Jacob Leick
Director of Product Management – Commercial Banking

Our exploration into the top business and commercial banking trends of 2024 continues, as we dive deeper into the transformative forces shaping the industry, focusing on the rise of instant transactions and the evolution of commercial lending practices. Our earlier article addressed other key trends, including strategic treasury management and artificial intelligence.

Enhancing service offerings to meet the evolving needs of business clients is crucial for financial institutions (FIs) looking to build stronger, more profitable relationships and remain competitive in a fast-changing marketplace.

The Rise of Instant Transactions

The increased demand for instant, seamless payment capabilities underscores a broader trend towards immediacy and efficiency in financial services. Banks are encouraged to adopt platforms such as FedNow to enhance their digital infrastructures and meet these demands.

FIs can also evaluate electronic funds transfer options – including instant payments – breaking down their fees, limits, speed and typical use cases to give businesses the flexibility and efficiency they need. The opportunity to increase revenue from these transactions is also something that we believe banks will experiment with this year.

Evolving Lending Practices

FIs are adopting more nuanced, data-driven approaches to engage with their clients, tailoring lending and investment solutions to meet the unique needs of each business. This strategy can help retain valuable clients and attract new ones by demonstrating a deep understanding of their financial aspirations and challenges.

A higher interest rate environment can compress net interest margins by narrowing the spread between the interest banks receive on loans and investments and the interest they pay on deposits. Higher interest rates increase borrowing costs, potentially discouraging businesses from taking on new loans and hampering a bank’s loan growth and profitability.

With uncertainty about the trajectory of interest rates in 2024, banks need to engage with business account holders proactively to understand their lending needs

Redefining Commercial Banking

Commercial banking is being reimagined to serve the needs of more complex commercial customers without sacrificing an approachable user experience – both for businesses and the banks serving them.

Providing a better digital banking experience is one way to acquire, retain and grow commercial banking relationships. Historically, FIs and account holders have had to choose between a high-performing digital banking experience, capable of serving complex commercial accounts and a simple, intuitive user experience accessible to all. That time has come to an end.

Banks are also focusing on educating small business owners about the benefits of specialized banking solutions, especially as many continue to manage their finances through personal accounts. By highlighting the advantages of commercial banking, such as improved security, tailored product offerings and enhanced operational efficiency, banks can foster a more informed, empowered client base.

If any example highlights the need for greater education, it’s the sheer amount of business transactions being run through retail or consumer accounts. Research found 74.6% of the businesses operating out of consumer accounts had payroll payments averaging more than $1.6 million per year. Those accounts had an average of $5.3 million in other expenditures. highlighting the need for greater education.

Often, these small business owners don’t understand the benefits of a commercial banking relationship or believe it would be too difficult to make the switch. These days, those that are opening commercial accounts are looking to do so digitally. Banks that can enable businesses to open commercial accounts without needing to step inside a branch can improve their adoption and retention rates.

Action steps for FIs:

  • Leverage a digital banking platform that prioritizes the user experience.
  • Use transaction data analytics to identify consumer accounts that may be used for business expenses.
  • Reach out with education and offers of products and services that have been built around commercial banking.

Embrace Digitization

From the introduction of instant transactions to the nuanced approach in commercial lending, these latest developments in banking reflect a broader shift towards more dynamic and personalized services.

Looking forward, banks’ ability to adapt and innovate will be paramount in redefining commercial banking for a new era. The journey towards digitization and enhanced client engagement is ongoing. Embracing the latest trends can pave the way for success in the ever evolving commercial banking landscape.


Jacob Leick

Director of Product Management – Commercial Banking

Jacob has spent the past 10+ years working in the Financial Services Industry with deep focus on Financial Product Management.