US Bank takes on fintechs with new online lending, card for small businesses
This week, US Bank is launching two offerings for small businesses looking to outperform fintech rivals like OnDeck Capital and Kabbage, which have snatched market share from banks.
The Minneapolis bank has created an online small business lending platform that can make lending decisions in a day. And it’s created a small business credit card with flexible rewards that will roll out on Tuesday.
Online lending was “completely designed from the ground up to look like fintech,” said Scott Beyer, who carries the unusual title of Agile Experience Owner for US Bank’s Business Banking Experience Studio. This newly formed group develops digital solutions for corporate banking.
“We were trying not to compete with traditional banks, but to compete and surpass fintechs,” Beyer said.
While completing an in-branch loan application with a banker takes 30-45 minutes, the online application process takes around five minutes and can be done on a smartphone, tablet or PC. Clients can sign loan documents online and receive funds electronically, often the same day.
“We interviewed business owners every two weeks, and we heard from them that they wanted something fast, but they wanted it simple,” Beyer said. “They never have to set foot in a branch or talk to a human if they don’t want to.”
Interest rates vary from 4.99% to 11.99% for loans and from 6.25% to 13% for lines of credit. The maximum loan is $250,000.
Some of the lending decisions will be made entirely by the software, which is based on the bank’s existing underwriting process. Loans that appear riskier will require manual intervention.
US Bank isn’t using artificial intelligence in this lending software yet, but “it’s something we’re definitely considering,” Beyer said.
The new card, called US Bank Business Leverage, was co-created with small business owners, according to Heather Wolfsmith, senior vice president and head of the small business cards division at US Bank.
“We brought customers and prospects together to create their ideal credit card, within certain parameters,” she said. “They had to design a product that they would like but also be profitable.”
The bank also hired small businesses to name the product, advertise it, and generate printed materials for it.
According to Wolfsmith, what small businesses wanted most was flexible rewards.
“Most points-based credit cards reward expenses that aren’t important to small businesses — they reward petty cash like restaurants and office supplies,” she said. Small businesses in US Bank focus groups wanted a product that awarded points for things they actually spend money on, such as raw materials, medical supplies, machinery and inventory.
“If I have a restaurant and one month I have to buy a new pizza oven and the next month I pay my taxes, the product automatically adjusts to give bonus points on these different types of expenses,” said said Wolfsmith.
Business owners have also asked for the ability to see what employees are doing with their cards.
“Every small business has had a situation where an employee misused a card,” Wolfsmith said. “It’s certainly their priority when they want greater transparency or control over spending so they can limit spending in specific categories and get more visibility in that regard.”
The bank already provides this on all of its small business cards, she said.