Restoring Small Businesses to Financial Institutions: Strategies for Banks
Small businesses, with their limited staff and time, require user-friendly banking solutions that are essential in today's fast-paced economy. Banks, traditionally seen as the backbone of financial services, have an opportunity to transform their branches into a Genius Bar for small businesses, offering merchant services as part of their account opening process.
The rise of fintechs has been a game-changer in the payment services sector. These tech-savvy companies offer easier, faster, and more specialized payment solutions that surpass traditional banking capabilities. Fintechs leverage technologies like blockchain and real-time processing to facilitate seamless, secure, and transparent transactions with minimal friction. They also focus on specialized industries or customer segments, delivering tailored payment experiences that cater to the unique needs of businesses such as retailers, restaurants, or healthcare providers.
Fintechs also harness data and advanced analytics to better evaluate risks, reduce fraud, offer faster access to financing and investment opportunities, and serve customers 24/7 with digital tools and advice. These conveniences and operational efficiencies are highly valued by small and mid-sized businesses (SMBs).
To stay competitive and win SMB loyalty, banks need to integrate modern fintech payment technologies, specialize strategically, offer payment solutions that improve SMB cash flow and streamline operations, and partner with fintech providers to bridge the technology gap. By doing so, banks can transform payments from a basic transactional function into a strategic differentiator that keeps them relevant to SMBs.
There is an increasing need for banks to offer small business-focused integrated payment capabilities. Small businesses are focusing on running their business and have limited time and capacity for new things. It's no surprise then that more than half of small businesses obtain their merchant payment accounts from providers other than their primary bank.
Small businesses spend nearly 20 hours a week on cash flow and financial processes due to juggling multiple providers. This is where banks can step in, offering a one-stop shop that includes banking services, payroll, insurance, and other essential business tools. By doing so, banks can deepen their small business relationships and improve cross-selling abilities.
The average small business owner wants a one-stop shop with digital capabilities and features of a commercial demand deposit account. Banks that can provide this will not only win SMB loyalty but also reap the benefits of merchant services. Merchant services can result in twice the deposit growth for financial institutions compared to accounts without merchant services, helping financial institutions grow and protect their deposits.
In conclusion, banks must adapt to the changing landscape of the financial services industry by embracing technology partnerships and focusing on specialization and superior customer-centric solutions. By doing so, they can transform payments from a basic transactional function into a strategic differentiator that keeps them relevant to SMBs.
Small businesses, seeking more streamlined operations and specialized payment solutions, are increasingly obtaining their merchant accounts from providers other than their primary banks. To compete and retain the loyalty of these small and medium-sized businesses (SMBs), banks must consider integrating modern fintech payment technologies and offering small business-focused integrated services that go beyond banking, such as payroll, insurance, and other essential business tools.
By offering a one-stop shop with digital capabilities and features of a commercial demand deposit account, banks can not only win SMB loyalty but also reap the benefits of merchant services, which can result in twice the deposit growth compared to accounts without merchant services, contributing to the financial institution's growth and deposit protection.
