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The secret to retaining SMB clients

Banks and credit unions that implement the right digital strategies and invest in their platform can prove their worth to small-business customers.

Jun 5, 2023 / Business Banking

Community banks and credit unions often have an uphill battle to prove their value to small business clients. According to a new report from Apiture and Aite-Novarica, only 35% of small businesses believe their primary financial institution fully addresses their unique digital-banking needs.

Even more alarming is the threat of imminent client attrition, specifically that 19% of all small businesses and 27% of businesses run by millennials and Generation Zers “definitely” or “probably” will consider switching or will switch primary financial institutions over the next two years.

Despite the challenges, the news is not all bad for community financial institutions. Banks and credit unions that implement the right digital strategies and make investments in their platform can legitimately prove their worth to small-business customers.

The first step toward building value is to understand what small businesses desire in a banking partner. This report, commissioned by Apiture, but independently authored by Aite-Novarica Group, includes several recommendations you can undertake to appeal to this customer base.

Offer tailored solutions: Small businesses’ unique needs aren’t easily met by traditional consumer banking solutions. In fact, 49% of small businesses want more sophisticated capabilities than what their primary financial institution offers. Small businesses who are stuck using consumer platforms with little or no tools to run their business may become frustrated and leave their financial institution. To fulfill small-business needs, include tools tailored to them such as international payments, positive pay and granular entitlements to enable employees to perform specific tasks.

Provide an intuitive user experience: Beyond specific tools to service their needs, small businesses also value overall user experience. More than one in four small businesses would consider switching financial institutions for a more modern, user-friendly digital experience. In addition to an intuitive user interface, small businesses also value capabilities such as digital account opening, transparency in payments and high levels of personalization.

Integrate with external vendors: Small businesses also require tight integrations with the other vendors they rely on to run their business, including accounting systems, investment platforms, and other third-party software platforms. Providing a seamless experience through a single login to access all accounts and products is important or very important for 87% of small businesses. Finding ways to incorporate seamless connections within the platform and across third-party integrations will resonate with small businesses and help you keep them as clients.

Include more money management tools: Traditional money management offerings from banks and credit unions often lack financial insights, forcing small businesses to go outside their financial institution to seek out capabilities that will help them fully understand their financial position. In fact, 61% of small businesses would like to see their bank or credit union offer more digital tools to effectively manage cash flow. You can manage this situation by offering your business clients financial tools that help with cash flow management, forecasting and budgeting.

Partner more with fintechs: Around 65% of small businesses go outside their primary financial institution to a fintech company to fulfill unmet needs in areas such as payroll, electronic invoicing, and expense management. To prevent this, many banks and credit unions have stopped considering fintechs as competitors and now view them as partners. In addition to filling gaps, fintech partnerships can enhance product portfolios and increase speed to market for certain capabilities.

In addition to secure, reliable banking services, small businesses value specific and sophisticated tools integrated into their digital banking platform to help them run their business. They also want their interface to be intuitive, helping to simplify money management and other complex processes. And they need a seamless way to connect all capabilities into one platform.

To best serve this segment, focus on defining a specific strategy for small business customers, rather than pigeonholing these clients into your existing retail digital banking strategy. Small-business clients have a set of needs that go beyond consumer banking capabilities. What’s more, they will change providers if you don’t offer them the tailored solutions their businesses require. Your goal should be to recognize the opportunity, show businesses the value you bring, and act quickly to deliver the capabilities they need.

Jennifer Dimenna is SVP, product, at Apiture.