Revitalize Your SMB Checking Accounts and Take on the Megabanks
By Gregg Early
A study done by the Independent Community Bankers Association (ICBA) revealed that community banks provide about 60% of SMB loans nationwide.
That puts community financial institutions at the center of their communities. It also means that SMBs are a crucial part of a healthy community FI’s portfolio.
Both these axioms are the current tension we’re seeing take place in the community banking sector.
The current interest rate environment, the instability of larger regional banks, the unstable commercial real estate market, excess deposit liquidity concerns, and the uncertainty of a pending recession are some of the challenges that are driving some clients to megabanks, and younger generations to fintechs.
These challenges for SMBs have seen them move to regional banks and megabanks for better rates, less risk to payroll fundings and modern, digital experiences.
And the features that megabanks are offering - advanced cybersecurity tools, back-office business support, credit and funding resources - are tough for community FIs to deliver due to staffing and costs.
The fact is, community FIs can’t compete head to head with the bigger banks, just like SMBs can’t compete with bigger companies in their industries. Both have to win by delivering quality products that enhance their customers’ experience by deepening relationships.
What to Do?
All these challenges and the questions that they prompt is one key reason we commissioned a study to get a snapshot of where SMBs are now and get some insights on where they’re headed, what they value most in a banking relationship, and what are the opportunities for community FIs to be relevant banking resources for them.
What we found was encouraging (see below for a link to the free report).
While the banking crisis earlier this year was a clarion call for SMBs to move to the safety of megabanks, they also have remained very interested in keeping their banking local, if you can make it worth their while. And that doesn’t necessarily mean giving them the best rates.
The greatest opportunity is providing a checking product that can provide the unique features that SMBs want.
And a big part of that solution is delivering an SMB checking account that can provide the services that SMBs need in a package that doesn’t weigh down the infrastructure of the community FI that’s trying to implement it.
Also, the mantra “more is better” doesn’t really apply in the SMB world in the sense that many business owners are very good at the business they do, but they’re not necessarily interested in becoming bookkeepers or accountants or cybersecurity experts.
Delivering a checking product that has a direct impact on helping SMBs manage their financial wellness and protect them from outside financial threats - fraud, cyberthreats, payments issues - is what SMBs are looking for today.
The key features to attract SMBs are:
Cybersecurity
Given the amount of transactions that occur online today, it’s absolutely essential that companies of all sizes protect their digital footprint. Data breaches at SMBs can be devastating for businesses and customers alike. And fraud is increasingly pervasive.
Providing SMBs with the resources to protect their digital footprint - as well as their customers - means one less product that leadership has to find on their own. An extensive suite of cybersecurity products is very attractive.
Integrated Invoice and Payment Acceptance
Again, the digital payments space affords SMBs scores of options. What good bankers do is curate those options to the best choices for their clients. By delivering seamless invoicing and payment services that allows businesses to keep their eyes on building and growing their businesses.
Financial Reports and Bookkeeping
Just as integrating payments and invoicing can save hours of headaches, so can delivering the kind of back-office help that can keep SMBs on track without having to farm out this business or hire additional staff to keep the books in order.
Business Credit Scores
A lot of SMBs aren’t aware that FIs look at business credit scores when assessing funding. Giving SMBs access to their credit scores can be a very educational and valuable tool for helping businesses work on their financial profiles.
Employee Benefits
A business is only as good as its employees. One way to help retain quality individuals in this competitive employment environment is to give them a benefit package that has a lot more to offer than the SMBs can give them on their own.
There are certainly other opportunities to make community FI checking accounts more attractive to SMBs but it’s more about developing a checking product that gives SMBs what they need without making them jump through a lot of hoops to get it.
This sector has always been the lifeblood of successful community FIs. Now it’s possible to revolutionize your SMB checking to continue this relationship with new generations of businesses.
For more information on revolutionizing your SMB checking accounts, contact Dave DeFazio, Partner, StrategyCorps at dave.defazio@strategycorps.com.
Download your free copy of the SMB report.
Gregg Early is a financial writer and editor who's worked as a journalist for American Banker, Bond Buyer, and others covering the SEC, MSRB, Supreme Court, and various Congressional finance committees. His expertise is fintech, emerging technologies, biotech, ESG, green tech, cryptocurrencies and derivatives. His work has been featured on CNBC, CNN, and Bloomberg, as well as in The New York Times, Washington Post, Wall Street Journal, and Businessweek. Contact him at gregg.early@strategycorps.com.