Providing critical support to Canadian SMEs throughout the pandemic

Jean-Yves Bourgeois, the newly announced Executive Vice-President of Business Services at Desjardins, details how the bank has relied on its communal values to be proactive in serving its SME customers during this challenging period.

Providing critical support to Canadian SMEs throughout the pandemic

2020 has been an outstanding and significant year in which many financial institutions have shown compassion and provided fast first aid packages to their SME clients who were hit hardest by the pandemic. Through a series of articles in the coming months, Efma is highlighting some best practices from banks in different geographies to show how they are supporting SMEs in a time of crisis. Desjardins in Quebec is one such example. In this interview, we spoke with their Executive Vice-President of Business Services to better understand how they have met this unique challenge.

Recent reports show that SMEs are considerably weakened by the Covid-19 crisis. What has the situation been like in your country?

The enviable economic situation enjoyed by Canadian businesses and consumers changed in the spring of 2020. As in most countries of the world, Canadian SMEs have been severely hit by the pandemic.

As a result of the widespread measures taken to contain the spread of Covid-19, the Canadian economy contracted 11.6% in April, following a 7.5% drop in March. Real gross domestic product (GDP) grew 1.2% in August, the fourth consecutive monthly increase which continued to offset the steepest drops on record in Canadian economic activity observed in March and April. However, overall economic activity was still about 5% below February’s pre-pandemic level.

Since the end of May, many businesses had begun to adapt to the new reality by shifting to teleworking, reducing hours, laying off staff, applying for government funding or seeking rent relief. While the majority of businesses in Canada were impacted, smaller businesses, which make up 98% of all employer businesses in Canada, reported being more affected. Small businesses were more likely to experience a decrease in revenue and have less liquidity, and more likely to be unable to take on more debt and to be considering bankruptcy in the current economic environment.

Revenue changes: Over half of businesses in Canada reported a revenue decrease compared to August 2019, irrespective of their employment size. However, it was more likely for smaller businesses to report a revenue decrease of 40% or more.

Debt, liquidity, and bankruptcy: Small businesses were less likely to have the ability to take on debt and also slightly less likely to have the liquidity to operate.

Employment since the start of the pandemic: Small businesses were less likely to lay off staff. However, when layoffs were made, small businesses were more likely to layoff all of their staff. These businesses were also most likely to rehire all staff back.

As has been the case all around the world, the hotel, restaurant, retail trade, tourism, information, culture, and leisure sectors have been hardest hit. Specific recovery conditions will vary by sector and region.

Fortunately, government support for small businesses has been extensive in Canada, with emergency funding programs, as well as wage and rent subsidies. So far, these measures have prevented the worst outcomes for most businesses and for the Canadian economy.

In Canada, the return to normal post-pandemic could turn out to be more difficult than expected. Despite the gradual lifting of lockdown measures, the sharp drop in oil prices and key interest rate cuts are fueling uncertainty regarding the extent of the long-term economic impacts. The significant economic damage caused by more widespread containment measures increases the risk of financial difficulties for some businesses. On the other hand, in this new business environment, many Canadian entrepreneurs are showing ingenuity to adapt to new challenges.

As a member of the International Co-operative Alliance, Desjardins shares the same ideals as thousands of cooperatives around the world. These ideals are expressed through a set of values that have defined the cooperative identity since the very start. More than ever during the crisis, our actions and decisions were defined by these values of mutual aid, responsibility, democracy, fairness, and solidarity.

What were the immediate first steps that you have taken as a bank internally to cope with the crisis and faster respond to clients?

One of the key determinants of an SME's survival in times of trouble is a strong relationship with their banker. During this unprecedented crisis, it was obvious to Desjardins that we had to find ways to be even closer to our business members than we had ever been before.

We believe that money is a tool to support the autonomy and development of people and communities. Our members' and clients' interests are what drive our actions.

Desjardins quickly took action to support all our members and clients, based on the challenges they faced. As always, our priority remains helping others: helping our members, clients, and communities get through this unprecedented situation with flexibility and compassion as our guiding principles. Our strategy was to roll out temporary relief measures to support entrepreneurs and front-line teams by giving them the tools they need to re-start operations and meet the challenges raised by COVID-19. They need our support now more than ever, whether it’s to get organizations and businesses back on their feet, jump on new development opportunities or create new partnerships. These measures included strategies involving recovery and growth, e-commerce, digital transformation, supply chain, financial education and business transfer. Community initiatives are often the best response to difficult situations like this one.

As an integrated financial cooperative group, Desjardins leveraged its unique business model, mission, and values to help SMEs weather Covid-19. As soon as the lockdown was announced, we quickly moved to implement temporary relief measures. To contribute to the re-opening, we developed a strategy around post-Covid-19 issues to help SMEs get back on track for growth. We were one of the first financial institutions in Canada to put in place relief measures for members and clients who might temporarily have trouble meeting their financial obligations.

From the start, Desjardins has been working closely with the federal and provincial governments to provide additional solutions and support during this challenging time. Businesses have benefited from significant government assistance programs. Thanks to these aid programs, some businesses have been able to accumulate cash and repay loans despite the crisis. In order to fast track the processing of government assistance programs, we implemented an automated decision-making process that immediately applies the government eligibility criteria.

To make a difference for our SME members, we implemented customizable relief measures in areas such as financing, credit cards, group insurance, and commercial vehicle insurance:

• Financing: Temporary changes to terms and conditions for lines of credit, moratorium on principal payments for all sectors, fast-tracked approval process, refinancing of certain assets

• Credit cards: Temporary reduction of interest rates, payment deferral for credit card and financing products

• Group insurance: Continuation of benefits in the event of temporary layoff, unpaid leave of absence or reduced working hours; various support measures; continuation of benefits and insurance premium credits

• Commercial vehicle insurance: Refund of commercial vehicle insurance premiums

• Desjardins also wanted to help businesses with non-financial services, as we knew that this unprecedented situation would impact not only cashflow, but many other areas. Our support goes beyond traditional financial tools to offer guidance and assistance. We produced a webpage for entrepreneurs that contains information on relief measures, updates, FAQs and tips to find the right government support program. We conducted interviews with SMEs in order to evaluate the impacts of the pandemic on their business so we could understand what they expected of us. We also proactively contacted all our members and clients to see how they were coping and so we could understand what their problems were and how we could better support them, and so we could let them know that they were eligible for relief measures. We didn’t wait for them to come to us; we went to them.

When the moratorium on principal payments required by the regulators expired on September 1, Desjardins decided to extend the program. We continue to offer our business members relief measures and moratoria based on their unique needs, in compliance with the regulators' orders.

How are you helping your SME customers face the impact of the Covid-19 crisis?

In addition to all the measures outlined above, Desjardins has put forward several strategies and programs to provide relief to SMEs.

We started by identifying the sectors most affected in order to establish personalized solutions. We then produced economic projections by sector and contacted all our members. It was important to us to understand the impacts, unfavorable or favorable, on their reality. On this topic, our tightly knit, geographically dispersed network fosters close relationships with SMEs, and this breadth of coverage makes for deep understanding of the issues entrepreneurs are facing.

Reopening SMEs will call for social responsibility, which is the keystone of our mission and cooperative values. With reopening on the horizon, we're putting forward many initiatives to help businesses and community organizations take on the relaunch with a positive outlook. Now more than ever, Desjardins is actively supporting projects of all sizes to help make communities more resilient.

The $150 million GoodSpark Fund: we’ve launched the Desjardins GoodSpark Fund to spur initiatives that respond to important community needs. The GoodSpark Fund will be in effect until 2024, supporting projects that contribute to economic vitality.

The $20 million Desjardins Momentum Fund to stimulate business growth: The aim is to support businesses with growth and recovery, so they can get back to business faster and protect jobs that were made vulnerable by Covid-19. This would enable businesses to retain their qualified workers and develop/grow locally.

The partnership with La Ruche Québec to support the local economy: To encourage consumers to shop local, foster community solidarity, and help organizations, Desjardins has teamed up with the La Ruche Québec, a crowdfunding site, to roll out the Pay it Forward program. When gift certificates were bought from local stores or when donations were made to fundraising campaigns up to August 31, 2020, Desjardins donated an equivalent amount—up to $25,000—to local organizations. Also, in December, with traditional door-to-door collections on hold, Desjardins launched a new initiative to help make up for a possible shortfall in donations. Desjardins matched donations up to $1 million through the Double Your Impact program on the La Ruche crowdfunding platform, with the money going to local organizations.

Concrete support to help entrepreneurs bounce back: Other strategies are designed to help entrepreneurs transform this difficult period into an opportunity to better address their challenges, with a personalized learning path.

Desjardins has partnered with a graduate school of technology to accelerate the transition to a circular economy, with a budget of up to $2 million. The partnership will give businesses more opportunities to innovate and increase their productivity by optimizing resource use, while cutting greenhouse gas emissions.

We’ve also partnered with the Québec Federation of Chambers of Commerce to promote socioeconomic recovery. Online meetings with our CEO brought together close to 130 chambers of commerce from across the province to engage local stakeholders in discussions on regional realities in the context of economic recovery.

Desjardins has worked on exclusive partnerships to help our businesses; we are fully aware that the current situation and the return to the workplace may raise concerns for business owners. In order to alleviate these concerns, we have called upon partners to give exclusive offers and preferred rates on essential non-financial services. Business members and their employees can take advantage of a virtual healthcare service, as well as assistance and coaching services. We also provide an E-business service with votresite.ca (in French only) in order to help SMEs speed up their digital shift.

Desjardins has partnered with Fundica to help all businesses find the most relevant government funding in Canada using cutting-edge matching technology. Through its intelligent filtering and advanced customization features, the Fundica X Desjardins site can help entrepreneurs find 97% of all Canadian government programs (grants, tax credits and loan guarantees), which is so important right now. This solution is offered free of charge to all businesses, whether they’re members or not.

Did Covid-19 have an impact on your SME customers' move towards digital banking? Do you have any figures that might demonstrate this?

Desjardins has taken great care to ensure the safety of our employees and our members. While many of our physical branches remained open and operational, we strongly encouraged our clients to make use of digital channels. We feel compelled not only to continue to follow public health guidelines to slow the spread of Covid-19, but also to maintain our leadership in limiting the spread of the virus by offering digital tools to our staff and clients.

On this matter, COVID-19 had a definite impact in moving our members and clients towards digital banking. We’ve seen a 10.9% increase in visits to our transactional website compared to the same period last year, with the biggest increase coming from cell phones (28%).

Furthermore, our members and clients already had access to many automated procedures (online forms, bill payments, direct deposit registrations, electronic signatures, online mortgage renewals, etc.). Desjardins was the first financial institution in Canada to raise our tap payment limit on Desjardins payment terminals, from $100 to $250, for Desjardins credit and debit card holders. We also encouraged members and clients to sign up to receive their government benefits by direct deposit instead of by check.

However, the most important thing was to be able to deliver relief measures to businesses quickly. We swiftly moved to automate some government programs, which allowed businesses to receive the financial help they needed as soon as possible. To date, more than 115,500 requests have been received from business members and clients, representing more than CAN$4 billion.

Desjardins has also made some changes to the online SME financing solution. This new digital solution provides immediate automated decisions online and the average disbursement process takes less than two days.

We also helped SMEs speed up their own digital shift by providing an exclusive, personalized training program on how to create an online store. It teaches members how to build and manage an online store from A to Z, and provides them with a better understanding of digital marketing.

How have your relationship managers served SME customers during the pandemic? Did you have to change your way of working and do more remote work? Has it been a smooth transition?

At Desjardins, we pool our resources—which is key if we want to meet the needs of our members and clients. It's also critical to consistently and effectively contribute to community development. Being part of cooperative financial group means our caisses (local financial cooperatives) and other business entities join forces to offer the very best to our members and clients.

Desjardins was one of the first financial institutions to respond to the pandemic. Almost immediately, 39,000 of 48,000 employees were able to work from home. Our priority was to ensure their well-being and their health. Guidelines were quickly set up so that they could support our members and clients in a safe manner. And in order to reassure our members going through difficult or uncertain times, we increased inbound call capacity. Calls from members increased dramatically, spiking to nearly 300% of normal call volumes! We took the time to explain and simplify several government programs as SMEs were suffering from information overload and were having a hard time navigating through it all!

A series of proactive measures were put forward to support SMEs and we promptly changed our way of working with them. We soon realized that some clients were still processing their financial transactions at a physical branch. We contacted them to let them know about our digital solutions so they could avoid unnecessary trips. We also proactively contacted all our members and clients to see how they were coping and so we could understand what their problems were and how we could better support them, and so we could let them know that they were eligible for relief measures.

We also led a tactical intervention with SMEs to evaluate the impacts of the pandemic on their business so we could understand what they expected of us. We held weekly web conferences with all our branches and our Relationship Managers to keep them up to date about government measures and relief programs. Economists regularly shared their perspectives. Relationship Managers were then able to provide essential and up-to-date information to business members. Their focus switched from business development to ensuring that all our members made it through this crisis.

Desjardins was also well aware of how challenging it could be to advise entrepreneurs during such a time. A series of 16 online training sessions was put together for our Relationship Managers to share with them tips, tools, and information to make their job easier during this difficult time. These 30-minute bi-weekly sessions featured guest speakers from inside and outside the organization discussing their areas of expertise and their roles as entrepreneur advisors. The training sessions included topics such as: Going back to the office, how advisors can stay healthy and safe, government programs, portfolio reviews, budget analysis, etc. Our Relationship Managers were equipped with insights and support so they could have empathetic and meaningful conversations with members and help them navigate their options.

More and more banks are launching online tools to help their SME customers to manage their business, transform digitally, and grow. Where do you stand on this point?

Desjardins has always recognized the importance of providing extensive and advanced digital tools to business owners to help them manage their SMEs and to support their growth. This digital shift is key for our members and is one of the pillars of our strategic plan. It emphasizes mobility while maintaining a strong relational approach.

Our state-of-the-art transactional website has been central to developing our relationships with members and clients. Many automated features and functionalities were already available (online forms, bill payments, direct deposit registrations, service provider and government remittance payments, money transfers (Interac, international and more), electronic signatures, email alerts, push notifications, etc.). However, the pandemic ushered us into a new digital era. Working habits have been disrupted and we have all had to speed up our adoption of new technologies. We knew that we would need to do more, faster. Consequently, over the past few months, new automated solutions were made available to businesses to simplify their banking, increase their productivity, control their costs, and limit the handling of checks and cash.

As mentioned, Desjardins launched an industry-leading online financing solution for SMEs. This solution meets the needs and expectations of our members by providing an immediate automated response online. Moreover, to help local businesses thrive, we signed an exclusive agreement with an e-commerce platform that helps local business owners set up their own online space. Free training is offered, along with tips on how to build and design an online store, learn the ins and outs of running a business online and master digital marketing.

At Desjardins, we believe in the strength of our network. Companies that do business with Desjardins have access to a network of thousands of professionals. We can put them in touch so they can develop rich and lasting business relationships as they grow their businesses. We've created a digital platform to help with this networking. Our advisors and Relationship Managers, who are at the center of the relationship with entrepreneurs, use it to quickly identify opportunities and connect entrepreneurs.

Earlier this year, in partnership with Fundica, we launched an innovative tool to help businesses find the financing programs that best meet their needs. What's interesting is that the site isn't restricted to Desjardins members. Any for-profit business in Canada that is incorporated or planning to incorporate can sign up for Fundica X Desjardins. Startups and small, medium, and large-sized businesses in any sector can use the Fundica X Desjardins services to get access to tax credits, loan guarantees, and grants. With its unique search system, the site filters and identifies grants, tax credits, and loan guarantees for corporations based on their location and twenty other criteria. Fundica was a great help to many businesses during this difficult period, and we're continuously improving the platform to provide the best support to businesses.

Looking ahead, Desjardins will be developing more advanced digital capabilities to better support SMEs by providing an engaging omni-channel experience. Our clients' day-to-day banking must be made easier and more automated, and a great user experience is key. We know how precious their time is and we want to provide technological tools that allow them to be more efficient at those sometimes cumbersome tasks so they have more time to grow their businesses We are also accelerating the digitization of our main business processes to offer our business members timely communications, notifications, and alerts that will help them process many key operations more efficiently. Our priority is to make Desjardins the digital one-stop shop for Canadian SMEs while providing the personalized support and expert advice Canadian businesses need.

At Desjardins, for the common good, no effort is spared to earn and maintain the trust of our members, clients and partners. This responsibility requires honesty, objectivity, competence, and transparency, as well as respect for all regulations and guidelines pertaining to our business and management practices. Managing our members and clients’ assets is something we take seriously. Our mission, which is to contribute to improving the economic and social well-being of people and communities, is more relevant than ever. Looking back, we take great pride in all the ways we were able to help and continue to help our members, clients and communities get through this crisis. Strong and capable leadership and dedicated employees are what made us able to step up and respond in a time of crisis.

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Keywords

SME/Corporate Covid-19 Customer service

Geography

Canada
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