This week U.S. Bank is launching two small-businesses offerings that seek to outdo fintech competitors like OnDeck Capital and Kabbage, which have been scarfing up market share from banks.
The Minneapolis bank has built an online small-business-loan platform that can render loan decisions within a day. And it has created a small-business credit card with flexible rewards that is being rolled out Tuesday.
The online loan was “completely crafted from scratch in order to look and feel fintech-ish,” said Scott Beyer, who has the unusual title of agile experience owner for the Business Banking Experience Studio at U.S. Bank. This newly formed group develops digital-first solutions for business banking.
“We were striving not to compete with traditional banks but to compete with and leapfrog the fintechs,” Beyer said.
While filling out a loan application in a branch with a banker takes 30 to 45 minutes, the online application process lasts about five minutes and can be done on a smartphone, tablet or PC. Customers can sign the loan documents online and receive funds electronically — often on the same day.
“We’ve been interviewing business owners every other week, and we heard from them they wanted something fast, but they wanted simplicity,” Beyer said. “They never need to set foot in a branch or talk to a human being if they don’t want to.”
The interest rates range 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 loan decisions will be made completely by the software, which is based on the bank’s existing underwriting process. Loans that appear riskier will require manual intervention.
U.S. Bank is not using artificial intelligence in this lending software yet, but “that’s something we’re certainly looking at,” Beyer said.
The new card, which is called U.S. Bank Business Leverage, was co-created with small-business owners, according to Heather Wolfsmith, senior vice president and head of the small-business card division at U.S. 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 love but that would also be profitable.”
The bank also retained small businesses to name the product, advertise it and generate print materials for it.
What the small businesses most wanted, according to Wolfsmith, was flexible rewards.
“Most points credit cards reward spending that isn’t material to small businesses—they reward petty cash like restaurants and office supplies,” she said. The small businesses in U.S. Bank’s focus groups wanted a product that awarded points for the things they actually spend money on, like raw materials, medical supplies, machines and inventory.
“If I have a restaurant and one month I have to buy a new pizza oven and the next month I’m paying my taxes, the product automatically adjusts to give bonus points on those different kinds of spending,” Wolfsmith said.
The business owners also asked for the ability to see what employees are doing with their cards.
“Every small business had a situation where an employee abused a card,” Wolfsmith said. “It’s definitely top of mind where they want greater transparency or spending controls so they can limit spending in specific categories and get more visibility to that.”
The bank already provides this on all its small-business cards, she said.
