Research Part 4: Opportunities from Reinventing Business Checking Accounts


Editor’s Note:

This is the fourth and final part in our series exploring market research we commissioned with financial services firm Cornerstone Advisors to get a state of market view through the eyes of SMB leaders across the country.

Our main goal was to understand their challenges now and how community financial institutions could best compete for their business moving forward.

This subject has become even more timely as the consumer deposit and spending environment is changing for consumers, which has a direct effect on SMBs revenue and loans. Community banks and credit unions have been the traditional leaders working with SMBs. And that can remain the rule – if community FIs can deliver the kind of service and products SMBs are looking for.

This final section explores the needs of SMBs and how a revitalized approach to SMB checking products can deliver the kind of features that will help attract more SMBs and allow these community FIs to stand out in their respective markets against all competition, including megabanks and big regionals as well as other community FIs.

The three paradoxes of SMB banking—openness to new relationships, interest in better business checking account features, and willingness to borrow from other sources, all despite relatively high satisfaction with existing providers and products—are both threats and opportunities for community-based financial institutions. 

On one hand, megabanks and regional banks—which hold nearly 90% market share of SMB checking accounts—have an advantage over community financial institutions as the larger institutions are going to be the first place SMBs will turn to for the loans and other value-added (and fee-based) services they are looking for. 

Community banks can’t just copy the penalty fee pricing approach of the larger banks. Instead, they can find wedges— i.e., products and services—to capture SMBs’ existing deposit and other non-lending relationships to establish new banking and lending relationships. By reinventing the business checking account, there are opportunities for community-based financial institutions to drive revenue from: 

  • Fees from value-added services.
    SMBs already receive—and pay for—value-added services for cybersecurity, business identity theft, data breach protection and credit monitoring services. Bundling these services into business checking accounts provides SMBs with greater convenience to obtain and manage the services and drives deeper engagement with the bank. 
  • Debit card interchange.
    Community banks lag the bigger institutions in driving debit card use and interchange revenue from their SMB customers. Reinventing the business checking account by bundling value-added services gives community banks the opportunity to create a pricing structure that incentivizes SMBs to make greater use of their debit cards in exchange for more favorable pricing on the bundled package.
  •  Loans.
    On average, SMBs that bank with a community bank got nearly 60% of their borrowed funds over the past two years from that bank. Establishing checking account relationships with SMBs that currently consider megabanks and regional banks their primary providers may open the door to more lending opportunities.
Table E

Source: Cornerstone Advisors survey of 1,009 small to medium-size business owners and executives, March 2023

Expanding SMB Relationships with Accounting and Payments Services 

Banks shouldn’t rely on just bundling value-added services into business checking accounts to grow and solidify their SMB relationships. Instead, they should explore opportunities to provide accounting and payment acceptance services to SMBs. Many SMBs wrestle with financial management functions like managing and forecasting cash flow, invoicing, and integrating the systems and applications they use.

Today, many SMBs perform a range of accounting and payments functions in-house (Table F). With the difficulties small businesses face finding qualified personnel in today’s tight labor market—and then coping with the wage inflation caused by today’s economic conditions—many SMBs are amenable to outsourcing their financial functions.

In fact, more than a third of SMBs are definitely interested in obtaining both accounting/bookkeeping as well as invoicing/payment acceptance services from a bank or credit union with another four in 10 saying they might have an interest.

Figure 14

Source: Cornerstone Advisors survey of 1,009 small to medium-size business owners and executives, March 2023

Cornerstone estimates that banks’ revenue opportunity from providing accounting and payments services to SMBs is roughly $424 billion per year with $200 billion of that coming from SMBs who are “definitely” interested in receiving accounting and payments services from banks.




New Banker Deposit Survey Results!


Based on our survey of small business owners and executives, Cornerstone Advisors believes that community banks: 

  • Have a significant opportunity to capture small business checking account market share.
    Despite relative satisfaction with their current banking providers, the majority of small businesses are looking for new banking relationships in the near future. 
  • Can win new small business relationships with a different kind of checking account.
    As many small businesses are looking for a checking account with better functions and features as are looking for better rates and fees or for better account management. In other words: Banks don’t have to compete on price and will struggle to compete on service. 
  • Should bundle value-added services into their checking account offerings.
    Many small businesses already get—and pay for—services like cybersecurity protection, business identity theft protection, data breach protection and credit monitoring services. And many small businesses are open to obtaining these services from the banks they do business with, bundled into their checking account. 
  • Can increase interchange revenue among small businesses.
    The small businesses that have checking accounts today don’t use the debit cards associated with their accounts nearly as much as the small businesses that have accounts with large banks. The large banks have created pricing approaches that incentivize small businesses to make more use of their debit cards—and community banks need to do the same. 
  • Can leverage deposit and payment relationships into new lending business.
    The challenge for community banks isn’t about winning the lending business of small businesses with big bank relationships—it’s winning that business profitably. Winning the lending business of small businesses without a prior relationship requires a big investment in marketing and then an investment in time to underwrite and decision loan applications. Banks lending to small businesses with a deposit can leverage account data and make proactive lending offers—and significantly improve loan profitability.

Editor’s Post Script: The goal of this survey was to get a better understanding of the thinking behind how SMB leaders are banking today; what motivates their choices; and how to lure them away from their current primary banking relationships.

To learn more about the results of the survey, download the results, or contact