Banks now need a firm sense of their purpose

The issue is further compounded by the lending rules related to the emergency funds imposed by the government. As reported, only businesses that usually do not qualify for a commercial loan can get access to emergency loans. That is why many banks are forced to apply their usual commercial terms in many instances, resulting in a devastatingly low number of pay outs so far. This is especially disturbing, as according to the BBC News, 800,000 businesses are at risk of going out of business.

Many businesses are facing major disruption and have been forced to take dramatic measures to keep their companies alive, from radical cost cutting, to applying to the coronavirus furlough scheme, to quickly finding new ways of generating revenue. Thus, the last a business owner wants now is to be let down by their bank. All the investment that went into brand building and public relations in the past by banks can quickly evaporate when business customers are in survival mode and are not treated fairly. Customers will remember very well who truly supported them when it mattered.

According to the coverage by BBC News, so far it seems that many banks have not understood that operating as usual is not the right call now. Instead, the U.K. fintech community came to help and initiated bottom-up projects within days that aimed at helping small businesses to survive, such as:

Banks are essential pillars of money transmission and thus play a unique role the economic and societal system. They receive unique advantages, such as deposit protections and regulations that control supply. Now more than ever, banks are accountable to give back to society by relieving businesses economically and by ensuring an efficient distribution of emergency funds.

Successful banks have a clear idea about their reason for existence, their fundamental purpose beyond the shareholder value-oriented chase for returns. Customers place great importance towards banks that stay true to their values and their “why”. They expect that banks fully act for the clients’ benefit. Making excuses is no longer an option. It goes without saying that even with suboptimal guidance by the Treasury, there has never been a more important time for banks to lead by example.

How leading banks are taking action

Late-fee and overdraft-fee waivers, as well as special assistance to clients in need, will hopefully be adopted by more and more banks. While they need to act within their own constraints and risk models, banks now have plenty of opportunities to demonstrate their social mission.

There are many instances proving that banks can fortify their position as trusted entities that not only keep customers’ money safe, but are there for them when they need it most. Denying Covid-19 loans is not the right move when purpose is a mission-critical asset.

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