It has been a rough couple of years for small and mid-sized businesses. Just as the pandemic started to wane, record inflation, dwindling consumer confidence and a potential recession are now putting pressure on profit margins.
SMBs need all the help they can get, and financial institutions that can provide it will secure loyal business customers, many of whom are also prime retail customers. That close connection between business and personal financial needs presents a formidable challenge for banks and credit unions.
SMB owners and managers want the same digital capabilities for their businesses that they’ve become used to as consumers. A raft of SMB-focused neobanks such as Rho and NorthOne have raised the bar for integrating digital banking with digital business management tools. At the same time, however, SMB owners also need expert advice that goes beyond what even the best mobile apps can provide.
TD Bank recognizes the unique needs of the small business segment and recommitted to making it a core part of its operations with new digital tools, consolidated services and a focus on relationships.
“I would say it is in some ways the heart and soul of our organization and what we have become,” Chris Giamo, Head of Commercial Banking at TD Bank, told The Financial Brand. “Coming out of the pandemic and with the macro environment we are in right now, businesses have had a lot of challenges. I don’t think that is going away, and businesses large and small are looking for more advice.”
The Need Grows to Serve Small Businesses Digitally
A survey by Ernst & Young found that 43% of small and mid-sized enterprises have increased their use of online banking services, while 40% are using more mobile banking services. Additionally, 38% say they have decreased their visits to branches and offices. While many SMBs were moving to digital before the pandemic, Covid only increased the pace of adoption. Small businesses that hadn’t even considered things like mobile payments or online ordering now had to, simply to survive.
“They had to take a new look at their businesses and how they interacted with their clients, then find new and innovative ways to interact with their banks,” observes Giamo. That put the onus on banks to meet those needs on an ongoing basis beyond emergency measures.
If I Can Do it So Can You:
Small businesses that thrive are adept at pivoting to meet changing conditions. They expect their bank to do the same.
While TD Bank enhanced its digital capabilities for its SMB customers during the pandemic and since, it has accelerated this transition. It has improved its online account opening process and enhanced its digital loan application process over what it developed initially for the PPP program.
The bank also recognized that small businesses increasingly are replacing manual cash management processes with digital solutions and are seeking banking providers that offer digital treasury capabilities that can aid in decision-making. The bank responded by rolling out TD Online Accounting, using technology from Autobooks. The solution integrates payments and accounting, enabling small businesses to manage accounting, send and receive payments, customize invoices and access a treasury management platform within their online banking account.
The East Coast regional bank also reorganized its business banking structure, combining its previous corporate, commercial and specialty banking teams to create a new commercial bank, which Giamo heads. Previously, the commercial unit comprised middle market and small business lending, deposits, and point-of-sale solutions. The change added specialty banking teams like equipment finance and asset-based lending into the mix. Putting everything under one commercial umbrella and consolidating underwriting has made it easier to bring new products to customers at a faster pace, Giamo states.
Why Non-Digital Interactions Remain Critical for SMBs
A unit of Canada’s TD Bank Group, TD Bank made its biggest inroads in the U.S. market in 2006 when it acquired Banknorth, followed two years later by its acquisition of Commerce Bancorp. Merging the two under the name TD Bank, the U.S. bank became one of the largest banks by branch network.
Although it closed 81 branches in 2021, TD Bank still has over 1,200 branches stretching from Maine to Florida. These provide the means to support small and mid-size businesses locally as a complement to its digital innovations. TD Bank has grown with a special focus on small businesses because the two U.S. banks it acquired were locally oriented, says Giamo. “They focused on delivering a big bank product mix but with a local delivery channel. It’s something that TD doubled down on,” he states.
The bank manages the small business segment through several channels, including its branch and relationship manager channels. It uses a regional president model under which local executives can deliver community-specific advice.
Despite its big push for digitization, live human interactions remain critical to serving the SMB market for TD Bank. As digital has replaced some day-to-day traffic, the bank’s “stores” have evolved to serve as advice centers where the relationship managers can help SMB customers with business advice or transactions.
These managers are also available via phone and can assist with anything from questions about a government assistance program to deferring loan payments or restructuring transactions. TD Bank also uses data to understand clients’ needs better and recommend the right products at the right time.
Beyond the App:
While 'reachable by phone' may seem almost quaint in the digital age, it's actually anything but, as anyone with more than a basic question has found.
“Human interaction is critically important,” Giamo maintains. “Businesses realized that in a crisis, being able to pick up the phone and get a human being when they needed to talk to someone was critically important to their business. It’s something we pride ourselves on and put a lot of effort into,” the executive states.
These businesses are also looking for advice, says Giamo. As many lack contingency planning and sensitivity analysis, they rely on their banks to project and model working capital needs. While large businesses are looking for subject matter expertise in specific verticals, SMBs typically seek more advice around financial planning, working capital, and wealth management.