How to Win More SMB Business in This Market
By Gregg Early
According to a recent Jack Henry article, the top 25 banks in the US account for 84% of primary banking relationships with SMBs.
And community and regional FIs’ share of primary SMB banking relationships are declining due to megabanks and digital banks expanding their market share - from 28% in 2018 to 16% in 2022. That’s a 43% drop, and that should be a clear signal that community FIs need to rethink and revitalize their SMB checking products before it’s too late.
The biggest challenge is community FIs haven’t put a lot of effort or imagination into their SMB accounts. Not only have they left them on “set and forget” but there’s little differentiation from one FI to another.
There’s also the thinking that community FIs can’t compete on loan rates or interest rates with the megabanks, big regionals, or neobanks, so there’s no point in chasing SMB accounts since that’s what drives most account openings.
New Opportunities for SMB Accounts
But this is more fiction than fact. In our recent proprietary survey of SMB owners and leaders we found that many leaders are happy to switch if they can get an account with valuable features for the company and employees.
What’s more, there’s a common sense way to revitalize SMB checking products and in doing so, differentiate with the competition and generate organic growth.
When asked why they might consider a new banking relationship, nearly 40% indicated they wanted to get better business checking account product features and capabilities—even though more than almost 90% said they were at least somewhat satisfied with the range of features they already have.
That puts nearly 50% of current SMB accounts in play - if a community FI can deliver the right features. Here’s what those desired features look like:
Source: Cornerstone Advisors survey of 1,009 small to medium-size business owners and executives, March 2023
That’s why we crafted BaZingBiz. It not only offers many of the advantages that big banks offer on their SMB products, but it also offers many non-traditional benefits that the megabanks and digitals banks don’t.
SMB Accounts That Deliver More
Rethinking SMB checking starts with pricing.
The continuing strong economy has been helping small and medium-sized businesses. SMBs are less interest rate sensitive and need to remain nimble and competitive to win and maintain their customers and grow their businesses. That means SMBs are especially focused on having primary SMB accounts with FIs that deliver unique value.
Community FIs need to think about transitioning away from free SMB checking or low conditional fee checking (i.e., with a minimum balance requirement) with no differentiated value to a conditional fee checking account or a subscription-based flat fee checking account with differentiated value.
This kind of product will, in the worst case, pay for itself. And in the most likely case will boost SMB deposits, fee revenue, and relationship balances.
It’s also a powerful way to differentiate from the competition, whether that means community FIs, megabanks, regionals, or digital banks.
Give SMBs What They Want
So, what do SMBs mean when they say they want “better business checking account product features and capabilities?"
In our survey, roughly 60% said they would be very interested in getting cybersecurity, business identity theft and data breach protection bundled with their business checking account.
Nearly half said they’re very interested in getting warranties and dark web monitoring from their bank, and 44% expressed strong interest in bill negotiation services.
Source: Cornerstone Advisors survey of 1,009 small to medium-size business owners and executives, March 2023
This isn’t a random list. According to the survey, 64% of SMBs have experienced cybersecurity threats over the past few years, with one in five saying it's had a significant negative impact on their business. Payments fraud has been an issue as well, cited by 68% of respondents, with 18% complaining about its negative impact.
That’s why we created BaZingBiz. We didn’t simply come up with a bunch of features and services and hoped some might have real value. We built this SMB product to deliver benefits and services that are targeted to the real needs of SMB owners and their employees.
And remember, for every SMB account, there are also potential retail accounts to be opened for employees of those businesses. And delivering these unique SMB checking features is a foot in the door for each of those potential retail accounts, too.
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.