How Banks Can Leverage Digital to Add Business Banking Customers

Banks and credit unions have focused most of their digital banking energy on retail customers. But businesses value great digital experiences as much, if not more, than consumers and expect solutions to be tailored to their needs. New technology gives smaller institutions an edge in meeting that challenge.
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The global commercial banking market is expected to grow by 4.2% in 2022, to reach $2.6 trillion in revenue. Not surprisingly, powerhouse banks such as JPMorgan Chase and Bank of America are leading the pack, but a shift in the business banking model, along with new digital tools, is lowering the barriers to entry for community and regional banks and credit unions.

In short, technology has leveled the playing field. The growing preference for digital requires financial institutions to offer their business customers self-service digital solutions combined with the tools that bank and credit union employees need to meet those customers where they’re at.

As long as a financial institution can deliver an experience that conveys an understanding of — and meets — the customer’s needs, they can scale without having one-on-one coverage with every customer. Tech allows financial institutions to scale to broader markets, including small and medium-sized businesses (SMBs), at a fraction of the cost.

Many SMBs are now indicating that they’d be willing to switch from a large bank to a community bank or credit union if they can get the right digital experience. And that’s where smaller institutions may have an advantage.

It’s far easier for them to take a digital-first approach since they don’t have to unwind all of the different manual processes and departmental hand-offs that large banks do. This, in turn, is pushing the large banks to think about how they digitize from end to end.

Win, Onboard, Serve, Grow

As business preferences continue to shift to digital, it’s much more important to both the businesses and the financial institutions that serve them to have a holistic experience.

Thanks to companies like Netflix and Amazon, consumers expect fast end-to-end digital experiences in every sphere of their lives. Likewise, business banking customers will no longer accept a paper-based process that takes 30 to 40 days to set up new cash management products. Nor are they willing to endure an arduous and time-consuming process to simply become a customer.

Financial institutions that want to compete and win in this market must make it fast and easy to become a customer and then follow that with a seamless digital customer experience.

So how do banks and credit unions deliver a digital experience that’s going to capture the business customer?

To begin with, they need to stop offering one-size-fits-all solutions. Banks and credit unions have traditionally created utilities for all banking functions such as payments, moving money from one account to another and other transactions. It’s all very generic and applies the same to every type of business. SMBs were left with a choice between using the bank’s retail online banking solution or the bank’s commercial cash management solution — and neither fit.

The retail side had ease of use but didn’t provide the capabilities the SMBs needed to run the financial aspects of their business. The commercial side had the capabilities they needed to make business-to-business payments, but the process was too complex. SMBs got stuck in the middle, and as a result, that market has been under served.

Banks and credit unions must leverage the customer data they have to provide the right solutions to their business customers, so they can run all the financial aspects of their business. To do this effectively, financial institutions need to focus on each industry.

For instance, if they focus on a dentist office, they can offer products specifically built for dentist offices and how they manage their finances. Then, they can add that into the digital experience so there’s a tailored solution that is purposely created for the dental industry. The value of that multiplies because if the financial institution meets that dentist’s needs, they’ll likely recommend that banking provider to their colleagues.

The Generic Trap:

Too often, banks and credit unions offer all small business customers the same products. Personalization is just as critical in business banking as in retail.

If banks and credit unions think about the target market in the segments they want to compete in and win, they can differentiate through those tailored experiences rather than just pushing banking products out into the market and expecting the market to figure out what product to use and how to use it to support their business needs. That laissez-faire approach won’t cut it any more

Teaching Customers How To Bank

Companies at the higher end of the SMB market (say, $100 million or more in annual sales) have been trained how to bank by the financial services industry — things like the automated clearing house (ACH) network, standard entry class (SEC) codes and addenda records. Millions of smaller businesses also need these types of services but don’t have time to find out how they work.

This is another way banks and credit unions can distinguish themselves among their business customers: Offer guided tutorials to teach new users how to run the financial aspects of their business and leverage data to recommend financial solutions that align with their needs — including fintech solutions. Then make it fast and easy for businesses to acquire these solutions.

Package the capabilities together in a way that makes sense to the end user and then configure the digital experience to align with exactly what that business customer needs.

Integrating the Human Element

Many banks have a relationship-based go-to-market strategy — i.e. the relationship between the bank’s relationship manager or branch manager and the customer. So when looking at how to design products and services for business customers, banks and credit unions need to focus on demonstrating that they understand their customers’ needs in their digital channel. That old one-size-fits-all approach won’t work here either; it needs to be tailored. To do this, financial institutions need to start by digitizing their internal operations.

So if a customer is talking to their relationship manager about a specific product or solution, they should be able to see that same product or solution available through the digital channel. And vice versa. If a customer shows interest in a product on a digital platform by clicking on an ad or reading an article, the relationship manager should be notified so they can follow up on that conversation.

Master the Omnichannel:

SMB customers value having a relationship manager, but expect that he or she will be aware of what the customer has already done and looked at online, and vice versa.

It’s a merging of the human and digital channels to create a superior client experience — whether the client is talking to the branch or the relationship manager or using the institution’s digital solutions.

Q2 created a solution that addresses these needs — Q2 Catalyst. It’s a broad suite of commercial banking solutions that helps financial institutions acquire new customers and provide tailored digital experiences that are aligned with the customers’ needs. It complements the personal touch of human relationships.

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