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Designing Products that Small Businesses Really Need


Despite their number and economic impact, small businesses have historically found few bank products outside of loans that meet their unique needs, with consumer products often offering too little and commercial products offering too much. However, a better understanding of small business customers by bankers is helping change that.

“Small businesses have cash flow, payables, payroll and accounting needs, things you just don’t have on the consumer side,” says Brian Hamilton, senior vice president of national small business for McLean, Va.-based Capital One. “Yet, while they have much more complex needs than a consumer, their demands for usability are very much consumer-like.”

To create products with both robust functionality and user-friendly interfaces, Capital One seeks to better understand its small business customers through both formal research and individual conversations. “I really encourage my executives and my product management teams to go out and talk to people personally,” Hamilton says. “Even though the evidence you get might be anecdotal, you feel it more. You tend to be able to put that context into your work when you design products for them.”

One such product is Spark Pay, a point-of-sale system for mobile devices, including smartphones and tablets, which Capital One recently added to its line of small business products. Spark Pay offers both ease-of-use through its no-contract, simple pricing plans and functionality through its open platform, Hamilton says. It’s designed to facilitate easy integrations with external products and services, such as inventory management, customer relationship management and accounting systems. That results in a more unified financial overview for the small business owner, which saves time.

Offering that open platform helped earn Capital One the Overall Most Innovative Award at the 2014 Monarch Innovation Awards, presented by Minneapolis-based Barlow Research Associates, Inc.

What Customers Do the Most

For San Francisco-based Bank of the West, focusing on small business customers’ problems paves the way for solutions that customers may not be asking for but, once delivered, are ideal. “Those problems may be broad, like, ‘I need more time,’ or they may be very specific, like, ‘I need to be able to stop a check,’” says Matt Krogstad, head of mobile banking. “Some of those have obvious solutions, and others have solutions that require a little bit more thought.”

When Krogstad’s staff looked at what mobile customers do the most, they came up with the idea for Quick Balance, a feature in Bank of the West’s mobile app that allows users to check account balances without logging in. “They log in and check their balance – that’s 80% of transactions in the digital space,” Krogstad says. “Looking at ways to improve that became the focus.”

The feature is available to both consumers and small business owners, but Krogstad says small business owners find it especially appealing because they usually have more accounts than consumers do and have balances that can fluctuate widely.

Adding Quick Balance to its app has increased Bank of the West’s customer engagement, he adds. Users who have used the feature at least once go on to use it an average of 21 times a month, a number that indicates how much they value the feature. Quick Balance earned the Innovative Product/Feature Award at the Monarch Innovation Awards.  

Concentrating on customer needs helps banks avoid what Krogstad calls “billboard innovation,” which he defines as “something that looks cool that you put on a billboard to show how innovative you are but no one uses. We really didn’t want to do that,” he adds. “We’re not saying, ‘What does Bank of the West most want its customers to do on mobile?’”

Instead, the bank asks what its small business customers would want and find most useful. “Because if we build that, they will use it,” Krogstad says.

Hamilton notes that delivering innovation that customers aren’t directly asking for is complex. When asked what they want, customers will usually cite a better version of the current system rather than a completely new one that could be even better. Hamilton suggests a solution: matching customer needs to the bank’s unique advantages as a provider.

“Wherever those two things meet, you should probably start there,” he says. “Because that’s where you’re probably going to be able to add the most value the fastest.”

Personal experience with small business processes can also create opportunities for innovation, says René Lacerte, CEO of Bill.com, a business payments network based in Palo Alto, Calif. Lacerte says he founded Bill.com to solve a problem he dealt with as a business owner: managing payables, receivables and cash flow.

Even for small businesses, collaboration is at the heart of that process, which usually makes it manual, paper-based, time-consuming and expensive, Lacerte says. Bill.com digitizes and consolidates the process, which not only reduces paperwork but also allows  small- and medium-sized businesses to adopt more efficient payment methods, such as Automated Clearinghouse (ACH) transactions.

Bill.com’s Banking Platform, winner of the Monarch Innovative Industry Partner Award, integrates into banks’ online services and puts them at the center of their customers’ financial management processes. For example, if a bank knows that a small business has an outstanding invoice from a customer who has always paid, the bank may offer to lend the business money or extend it credit, Lacerte says. Banks that don’t know about the invoice or the customer’s history can’t offer that. 

“The ability to be at the core of that financial operation for that business will change banking,” he says.

Ms. Whalen is a contributing writer to BAI Banking Strategies based in Berkeley, Calif.