Five ways banks can better serve small businesses

Published October 20, 2020


Small businesses are the foundation of the U.S. economy and are critical to driving economic growth. They make up over 95 percent of businesses in the nation . Yet many feel their banking needs aren’t being met. In fact, only 32 percent of small businesses feel their financial institution understands their business, and just 44 percent believe they can manage all their business banking needs through digital channels.

This reveals a significant gap between what small businesses need and what their primary financial institutions offer—and it frequently means they have to go somewhere else to get everything done. This creates a fragmented experience that makes it difficult to manage their business and financial wellbeing.


A substantial shift toward digital

Amid the global pandemic, a major shift is underway—more people than ever are turning to digital. And it’s true in banking, too: A staggering 97 percent of financial institutions have seen an increase in their customers adopting and using digital channels due to the pandemic, according to a recent Bank Director survey.

Also, more and more businesses are looking for contactless, self-service options for managing cashflow, sending and receiving payments, submitting invoices and engaging with a banker. This shift, coupled with the demand from small businesses, presents a huge opportunity for financial institutions to improve their digital self-service capabilities and better serve these users.


But what do small business users need?

Small business owners need more from their banks and credit unions—now more than ever. Here are some of their essential requirements and the capabilities they need to manage their businesses effectively.

To be treated like a business

Small business owners want to be treated as just that—a business, not a consumer. However, many are only given access to consumer digital banking solutions that lack the features they need for their business—from invoicing and payments to entitlements and approvals. According to Aite Group, an estimated 35 to 40 percent of small businesses continue to be served like consumers.

A single location for managing their business finances

Aite Group also discovered that more than 60 percent of small businesses go outside their financial institution to meet their business’s financial needs—for everything from borrowing to invoicing and payments. Additionally, many small businesses must maintain separate logins for their business and personal accounts within the same financial institution.  

Receivables capabilities

Invoicing and receivables are a critical component of running any business. However, in another recent report, Aite Group estimates that less than 10 percent of financial institutions offer invoicing and receivables capabilities to their small business users. The report also mentions that most financial institutions understand the importance of providing such capabilities but have been slow to roll them out.

A fully digital account opening process

Many financial institutions tout digital account opening—however, it’s often not fully digital. Many solutions still require the applicant to go to a branch or call their bank or credit union to complete the process. The same Bank Director survey found just 20 percent of financial institutions actually offer a fully digital small business deposit account opening process, and only 13 percent offer a fully digital small business lending process.

Customizable reporting capabilities

One of the biggest challenges for small businesses is being able to customize reports. About 65 percent of small businesses create many of their own reports because those provided by their financial institution don’t effectively meet their needs.

Many financial institutions are missing out on these opportunities to expand relationships and deepen loyalty with the small business customers and members they serve. As the need for digital self-service among small businesses continues to accelerate, financial institutions that do not advance their technology and expand their product offerings risk being left behind.

To better serve this profitable customer segment, look for digital banking platforms that enable you to expand product offerings, enhance the user experience, improve usability, create personalized interactions and proactively offer financial support. It will go a long way to positioning your brand as the financial institution small businesses know they can count on for all of their needs—in one place.

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