How Well Do You Know Small Businesses?

By Jen Dimenna, SVP Product at Apiture

I recently had the opportunity to participate in a business banking webinar with Christine Barry, Head of Banking and Payments, Insights & Advisory at Aite-Novarica. The webinar drew from a commissioned Apiture report examining the business banking market and giving advice to banks and credit unions on how to attract and retain more small business customers.

Even though I’m heavily involved in business banking strategy at Apiture, this report and Aite’s research held some surprises for me.

First, it reminded me just how important the small business market is to community banks and credit unions. I learned that 85% of banks think their overall success is tied to their success with small business customers. A winning formula begins with an institution offering the right products and having strategy in place to attract small business customers. With product parity in place, you can focus your efforts on promoting values — like excellent customer support and promoting the financial health of your business owners — that set you apart.

The second big aha moment in the webinar was this: 58% of small businesses currently bank with a big 4 bank. Yes, only four banks control a majority of the small business banking market! But, flip this stat on its head and you realize that 42% of businesses currently seek a business banking experience outside of the norm. So, competing — and winning — against a big 4 bank is not impossible. The challenge for community institutions is to listen to what small businesses need, deliver this to customers, and level the playing field with big banks.

For years now, many community institutions have been giving business banking services away for free. The market has been tilted in favor of big banks that invested heavily in innovative commercial products and services. Community banks and credit unions felt they had to give services away to keep their small business customers, even when those customers were willing to pay the big banks for similar services. But now, innovation in the form of better digital experiences and integration with fintechs has helped smaller financial institutions improve their business offerings and increase their capacity for innovation.

With 30 million small businesses in the market today, plenty of opportunities exist to grow this segment at your institution. Businesses today have specific needs — fraud detection and prevention; faster, more streamlined ways to make and receive payments; and analytics that show them how to be more financially healthy — and businesses will pay for the right products. We know this because they are currently paying fintechs or larger institutions for these products and services. Your goal should be to devise the right value proposition so you can monetize your business banking services.

To win with small businesses, you must be prepared to compete head-to-head with a big bank. You can learn how to do this by watching the webinar, 4 Ways for Community Financial Institutions to Win the Hearts and Wallets of Small Businesses, or by downloading our white paper, How Community Financial Institutions Can Make Money from Business Clients. For more information on business banking products and services, contact us.


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