Ed Obrien
Ed O'Brien Jul 11, 2017

Touch + tech = Small business banking success

It’s little wonder that small businesses mean big business for today’s banks and credit unions. 

Small businesses are mushrooming. The 28 million small businesses in America account for 54 percent of all sales, according to the U.S. Small Business Administration. Meanwhile, they’ve added jobs at twice the rate of corporate America over the past two decades. No wonder financial institutions are paying renewed attention to small business banking customers. They know—keenly—the potential for expanded relationships and growth opportunities in this important market.    

This occurs as today’s time-constrained small business owners (SBOs) seek ways to improve efficiency and effectiveness in the ways they manage their businesses. Many look to their banks and credit unions to offer products and solutions that make their business lives easier and more productive, and for innovative solutions to meet evolving banking needs.

In response many of today’s institutions are developing online and mobile solutions with SMBs in mind, and at an increasing rate, as part of a broader banking strategy to more fully engage business banking customers. For those already offering advanced capabilities, research from the recently ath Power Small Business Digital Banking Study revealed that while some solutions meet customer expectations, others fall short in terms of usability—and that causes frustration amongst consumers.

Meanwhile, today’s banks and credit unions face the major challenge of offering appropriate solutions that address the disparate needs of micro-businesses and other small businesses. Yet what exactly do SBOs want from digital engagement and channels solutions? And how they wish to be served? This riddle can also mean opportunity, as existing marketplace solutions are typically based on consumer banking platforms yet often fall short in meeting small business needs.

Enter small business digital banking, a term many institutions and FinTech partners use to describe the convergence on online and mobile banking to forge a broader business banking strategy.  It leverages digital banking, a growing phenomenon that financial institutions of all sizes are adopting.

Yet further findings from the ath study show that small business owners who crave business-specific digital features don’t want them at the expense of in-person advice. These capabilities are not mutually exclusive. 

Let’s consider the digital side first. Since SBOs often need to access information via online and mobile banking solutions (depending on the task at hand), digital banking solutions must display and synchronize data across platforms, as well as include responsive design elements that enable viewing across devices.  To better accommodate this important shift, financial institutions are working hard to develop solutions that best meet the needs of all small business banking customers—no matter which device or computer they use to access their account information.

In fact, digital banking features remain top of mind for many of today’s SBOs as they desire 24/7 access and efficient use of one of their scarcest resources: time. And some of these features follow the path of consumer digital banking. Solutions such as mobile remote deposit capture, online account opening, online loan application and mobile payments pique the interest of small business owners.

But small business owners also need subject matter expertise for higher-level business planning and execution, and guidance on money management and cash flow issues. For many small businesses, an omnichannel banking strategy is a smart and appropriate approach, as SBOs desire a mix of technology and touch. 

It’s important to note that branches remain important to many small business owners, with a little more than a quarter of survey respondents feeling that branches act as their primary channel.  This is almost twice the number of responses as seen in the recently published Consumer Digital Banking Study. But this is not surprising as branches remain a vital resource for small business owners, particularly when they seek business banking expertise. 

Further, ath Power research shows that while SBOs remain largely content with their primary financial institution, relatively few express passion about their banking relationship. Most do not consider their business banking relationship as one that revolves around a trusted advisor. 

This serves as a wake-up call for financial institutions that look to nurture and grow this important line of business. A full third of small business owners responded that they are “very likely” or “somewhat likely” to consider another financial institution in the near future. The question for banks is “How soon is the near future?”

Enlightened institutions grasp the potential to lose these customers if they aren’t careful.  They also understand the value of a well-planned and executed digital banking strategy that works in concert with access to subject matter experts. It differentiates solutions, reduces attrition, deepens relationships and improves the overall small business customer experience.

Indeed, the solutions that set smart banks apart will bring them and small businesses together.

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Ed O'Brien is EVP, research and strategy, for ath Power Consulting, a premier provider of research and customer experience solutions for the financial services industry. Ed can be reached at eobrien@athpower.com.

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