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Attract small businesses with a holistic banking experience

By connecting the dots for what these customers want and need, banking institutions can put them at the center of the relationship.

Small Business

Business banking customers with both growing deposits and increasing loans would seem like ideal targets for financial services organizations. But these businesses—what BAI calls the “Dual Opportunity” segment—are not being fully optimized by banks and credit unions.

The failure to seize on what seems like an enviable target is one of the key findings of the recently released BAI Banking Outlook report on Business Banking Insights. Dual Opportunity businesses were 27% of all businesses in the BAI survey. The report is based on a BAI survey in February of 600 U.S. businesses with annual sales of $20 million or less, which BAI defines as small businesses.

Unfortunately for banks, the potentially lucrative Dual Opportunity segment, with its need for additional loans, is also the segment most likely to look for a new banking relationship. Half said they expect to change their primary financial services relationship in the next two years. Fintechs and neo-banks are eager to accommodate businesses in search of loans.

The other segments in the new BAI report are Deposit Rich (34% of survey respondents), which have increasing deposits and decreasing loans; Growth Challenged (32%), with deposits the same or decreasing and loans the same or decreasing; and Concerned Lending (7%), with deposits decreasing and loans increasing.

Regardless of the segment, the challenge for financial services organizations is providing business customers with a compelling reason to consolidate deposits, take out loans, and use treasury management and merchant services with their primary financial institution.

Most business owners don’t see the connection between giving their bank more business in exchange for more value. Only 24% of small business owners in the survey, completely agree with the statement: “My main business financial services provider clearly gives me better value the more business I give to them.”

Banks are not taking a holistic approach to their business customers. By failing to connect the dots, they don’t put business customers at the center of the relationship.

And there’s another disconnect uncovered by the BAI survey. Amazingly, nearly nine out of 10 business owners say their personal account is at the same bank as their business account. But banks often fail to recognize that relationship. It’s not necessarily because personal bankers aren’t talking to business bankers.

It’s primarily because banks often don’t recognize that relationship from a data perspective. The data is siloed, and the accounts are treated separately. Much of the information—especially at the small business level—is automated. The bank’s data systems need to talk to each other before customer information can be comprehensively analyzed and then optimized. But that’s a tall order.

Financial services organizations must somehow integrate the data and look more holistically at the relationship. The next step is persuading business customers that they would receive some additional benefits by concentrating their banking—both business and personal—with their primary institution.

For example, business customers might be awarded some personal account benefits if they brought or kept their business relationship with the bank. The reverse could be true as well by specially packaging and pricing business products and services.

Steps like those are key to keeping the Dual Opportunity segment—or any of the other three business customer segments—from seeking a relationship at another financial services organization.

What do business customers want? According to the BAI survey, lowest fees and best rates are the top two considerations in choosing a primary financial services organization. But fees and rates are commoditized features that hardly differentiate one bank from the next.

A stickier reason to select or remain with a bank is the quality of the customer experience. Businesses owners, according to our survey, say their top customer experience priority is a financial services organization that delivers the tools and options that allows them to customize their banking experience.

The tools can range from products to digital services, including the ability to open new accounts online. The second-leading customer experience priority is transforming the branches to create a better in-person experience. Branches would be staffed with experts to help business owners achieve their financial goals.


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Although many financial services organizations tout their ability open new accounts online, gaps continue to exist. Too often, business and retail customers alike still need to complete the new account-opening process that they began online in the branch. Business owners like the assurance of a properly staffed branch in the event they encounter a snafu online.

While some banks and credit unions have yet to streamline or even offer new account-opening services online, fintechs have been eagerly filling that gap. These new entrants in the banking space have been refining the online account-opening process by borrowing successful techniques and technologies they’ve studied in other industries.

Financial services organizations are not doing a sufficient job of understanding their business customers’ needs, causing attrition to be about fees and rates.

To attract and retain business customers, organizations—be they banks, neo-banks, credit unions or fintechs—must break down silos and integrate all their data. The data points can be deployed within decision algorithms that furnish business customers with efficient, focused products leading to a more satisfying, holistic customer experience.

Karl Dahlgren is managing director at BAI.