Teslar Software, provider of lending process automation tools for community financial institutions, today shared commentary on what most significantly impacted the lending landscape in 2022 as well as the primary trends for community institutions to watch for in 2023.

More community banks will embrace indirect lending to diversify portfolios and keep business local.

Community institutions will need to diversify their portfolios and offer new services to businesses as rising rates continue to make lending more competitive. While the lending landscape is inordinately crowded for both commercial and small-dollar loans, there’s still a notable need for more accessible, responsible financing options for medium-sized purchases. To fill this gap and create a new revenue stream, community banks should break into this untapped market of indirect lending.

Most banks, when they hear indirect lending, think of the auto industry. However, local small businesses are offering their customers financing for purchases like farm equipment, pools and spas, jewelry stores, powersports, HVAC and more through large banks at high rates. Community banks have an opportunity to become immersed in this market by partnering with local businesses for indirect lending, which can drive more business back to the bank and keep funds local within the community.

Cost-effectiveness has been a concern for community institutions when it comes to indirect lending offerings. Fortunately, there is now technology available to simplify and streamline this process. Local institutions can offer better rates to their small business customers, funds stay local and banks generate new business with minimal lift to their team. 

Banks will face pressure to provide a digital experience that rivals branch interactions.

Being able to provide a personalized touch has always been a differentiator for community banks, who are now being challenged to make sure their digital offerings reflect that same level of personalization offered in the branch. To retain loyalty next year and beyond, community banks must prioritize a digital experience that is as strong as their in-person offerings.

This should be an even higher priority for commercial customers and their lending experience. Customers expect the ability to seamlessly manage their loans via digital channels in a way that still reflects their loan officers know them and understand their needs. This doesn’t mean things like automated emails on customers’ birthdays, but rather utilizing functionality like real-time status updates on loans, secure document upload portals and automated reminders for employees.

Operating with less staff will cause banks to rely more heavily on technology.

Between national talent shortages and seasoned bank professionals continuing to retire en masse, community institutions are struggling to maintain operations. Employee longevity has also seen a decline; people are job hopping more frequently, causing knowledge transfer gaps. This problem is often exacerbated in rural communities, which typically have a smaller talent pool than major cities.

Many banks are more widely embracing technology to mitigate resource restraints, helping them accomplish more with the employees they have. Digitizing processes and automating workflows can optimize efficiencies and save significant time. Technology can also help ensure new hires get up to speed faster, including getting to know the banks’ customers. Tools like sophisticated CRM systems and digital communication options can help bridge this gap more quickly and effectively. Plus, leveraging modern technology and automation allows employees to spend more time talking to and deepening relationships with customers, and less time on tedious, manual processes.

“To succeed in 2023, community institutions must be nimble, tech-forward and embrace change,” said Joe Ehrhardt, CEO and founder of Teslar Software. “Modern technology has the power to enhance, not replace, human relationships, allowing employees to spend more time on the activities and conversations that matter most. We’re confident that despite any upcoming challenges next year, community banks will continue to step up to serve their local communities – it's what they do best.”