Leveraging Digital Channels to Bank Small Businesses

The small and midsized business banking sector is undergoing a profound evolution. Rising competition, technological disruption and evolving small business expectations are placing new demands on community banks who face a simple choice: innovate to compete or risk losing market share.

Today, small and midsized businesses are challenged by increasing costs, higher interest rates, staffing challenges and depending on industry, major economic headwinds. Business owners are looking across a variety of channels to reduce costs, borrow inexpensively and improve efficiency, as they weather the current economic uncertainties.

Small and midsized businesses have access to an ever-growing range of financial services and can easily find providers that deliver products and services that are tailored to their precise business needs. Financial service options range from traditional national and regional banks with sophisticated treasury management solutions to innovative fintechs that specialize in a niche product offering to challenger banks that emphasize their digital offerings.

The small and midsized business sector is an important customer segment for community banks, with the potential to fuel long-term relationships from both a lending and deposit relationship perspective. It is no longer strictly about rates or fees, but how a banking relationship can create business impact for a small or midsized business.

There are multiple strategies for community banks may consider as they reevaluate their product and service offering, along with the underlying technology and partnerships that deliver enhanced services. Ron Shevlin, chief research officer at Cornerstone Advisors, highlights one such strategy in a recent research report titled What Do SMBs Want In A Small Business Bank Account?

Shevlin highlights the opportunity for community financial institutions to reinvent their business checking accounts, weaving in value added services to further differentiate themselves in the market. Small and midsized businesses are expressing a willingness to consider moving their checking account if it includes a variety of value-added services that drive business impact in safety, security and soundness.

Community banks have an enviable position as a secure, experienced and trusted partner to this customer segment.

As small and midsized businesses are pressured to do more with less, they seek financial service partners that help create efficiency, move quickly, and deliver value added services. Community banks should do a self-assessment and ask:

• Do we make it easy for a small or midsized business to establish a relationship with us?
• Is it easy for a small or midsized business to bank with us?
• Where and how do we create business impact for our small and midsized business clients?

Technology innovation should be a high priority to successfully execute their strategic objectives. Historically, community bank strategies have been limited by technology. With technological innovation, bank strategy can now drive technology decisions.

By focusing on the digital relationship between the bank and the small or midsized business, there may be several opportunities to improve client operating efficiency, deliver value and create an individual relationship through the digital channel.

Here are some examples of how banks can enhance relationships through the digital channel and drive impact for small and midsized business clients:

• Simple new account and product onboarding
• New product recommendations
• Configurable back-office workflows
• Open application programming interface (API) platform to easily integrate value-added fintechs
• Comprehensive payments and money movement capabilities

Deploying a platform with a combination of defined works flows, approvals, and preconfigured settings for common or recurring events can significantly improve the back-office operation of the small or midsized business.

The small and midsized business market presents a tremendous opportunity for community banks to grow existing relationships and deliver an innovative set of services and technology that will lead to long-term relationships. A community bank that is seen as a partner will be indispensable to its small and midsized business clients.