What Keeps Small Business Owners Up at Night? Newsflash: It’s Not Banking

Small and medium-sized businesses (SMBs) are a significant and underserved market for financial institutions (FIs). They make up 99% of the businesses in the U.S., and SMB banking revenue is projected to hit $100 billion this year. 

But this segment is also characterized by volatility, with SMB owners showing a pronounced willingness to switch banks if their needs aren't met. If they can do what they need faster and easier, they will. In fact, Accenture research in 2024 revealed an obvious but crucial insight: Small business owners aren’t focused on banking.

What does get their focus: growing their business, hiring and retaining employees, managing supply chains, and handling cash flow and accounts receivable. SMB owners are looking for financial partners who understand these broader, day-to-day operational complexities and can offer meaningful solutions. So what do FIs need to do?

Tailor their digital experiences 

While digital capabilities are table stakes, a significant gap exists in how tailored these experiences are for SMBs. Historically, the industry offered either simplified consumer platforms or overly complex commercial platforms, neither of which fully met SMB needs. SMBs want a digital experience that feels built specifically for them and how they work, which is often on-the-go and outside normal workday hours. More SMB owners and operators are expecting to manage their businesses wherever they are whenever they need to, preferably from a smartphone.

Dean Jenkins, principal digital solutions strategist at Q2, often talks about how banking has traditionally had a “two sizes fit all” approach, and the small business owner or operator is caught in the middle. “As an industry, we've actually made it really hard for small businesses to leverage digital banking,” he said. In fact, a live poll in a recent webinar showed that only 36% of participating FIs were tailoring their digital offerings to specific small business segments.  

Give them a one-stop shop

FIs need to demonstrate that they understand the operational complexities SMB owners and operators face daily. Rather than focusing solely on selling banking products, FIs should help SMBs navigate issues like employee management, accounts payable/receivable, and cash management more effectively. 

By partnering with fintechs to integrate solutions for needs like payroll and invoicing directly into their platforms, FIs can become more of a business hub for customers, enabling them to take care of all the day-to-day tasks of running a business in one place. 

Beyond that, many SMBs need a helping hand in navigating the financial aspects of running a business, and they appreciate when their FI can provide it. For example, Texas Security Bank spends the time to walk each customer through onboarding. Shon Cass, executive vice president and chief experience officer at the bank, explained, "We have a pretty simple treasury assessment that we do with all new customers where we sit down and talk about (things like) how are you currently paying your vendors? How are you handling your accounts payable? How are you handling your accounts receivable? It starts off with not a product discussion, but how are you currently handling these situations?"

Texas Security Bank established a Business Speaker Series and TSB Academy to educate owners and key players on critical topics like leadership, marketing, and financials. As Cass noted, "A lot of them are not banking-related. They're running-a-business-related." 

Use what you know about them

FIs possess a treasure trove of data they can leverage to provide a more personalized experience for businesses—if they know how to mine it and understand it. While aggregating this siloed data is challenging, the emergence of GenAI is opening new pathways to gain insights, identify opportunities, and personalize interactions. When an FI can successfully provide just-in-time answers for SMB issues, the result is powerful. 

For example, Bank of Ann Arbor uses data to identify customers who are prime to adopt positive pay for check and ACH fraud prevention. Rather than waiting for a customer to have a bad experience or loss to fraud, the bank proactively seeks to identify and educate.
"We look for customers that are active check writers, and we also look for customers who have a large relationship with us,” said Jessica Salerno, e-banking officer and fraud analyst at the bank. “Good customer service is proactive and not reactive.”

Learn more about how to better serve SMBs with these resources:

On-demand webinar: The Future of SMB Banking: Partnership and Innovation
E-book: Digital Banking for a New Generation of SMB Owners
Podcast: Making a Case for Positive Pay