The Future of Commercial Banking

Most of the attention around bank digitalization has focused on the retail experience. Retail banks have readily embraced technology to enhance the customer experience. But commercial banking can catch up, complete with business insights that increase customer engagement and add real value. In doing so, a bank can elevate its position from trusted transactional banker to strategic business partner.

In the U.S., there were more than 32 million small-to-medium size businesses (SMBs) in 2021, according to the Small Business Administration. Collectively they create 1.5 million jobs annually, according to Fundera, citing SBA data; this is around 64% of total new jobs. But the stakes of owning an SMB are high: almost half fail within the first five years and 20% fail within the first year, according to the Bureau of Labor Statistics. Most failures cite cash flow as a major contributor to failure. Banks can and should do more to help.

With a wealth of transactions data at their fingertips, banks can help SMBs understand their cash flow and manage their liquidity better. But transactional data is only part of the story. If banks can access their customer data held on internal accounting systems, they can obtain a holistic view of cash flow, gain unique insight into how their customer’s business is running, and offer help exactly when and where it’s needed.

Bank customers are increasingly willing to share their data: 82% of SMBs say they are willing to share data with their primary financial provider, particularly in return for business benefits, according to FIS research conducted in 2022. Moreover, we found that 66% of SMBs are interested in trusted advisory services. The time is right for such services.

Technically, it is quite simple for a bank to orchestrate data flows. Over 64% of SMBs in the U.S. use accounting software, such as Quickbooks, Xero, Sage and a handful of others, minimizing the amount of integration work and number of interfaces needed. So how can banks help SMBs businesses survive and prosper?

The Ideal SMB Banking Overview
A combined view of transactional bank data and accounting data allows banks to help an SMB understand exactly how much cash it has now and whether it has sufficient liquidity to meet upcoming obligations.

Incorporating accounting data can pull in open invoices and bills combined with cash flow forecast to build an accurate picture of how money is flowing throughout the business and compute standard accounting ratios. Such information can give an SMB owner, most of which don’t have much knowledge of accounting, some valuable business insight into how their business is performing.

A snapshot of cash flows allows users to modeling future performance by using “what if” criteria. Users can set thresholds of a minimum cash position to eliminate financial shocks to the business. If cash shortfalls seem likely, the user can be prompted to transfer funds from account, consider credit options or arrange to speak with a banker.

Benefits for Banks
All of this information that’s available to the customer can also be accessed by a banker, who can help with financial decisions and offer advice. Although this may be an opportunity for a bank to sell products, the real benefit is to add value to the relationship and build customer loyalty.

With all the relevant information in one place, bankers can be better prepared for customer meetings and, if required, can meet customers where they are. With many bank branches being repurposed as advice centers, bankers can use tablets to review customer business plans either in branch, at a remote location or in a virtual meeting. Whatever the location, this is relationship banking at its very best.

Millennials are currently the largest group of bank customers, according to the American Bankers Association. In the wake of Covid-19, many have reflected on their career choices; some have launched new businesses and entrepreneurship is a goal for 56% of the cohort. These individuals have bank accounts, and many will need business banking either now or in future. They see little distinction between retail and commercial banking. Banks must acknowledge that the retail customers of today are the business owners of tomorrow.

Monotto: Friend or Foe


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Not since the baby boomer generation has a single demographic cohort been more sought after by the financial services industry than millennials currently are. A smart, cost-conscious and tech-savvy bunch, millennials are perceived as being almost ruthless when it comes to cutting ties with their bank for a better option. And this has put pressure on traditional institutions to come up with new, innovative ways to attract millennial customers—and even more so, keep them loyal. This is especially challenging as it relates to unexciting, but necessary, services like savings accounts.

And that’s exactly the problem that Atlanta, Georgia-based fintech startup Monotto is solving. A white-label software solution designed for banks to fold into their services, Monotto is designed to make saving money less frustrating (and more engaging) for millennial customers. More than just an automated savings-to-checking application, Monotto’s algorithm analyzes a person’s debts, savings, investments, financial history and designated goals to determine the right amount of automated savings.

Sounds great on the surface, but is Monotto truly poised to be a friend of banks, or is it potentially a foe? Let’s take a closer look and find out.

THE GOOD
The phenomenon of users discontinuing certain services at their main bank in lieu of other fintech services or applications has come to be known as “unbundling.” Monotto provides banks with tools to prevent this from happening, specifically with millennials. While it’s true that millennials love to try new apps and services outside of their main bank, statistics also show that they’re four times more likely to use an app they need if it’s offered by their current financial services provider. Monotto enables both banks and credit unions to provide competitive personal finance tools to their customers, therefore decreasing the risk of unbundling and creating a stickier relationship with account holders. But what makes Monotto stand out from the crowd of similar automated savings apps is that its Artificial Intelligence (AI) makes sure that the amount of money being transferred is suitable for that particular account holder, at that specific point in time. If someone is behind on a savings goal, it may automatically transfer more on a particular month. But the AI will also take into account past spending patterns and not transfer so much that it will impact a person’s monthly budget.

This creates a true “set it and forget it” savings experience that automatically adjusts depending upon changing life circumstances. Users can also quickly adjust current financial goals or set new ones. If someone has an urge to plan a vacation to the Bahamas, for example, they can easily place that in the application and have it determine how much more money they need to save each month to achieve that goal. Finally, Monotto’s predictive AI also benefits the upsell and cross-sell capabilities of banks. Based on spending patterns, financial goals and life events, Monotto’s engine can then push and promote highly relevant additional services that are well suited to the individual at that specific point in time.

THE BAD
One of the main hurdles that Monotto will eventually need to overcome is the amount of competition that exists in the automated savings space. This entails both third-party apps that millennials will use to unbundle, as well as those that seek to emulate Monotto’s approach by switching from a business-to-consumers approach to targeting banks directly. Digit, Qapital and Level are just a few examples in the space that perform similar functions. Rather than should a bank partner with one of these services, the question could very well become which program to choose.

Banks will need to familiarize themselves with Monotto’s analytics platform in order to gain an adequate understanding of the return on investment they’re receiving, as well as passing necessary information on to regulatory bodies. Operating on a SaaS model, Monotto does entail an ongoing cost to banks that use its services, rather than just a one-time capital expenditure to build out an application. This means that in order for Monotto to be the best option, banks will need to make sure they are able to engage in a way that allows them to utilize the tool as a revenue generator, rather than just supplying the feature, by identifying potential customers at their time of need for particular, stated, goals and products.

OUR VERDICT: FRIEND
Keeping up with third-party fintech applications can be a tough game for banks and credit unions. Anything that makes it easier for traditional institutions to keep pace is of great potential value. That’s why we’re putting Monotto in the “friend” category. Primarily, Monotto allows banks to offer millennial customers a top-notch automated savings application within their own ecosystem. And more than just another monthly checking-to-savings app, Monotto’s AI is able to understand customers over time and adjust to their specific needs, the main goal being to prevent millennial customers from unbundling and using third-party apps. Bankers should think of Monotto as a way to capture, maintain and grow deposits, find new loan opportunities with its existing customer base and ultimately to decrease the risk of losing savings accounts. Many millennials want to save; they just don’t know how—yet. With Monotto, saving is easy, intelligent, and maybe even fun—if you can say that about a savings account!