The Stakes Have Shot Up for Small Business Banking

Just as technology has spurred a consumer banking revolution, the same is happening with the huge small and midsize business banking market. These companies have great need for the kind of advanced functionality and features that can ease the complexity of financial management.

We are standing on the brink of a business banking evolution. …Or is it a revolution?

Business banking incorporates a vastly diverse group with varying industries, needs, income and maturity levels. Many financial institutions have struggled to fully and properly service these companies, and their expanding needs.

Some banks and credit unions avoid small business banking altogether as a distinct line of business and allow small business clients to “hide out” on their retail platform. That’s really a lose/lose for all involved. The institution misses out on a revenue stream, or worse the banking relationship entirely, and the business loses valuable services and insights.

But with the right vision and strategy, you can differentiate through digital banking solutions, boosting banking satisfaction for your business clients.

3 Common Traits Among Small Business Banking Clients

Wondering where to begin? It starts with the simple question: How are your businesses accessing their funds?

Before you answer, take a moment to ponder three cold, hard facts.

1. People like to keep retail and business accounts in one place. Consider that most small business owners prefer to keep their business and personal accounts with the same financial institution — it makes sense to help keep things simple. But that means if you want their retail account, you need to differentiate with your business offering.

2. Business owners are still using retail to complete their business functions. Think about the sheer number of financial institutions that are serving commercial clients from within the retail part of the institution. Retail solutions lack business-specific products and services — services that could streamline business productivity, provide insights to the business and the financial institution, and generate additional revenues and cross-sell opportunities.

3. Small businesses are willing to pay for what they need. Those that are using business services with their primary financial institutions are also paying for more robust, third-party services to supplement what their institution cannot provide. It would not be farfetched to envision a migration of basic banking services to tech-enabled companies, especially if the non-bank providers use their tech savvy to streamline the delivery of the additional financial management services that small businesses are seeking.

Now, ask yourself a few more questions. Is your business solution easy to access, onboard, and navigate? Can you communicate to key account holders effectively and in a timely manner? Can your entitled account holders approve an ACH or wire on a golf course? Why not?

Asking “why not” could be the first step in your business banking (r)evolution. Imagine if you can deepen your relationship to your business accounts. …Why not?

Perhaps you are offering a new virtual payment method to a select group of premium businesses. As a valued partner, you could offer the local “Acme Lawn Service” an app to streamline their monthly payment collections. Now, instead of walking to the mailbox to gather the payments as they come in and then going to the ATM or even depositing them remotely, Acme’s clients can simply download an app onto their phone. With a few taps of a button, from the comfort of their dining room table, they are able to pay from a card or a check.

Simple, easy and efficient.

Great for Acme’s clients. But, it’s also great for Acme Lawn Service. This saves their accountant time and reduces the risk of the dreaded “lost check.” But — and perhaps more importantly — it can also provide analytics for the business, giving better data to the business owner. By digitizing their accounts receivables, businesses can not only streamline payments, but also gain valuable insights into predictive cash flow.

Why the SMB Stakes Are Rising

There are solutions out there that offer this service, but they are rarely integrated into banking software. Businesses, and their financial institutions, are left bolting antiquated solutions together piecemeal to enable some semblance of insights. And insights, especially financial insights, are key to properly understanding and predicating changes to the businesses. True insights, however, are only effective if you put in the work to maintain the data — only as good as the data you are mining from.

As SMBs seek tools to streamline financial functions, banks and credit unions as a whole continue to serve business needs from outmoded consumer platforms. However, the stakes are about to change as large and mid-sized banks migrate business customers onto commercial platforms that have the capacity to fill SMB product and service needs.

But as big banks spend their time building on-premise solutions, community banks and credit unions can get the jump on customer acquisition by serving the wide range of SMB needs now, improving the efficiency and cost of service to gain market share.

For now, better business banking through digital banking is a low-hanging fruit. Digital delivers better technology. Better technology means community banks and credit unions can expand their market by better servicing the businesses in their community.

Remember, when competing with the banking giants, you need to choose a partner not a vendor. Fintech partnerships offer a faster and less costly road toward digital development and can provide a full range of solutions to fit SMB needs.

When choosing a fintech partner, it is helpful to consider the following points:

  • Does the company’s capabilities and approach align with the strategic vision of your business?
  • Does that partner clearly recognize market trends and quickly innovate to meet them?
  • Are they offering industry subject matter expertise to support you through the conversion as well as after, while you are growing this new segment of your business?
  • Does the fintech have the technology you need and the features you have identified to fit your specific business needs now? What about after you (and your businesses) have grown?

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