FIs: Ignore the SMB Market at Your Own Peril

A group of industry experts will gather this Thursday to share their views on the small to midsized business (SMB) sector and what financial institutions (FIs) could and should be doing today to attract, retain, and grow this valuable market. Texas Security Bank’s Shon Cass, Autobooks’ Derik Sutton, and Monit’s Ryan Johnson join our conversation in “Harness Fintech Partnerships to Win SMB Market Share in 2023 and Beyond.”

Mr. Johnson, who serves as Monit’s Chief Customer Officer, has deep intel into the market and will open the conversation with a dive into why SMBs matter. We sat down with him for a Q&A about some of the topics he’ll be covering.

Q2: Why should financial institutions (FIs) actively pursue the small to midsized business market?

Johnson: Small businesses are the backbone of the American economy and represent a tremendous profit pool for FIs. They are a major source of high value and sticky deposits, borrow to fund and grow their operations, and need an evolving suite of financial products to run efficiently.

They’re strong economic contributors, comprising more than 99% of all U.S. businesses; they’re owned and operated by a remarkably diverse group, including women, minorities, and veterans; and they’re major employers, employing nearly half of all private sector employees. Our local communities are strongest and most stable when small businesses are performing well. 

Q2: You talk about the confidence small businesses command. Can you explain?

Johnson: Gallup’s annual “Confidence in Institutions” survey shows Americans trust small businesses more than any other institution—including medical systems, large tech companies, and financial institutions.

Their owners are the neighbors, peers, and friends of so many Americans, with high relatability on a personal level. FIs that ignore the SMB sector risk building up the goodwill that comes from supporting organizations their customers trust.  

Q2: Are there major trends you're watching related to small business ownership?

Johnson: Absolutely. One of the biggest themes that has caught my attention is the generational turnover currently under way. More than half of privately-held businesses are owned by Baby Boomers, those born between 1946 and 1964. These owners will be fully retired by 2035. Some analysts estimate as much as $5.1 trillion in equity value transitioning to the next generation or shutting down if a buyer/inheritor can't be found.

With this transition, financial institutions need to really home in on the needs and demands of Generation X and Generation Z owners. These younger entrepreneurs are far more likely to view integrated small business digital services as table stakes, and are far more likely to switch to a new bank if the incumbent is unable to meet their expectations.

Q2: What are some of the things influencing how younger generations are developing different expectations?

Johnson: The obvious answer is younger generations have had totally different experiences growing up in a digital world. With that said, many entrepreneurs get their start with a small side hustle or early online business.

On the retail side, the emergence of tech platforms (think: Amazon Marketplace, Esty) make it simple to set up and operate a business. And integration with other operations and finance tools (for example, Shopify and Square) are easier than ever before. As they grow or start bigger businesses, the expectations inherited from solutions that are simple to set up and integrate are carried forward. And these digital natives can get frustrated when more sophisticated organizations, like banks, can't recreate this experience. 

Q2: What are some important things for bankers to remember when serving SMBs?

Johnson: First and foremost, SMB owners are busy! They are experts in their products, their customers, and communities, but are not necessarily finance and accounting people. The language of accounting and finance can be intimidating, so it's important to limit the use of heavily technical terminology and jargon in favor of more inclusive communications.

Secondly, given the competing demands on their time, SMBs prefer experiences that are streamlined, efficient, and available when they need them. And, since they’re running their businesses from 8 a.m. to 8 p.m., at a minimum, this leaves them with limited time to adhere to a bank’s 9-to-5 schedule.

To hear more of what Johnson and his cohorts have to say about winning and serving the SMB market, join us this Thursday for “Harness Fintech Partnerships to Win SMB Market Share in 2023 and Beyond.”