Small Business Banking | Opportunity for Today’s Forward-Looking Financial Institutions
Small business banking is the new battleground for financial institutions (FIs), as many seek to ramp up revenue by focusing on these often-underserved assets.
The push comes as small business undergoes big changes; from the owners themselves to the sought-after account features to the diverse set of players in the space. This small yet mighty facet is creating major opportunities, as well as some considerable competition, for banks and credit unions. Small businesses can also serve as a viable referral source for personal accounts too.
Let’s review the small to mid-size market profile for banks and credit unions while exploring how to attract even more small businesses. Also, the innovation tips FIs need to win the trust and confidence of the small business accounts while protecting both their digital safety and security and that of their employees.
The Lure of a Small Scope
Main Street is not only a critical component of the U.S. economy; it’s often an underserved market, which makes the potential for growth quite lucrative. Small businesses of less than 500 employees make up 99.9% of U.S. businesses and employ 47.1% of U.S. employees.
In the banking sector, small to micro businesses account for more than half of all deposits and loan balances in the U.S. With a favorable economic environment and small business optimism hitting an all-time high — this niche’s profitability is only poised to grow.
This comes as owners scramble to find a user-friendly small business banking experience. Javelin Strategy & Research reports only 39 percent of small businesses have full-time bookkeeping or accounting staff. Owners often do the leg work themselves, which results in reduced productivity and an increased risk of error.
The Essential Small Business Owner
So, who are these optimistic, account-intermingling entrepreneurs? Well, they’re certainly not the team of Mark Zuckerberg prodigies Hollywood’s been selling us. Quite the contrary! Fortunly has offered some eye-opening small business stats:
- Only 0.7% of U.S. entrepreneurs who apply manage to get VC funding.
- Four years ago, millennials became the largest workforce generation in the States. By 2025, they will make up 75% of the global workforce.
- More than 25% of US businesses are started by immigrants.
It’s important to note that many small business owners are preparing to retire, and millennials or even Gen Z are likely to fill their roles. Although very different, they will all share a common core — their business is their life. They’re searching for a small business banking solution that emulates this shared belief. And it shows in their wish list of small business banking account features.
The Top Two Business Banking Account Features Small Businesses Want
The key capabilities that are really top of mind for today’s small business owners are on-the-go mobile banking and a dual-view of personal and business finances. This is often because small business owners frequently co-mingle funds between both types of accounts, adding even more complexity to thinly stretched entrepreneurs’ daily existences.
Javelin also reports that 50 percent of small business owners prefer to view their personal accounts alongside their business accounts in online banking portals. These multi-taskers also want this dual-view to follow them wherever they go with mobile access, which leads to the next key feature.
The pandemic certainly created even more demand for mobile online banking. According to Mercator Advisory Group in their blog post, 2020 Small Business Payments Insights: SMB Attitudes and Banking – Charting a New Course:
- Mobile check deposit jumped from 59% used by small businesses in 2019 to 69% in 2020.
- Mobile ATM withdrawal increased 13% between 2019 to 2020, with 63% of small businesses currently using it.
- “Mobile ability to lock accounts” increased from 47% of small businesses using in 2019 to 59% in 2020.
This need for a streamlined, mobile, and multi-view experience is nothing new. Providing business accounts with flexible financial tools that center on personalized protection can only strengthen the bank’s relationship with small businesses. Sontiq can help financial institutions further deliver the digital safety and security small businesses deserve through its small business identity protection products. Additionally, Sontiq can help small businesses protect against fraud.
So much of an owner’s personal and financial information is tied to their business, creating major security concerns that can jeopardize not only their identity but their livelihood. That’s why offering user-friendly, all-encompassing products is something Sontiq prioritized when delivering these value-added solutions to business account holders. And like with any sensible solution, if you’re not willing to offer what the account holder wants, someone else will.
Next STEPS FOR SMALL BUSINESS BANKING
These changes in the small business banking space leave many financial institutions questioning what their next steps should be. It’s critical to evaluate innovative new product features that provide peace of mind to all banking customers, while also helping protect the digital and financial well-being of account holders. Additionally, the same mindset for their small business customers, and even their employees, will pay back in massive dividends.
Small businesses are at the heart of the U.S. economy, and they continue to face a myriad of challenges. In 2020, almost a third of all data breaches targeted small businesses. Now is the time to address small business identity protection and build continued trust and confidence within this market.
Learn more about Sontiq’s suite of services for FIs and how we can help further strengthen customer safety and engagement with our AI-driven and actionable recommendations through BreachIQ™.