seamless. 

Don’t give potential customers a reason to leave your bank’s website simply because the account opening process is clunky (or worse — nonexistent). 

Tech borrowers will have high expectations

SVB was a mecca for tech startups, and one of the reasons was that these companies had trouble getting services from other banks. Their business models are very unique (often software-as-a-service subscription products) and they lack traditional collateral.

The reality is that companies in this sector will only continue to grow. It’s an opportunity to figure out how to manage risk and underwrite loans for such companies. Not every SVB customer was the size of Roku or Etsy — many could be perfectly sized for a community bank offering exceptional customer service.

As new industries emerge and mature, banks often need to re-think their lending strategies and risk tolerance. We’ve covered these changes in BankBeat before, such as community banks that serve the cannabis market. 

If your bank is considering tapping into the tech and startup market, the expectations for lending platform technology will be high. These companies are used to doing everything online and remotely. SVB only had branches in two states, but their customers were scattered nationwide. It’s a reminder that your reach can be a lot greater with support from online loan origination solutions.

Communication matters — a lot

Future PR majors will probably study the role of poor communications in the downfall of SVB. A botched announcement — without enough context — triggered the panic. 

Over the weekend of SVB’s collapse, CNN was running an article: “Should I move my money out of my bank? Is my money safe?” Clearly, people were wondering what everything meant. I’m guessing more than a few ended up calling their community bank on Monday morning.

As The Financial Brand pointed out, just days after the SVB collapse, “When the hits to the banking industry keep coming, reticence doesn’t cut it.”

Banks should ask themselves: If there’s a crisis, how can we communicate with our customers quickly? SVB isn’t the only example. Provisions under the CARES Act in 2020 impacted small businesses, mortgage holders, and others. Natural disasters might be another example when quick communication is needed. 

Your bank should have a way to quickly send an email to a targeted group of customers based on their account types, loans, geographic location, and other factors. The technology should be the least of your concerns; the message should be the primary focus. 

Your goal should be to provide reassurance to your customers that your bank is available and ready to help. You can also include helpful or pertinent information about your bank’s products or services. Communication plays a huge role in maintaining customer loyalty and confidence.