Serving Small Businesses Starts With Listening to Them

Businesses in the U.S. are as diverse as the U.S. populace itself. From Etsy sellers to franchisers and from mom and pops to inventor-entrepreneurs, they come in myriad shapes and sizes and are run by people from varying backgrounds, generations, and experiences.

On the other hand, business banking is much more homogenized—at least it has been, traditionally. No matter where business owners bank, they’ve been likely to get a standard set of capabilities: checking, cards, payment processing, lending. Even as banking has moved into the digital space, the difference from one financial institution to the next has been minimal.

That is changing quickly. And so are the expectations of business owners.

In today’s financial services market, owners have a buffet of options for the services they need to run their businesses—including banking—and the most compelling options often don’t come from their local financial institutions (FIs). Fintechs and large banks offer the flexibility, mobility, and ease-of-use many owners require. And recent research shows that as much as 37% of small and medium-sized (SMB) owners are willing to switch financial institutions to get those needs met.

The question is: Why haven’t they already? Perhaps they need something else even more. 

At our CONNECT 25 customer conference, we dedicated a track in our agenda to discussing and seeking to better understand how to serve this segment. We wanted to know what makes a business owner choose to leave—or stay with—their bank. And who better to ask than business owners themselves? 

Personal Doesn’t Have to Mean Local: Russell’s Story

Key takeaway: Provide the digital capabilities that enable business owners to take care of the day-to-day transactions of running a business on their terms—when and where they need to. Then, use that transactional data to provide a more personal, customized banking relationship. 

Russell Griffin wasn’t aiming to become a business owner when he started his career as an HVAC technician in 2002. He just knew that, in Texas, where summer seems to span eight months a year, knowing how to keep the air conditioner functional equals job security.

But when he got the opportunity to purchase the Houston office of his employer, APS Building Services, in 2014, he jumped in with both feet—even though he admits he knew very little about how to run a business. In 2020, he purchased the Dallas home office. What started as a three-person operation now has almost 300 employees.

As the business has grown and evolved, so have Russell’s banking needs. Before becoming a business owner, he considered his bank nothing more than a place to deposit his paycheck. His relationship with Texas Security Bank is a robust, personal relationship—even from 300 miles away.

“Without the digital experience, I would not be with Texas Security Bank,” he said. “I am in Houston; they are in Dallas. They do not have a branch anywhere close to me. So the digital is the only way this relationship can work.”
 
Even so, digital isn’t everything, he said. “The most important thing that the bank can do for us is just the personalized experience.” Through the bank, Russell has participated in a variety of training sessions to better understand things like small business loans and positive pay. 

“With positive pay, I knew nothing about that, didn't know what it was, didn't know what it meant. Texas Security Bank guided me toward that. At the time, did I understand anything about it? No. Since then, have I understood the importance of it? When we got hit with fraud, I absolutely understood the importance of it,” he said.

Shon Cass, executive vice president and chief experience officer for Texas Security Bank, said it was the bank’s digital experience that enabled the personal one.

“(Russell) was the guy working out of the back of a truck that never made a payroll, didn't understand all of the aspects of running a business,” he said. “But he's in Houston; we're in Dallas. We don't have locations there. And so he's able to use that technology to do his day-to-day banking, but our relationship manager stays in touch with him, engages with him regularly, and that's really where the relationship is.

“When business customers used to come into the branch and they had that interaction with the teller, we thought, ‘Wow. That's a great relationship.’ Well, that was just a transactional relationship. The relationship today can actually be stronger because we've taken care of the transactional piece with the digital, and now we can engage more often with the customer on the actual things they need to grow and win the business. I think it's an opportunity to have even stronger relationships with our customers. And with the technology, being able to monitor their transactions, engage with them when they see certain transactions that are happening is absolutely critical.”

Grow With SMBs and Win Their Loyalty: Carter’s Story

Key takeaway: Providing the right digital experience early on in a business owner’s career can create a loyal customer for life, especially when that digital experience can evolve and scale with the customer’s needs. 

Some business owners are made, and some are born. Like Carter Davison.

Carter owns The Bagel Exchange, a popular spot he took over at the tender age of 19. But even then, Carter was already an experienced entrepreneur, having run a successful lawn care service and, later, portable toilet business, which he purchased and tripled the business before selling it. All before graduating high school.

Carter has an innate sense for business, and he leads The Bagel Exchange with plans already in motion for expansion to another location. Beyond the food, Carter sees The Bagel Exchange as a way to strengthen the community through job creation, providing a gathering spot, and ensuring profits are reinvested locally. He attributes his business acumen to his father’s sales background and his own "nerd-like" fascination with technology and online research, which he’s used to learn about everything from write-offs to real estate depreciation.

Carter’s relationship with Bank of Tennessee is a cornerstone of his success. At just 18 years old, Carter sought a loan from the bank to buy Potty Box Portables. Bank of Tennessee bought into his business plan and vision, providing the crucial funding others might have hesitated on. 

For Carter, the bank’s personalized service and digital convenience are paramount. He relies daily on their online banking for essential tasks like checking balances, sending ACH payments, and transferring funds. 

“As I've grown from a small lawn care business to the porta  potty business and now to The Bagel Exchange, where I've got 12 to 15 employees and a lot more expenses that I have to take care of, it's great to have the guys at Bank of Tennessee and the digital banking platform that I can rely on,” he said. “The main digital services that I use on a daily basis are mobile deposits, obviously, checking balances, and then sometimes I'll need to transfer money from one account to the other for a payment that I need to make that day. And it's nice to be able to do that on the go, on the fly.”

Thomas Eorgan, director  of sales enablement for Bank of Tennessee, said he and Carter’s relationship manager have enjoyed watching Carter expand on his business dreams. And from one business to the next, the consistency of Carter’s digital banking experience has been a crucial aspect of helping his businesses evolve.

“If you're a small business owner like Carter, you're just starting out, you’ve got maybe just yourself as an employee, you use certain features of the digital banking suite. But then, when you add complexity—another business, you add employees, you add payroll, you add ACH—the system grows with the business,” he said. “He doesn't have to go back and learn a new system; he just uses the same system as long as his business grows. And on the consumer side, he's a personal consumer customer, he does the same thing with the same UI.”

But that’s just the beginning, Thomas said. 

“The way that people use the online banking platform has dramatically changed. It went from, like Carter said, checking balances, moving money around, and it became more of a financial operating system. They run their business organizationally and operationally within the platform, and we found that because we look at our engagement metrics and we know that people are spending a lot more time in the platform,” he said.

“When we launched with Q2 back in 2014, it was a convenience platform. It was a way for customers to access their accounts. Now we use the platform on the back side to get interesting data about our customers. 

“We launched Monit a year ago, and it's been a huge success for our company. We get all these tailored insights on the back end, and we can take those to our business bankers and say, ‘Here's an issue a customer's facing’ or, ‘Here's a cash flow problem’ or, ‘Here's a receivables problem.’ And we can take that to them and say, ‘Contact your customer, find out what's going on there.’ So the way that we use the platform in the back end is almost as revolutionary as the way our customers use it on the front end because we're using it to just better serve and deliver services to them when they need them.”

Act on the Information You Have: Dean and Deidre’s Stories

Key takeaway: Understanding the customer data you have is critical to understanding where they’re likely getting their needs met elsewhere. 

Dean Jenkins isn’t a business owner, but he might as well be. Dean is a digital strategist at Q2, and two years ago, his wife started a small business selling succulents. That business has bloomed into a family affair that includes two locations, a supply chain, and a big increase in payment transactions. 

The business’ main account is at a large regional bank in the area, and Dean’s wife logs on to digital banking four or five times a week and spends about 30 seconds checking balances. Where does she spend most of her time? 

“She spends a lot of her time—to the tune of five, six, seven hours a week— in Square because Square has all of the information about her business, has all of the information about what her incoming receivables are, about her cashflow, even to the point where Square really understands her business and where it's at,” he said.

And now Square is using that information to make offers for loans to help her with the inventory. She got no such offers from her bank.

“The opportunity that's in the market for businesses like this—and there's all kinds of these businesses, bigger, smaller, that are growing and changing over time—and many of the financial institutions don't know what's going on. … They're not telling us this, but they're telling Square that, right? They're telling that through the transaction patterns and their behavioral patterns of what's going on in the business.”

Deidre Barrett is the chief experience officer with Guaranty Bank and Trust in Mississippi, and she has her own story to tell about a family member with a small business. For 25 years, Deidre’s brother has owned a successful turf-painting business that paints stripes and emblems on sports fields. Think Super Bowl.

“I go to him every now and then, and I'm just like, "Tell me about your business. Tell me about what you are using electronically. How are you paying your employees? And what about when you're invoicing the Denver Broncos? What's that turnaround look like for you? How does it affect your cash flow?’ And he's like, ‘What are you talking about? I don't do any of that.’ "

Deidre used her brother as an example of how some small business owners—the roughly 50% that are baby boomers and not as comfortable with technology—may need a bit more help from their bank to employ the digital capabilities that can really make their businesses more efficient. In addition, reaching out now can help create a stronger relationship for when those businesses eventually pass down to younger owners.

“If we could identify in our banks who are those that are business owners that may be 70-plus that are still owning their business, get in front of them, go with empathy, go with curiosity to find out what their succession plans are—to be able to get in front of that and those next successors, I just think that's huge for us,” she said.

In his role with Q2, Dean talks with many community and regional banks about the small business opportunity, which research shows is worth about $700 billion in deposits that could be on the move over the next one to two years. 

He holds up his wife’s business as an example of opportunity lost, a scenario that is becoming all too common as fintechs and nonbanks lure business owners with the fast, easy, intuitive digital experiences they need, and then make use of that data to understand and anticipate needs, offering just-in-time services.

“I always get from the bank, ‘Well, we don't know about their emerging needs.’ And I say, ‘But what if you could?’”

Be More Than Just a Bank: Ben’s Story

Key takeaway: Business owners have so much more on their to-do list than banking, and they appreciate when their trusted FI partner can help them meet the their day-to-day challenges. 

Ben Cash has the best name a banker could have. But he’s not a banker; he’s a senior product manager at Q2 who focuses on small and medium-sized businesses. He, too, has a sibling story to tell.

Ben’s brother owns a couple of coffee shops in their hometown. On a recent visit, Ben put on his product manager hat to glean some insights not only from his brother, but from some other small business owners gathered at the shop on a random day. Through that conversation with a coffee shop owner, a law firm owner, and a tech company owner, Ben came away with a better perspective on the challenges small businesses face every day—and the part their financial institutions play.

“What was interesting from that conversation is the answers were very telling because you learn about the financial tools they're using, but what you really learn is the challenges they face every day, the risk that they're up against, the trust they have to build. And they're really trying to stitch together all these different things because they're trying to manage their business and manage banking,” he said.

Ben used that conversation as the impetus for a panel discussion at CONNECT 25, which brought together bank and credit union leaders to share some of their own stories.

Katrina Leach is director of digital banking at United Federal Credit Union, and she said a key approach for her institution is to not only provide the services business owners need, but to find new ways to meet them where they are and help them understand how the bank can help.

“One of the things that we've really been focusing on is how do we make our businesses aware of the services that we offer? They're not going to approach you with something that they need if they don't necessarily know that you offer it. So educating your staff to educate the businesses on what you offer is key,” she said.

“But also putting that content in front of them, making the information readily available right there in their experience is going to help drive their adoption and their interest in the products. And then it allows you to have the conversations on what's going to most efficiently benefit them for them to be able to leverage.” 

Tap Into the SMB Opportunity

The small business opportunity is significant, and it can be a strategic way to drive deposits and long-term relationships for your financial institution. Understanding what business owners want and need from their financial institution doesn’t have to be a Herculean task. Many times, the tell-tale information is already in your transaction data. With the right technology, you can find that information, then act on it.

At CONNECT 25, we heard from many community FIs that are making it happen. And for those who crack the code, SMB will be key to securing their FIs’ futures.

How Q2 can help: 

•    Q2 Digital Banking Platform
•    Q2 Innovation Studio
•    Dynamic Personalized Experiences
•    Centrix Exact/TMS Positive Pay
•    Money Movement