Why SMBs Are Looking for More, and Credit Unions Can Deliver
By Cary Strange, CEO of PayOnward
Simple Subscribe
Subscribe Now!
Small and mid-size businesses are increasingly spreading their financial relationships across multiple providers. One institution may hold the primary checking account while another handles payments, a fintech manages invoicing, and yet another provides lending or cash flow tools.
That fragmentation creates real challenges for business owners, but it also creates a significant opening for credit unions.
Key takeaway: The institution that becomes the primary operating relationship for an SMB gains more than an account. It becomes part of how the business gets paid, pays others, manages cash flow, moves money and makes financial decisions. That activity drives engagement, deposits, data and, over time, a much broader financial relationship.
Credit unions already have an important advantage. They have built their businesses around personal service, trust and community relationships. The challenge is combining those strengths with the modern financial tools SMBs now expect.
That does not mean trying to become a fintech. It means giving SMBs fewer reasons to leave the credit union to conduct the most important parts of their financial lives.
Fragmentation Is More Than an Inconvenience
SMBs often rely on multiple financial partners because no single institution provides everything they need.
For the business owner, that can mean managing separate systems for invoicing, bill payment, banking, payments, cash flow and lending. It adds complexity by creating additional workflows and makes it harder to maintain a complete picture of the business.
For financial institutions, the consequences are just as important.
A credit union may technically have the SMB account while another provider owns much of the actual financial activity. Payments may be processed elsewhere. Receivables may flow through another platform. Deposits may sit outside the credit union. The transaction data that could help the institution better understand the business may also be going somewhere else.
In that scenario, the credit union has an account, but it does not necessarily have the relationship.
That distinction matters.
Key insight: Payments are not simply another feature in an SMB banking platform. They are one of the primary activity layers of the financial relationship. Businesses receive money, pay vendors, move funds and manage cash every day. The provider that supports that activity is in a much better position to understand the business and deepen the relationship.
This is one of the reasons fintech companies have been successful with SMBs. In many cases, they did not begin by trying to replace the business’s bank or credit union. They started by solving a specific payment, invoicing or financial management problem. Over time, that gave them a larger role in the overall financial relationship.
Credit unions should pay attention to that progression.
What Credit Unions Need to Deliver
The answer is not simply more technology.
Many credit unions have already made substantial investments in digital banking. The bigger question is whether their business banking capabilities match how SMBs operate today.
Business owners increasingly expect to be able to receive payments, send payments, invoice customers, pay vendors, move money and understand their cash position without stitching together multiple providers.
Key insight: Credit unions do not necessarily need to build all of those capabilities themselves. The right fintech partnerships can help them add modern functionality much faster while allowing the credit union to retain the member relationship and its own brand.
That combination is important.
Fintech companies can compete effectively on technology and user experience. National banks can compete on scale. Credit unions have the ability to combine modern technology with something much harder to manufacture: established member relationships, personal service and community trust.
If they can bring those strengths together, they have a credible path to becoming a much larger part of an SMB’s financial life.
The Next Generation of Business Relationships
There is also a longer-term reason why this matters.
Today’s younger consumer member may become tomorrow’s business owner.
The financial institution that develops that relationship early and continues to provide the right capabilities as the member’s needs become more sophisticated has a much better chance of retaining the relationship over time.
That becomes increasingly difficult if the member has already moved payments, deposits and financial activity to outside platforms.
The objective should not be to predict which Gen Z member will eventually start a company. It should be to build a financial relationship that can grow with the member when that happens.
A consumer account may eventually become a business account. A simple payment need may become invoicing, accounts payable, payroll, financing or treasury management. Credit unions that can support that progression have an opportunity to create relationships that last for decades.
The Goal Is the Primary Relationship
SMBs are not waiting for traditional financial institutions to catch up. They are already choosing the providers that make it easiest to operate their businesses.
Credit unions do not have to be first. But they do need to act before fragmented financial relationships become permanently established elsewhere. That means thinking beyond simply acquiring more SMB accounts.
The larger goal should be helping those businesses operate and grow, then becoming the financial institution they rely on to do it.
Bottom line: Credit unions do not need to replicate fintech companies. They should build on what fintechs cannot easily replicate: trusted relationships, local knowledge and personalized service, supported by the modern payment and financial capabilities businesses now expect.
For credit unions, that combination can turn an SMB account into something much more valuable: the primary financial relationship.
