Financial service firms tend to focus their products and services on large companies, ignoring the small and medium-sized businesses (SMBs) that make up 99.9% of all businesses in the US.
These businesses are significant players in the economy, driving growth and operating across all industries. While their impact is huge, the financial needs of SMBs are different from big businesses. There is a growing demand for financial institutions to deliver customized and cost-effective digital solutions for these businesses and their customers. A financial institution that succeeds in meeting SMB needs will increase customer retention, attract new clients and strengthen their reputation.
Many financial institutions serve SMB customers through business banking, savings accounts or business loans. Partnering with a vendor to offer payment processing solutions is a low-risk way that banks can provide added value for their business customers, without incurring additional costs. A payment solutions partner can provide end-to-end service — from sales to account management — while the financial institution focuses on its core business. When a customer has multiple services from one institution, that relationship elevates from a transactional one to a trusted, long-term partnership.
Additionally, a merchant services partner may enhance a financial institution’s reputation in areas such as digital technology or diversity, equity and inclusion (DEI). For example, a financial institution may highlight its own interest in supporting diverse businesses by choosing a merchant services processor with similar values, attracting new clients seeking a more progressive approach.
One of the biggest challenges faced by SMBs is keeping up with rapid technological changes to meet their own customers’ demands. This is especially true in the payment space, where many customers prefer contactless payment methods. Contactless transactions in the U.S. increased by 150% between 2019 and 2020 and is only expected to grow. Customers want convenience, speed, and choice when they buy. Even as a consumer or business client of an SMB, they are still used to the level of service they get from large companies. Barriers at the checkout level can impact customer satisfaction and loyalty. SMBs risk losing clients if there is an easier way to do business just down the street or on a competitor’s website. Customers may also expect merchants to accept mobile wallets, offer buy now, pay later or point-of-sale lending options and accept cryptocurrency as payment. Unfortunately, SMBs often lack the resources — such as capital, infrastructure, technology and staff — to offer the latest payment options to their customers and run their operations in the most efficient manner.
But a payment partnership allows banks to offer a slew of services to help business customers optimize their time, save money and improve customer satisfaction. For example, SMBs can benefit from an all-in-one, point-of-sale system that accepts multiple payment types, such as contactless, and includes features such as digital invoicing, inventory management, online ordering, gift cards, staffing, reporting and more. It can also give business customers access to real-time payments, seven days a week, that can improve their cash flow efficiency and avoid cash-flow lags — a major concern for many SMBs.
Small and medium businesses represent an untapped market for many financial institutions. If a financial institution starts to offer tailored payment solutions and services that help SMBs overcome their unique challenges, they can unlock significant, new opportunities in the small business segment.