How Can Banks Accelerate Growth from Small-Business Clients?

 In 2024, SMBs (small- and medium-sized businesses) are the clear economic engine of America.

According to the US Chamber of Commerce, SMBs employ half of the entire US workforce, representing 43.5% of US GDP or $11.5 trillion in 2023. There are 33.2 million SMBs in the US with 62 million employees. Following the COVID-19 pandemic, entrepreneurship has been booming with 5.4 million new business applications filed in 2021 and another 5.1 million filed in 2022. These numbers are hard to ignore. McKinsey estimates that SMB banking represents about $150 billion in revenue across all products – deposit, loans, cards, cash management and merchant services.

How can community and regional banks use the SMB sector to strengthen their revenue growth at a time when sky-high interest rates and industry disruption from non-bank competitors are prompting small businesses to move their money elsewhere?

The challenge is compounded by the fact that many small business owners want to manage their business via their smartphones, and often banks are simply not keeping up with what their customers want. This trend means that SMBs are spending less time talking to their bankers and more time interacting digitally. Banks are losing their grip on the customer.

A recent study published by McKinsey provides some insights into trends that banks should consider to better serve their SMB segment customers. First, smart bankers should work to enhance their business offerings to differentiate themselves from other banks and nonbanks (like payment processors).

McKinsey found that SMB clients value robust relationship management/servicing and online/mobile tools, and that the availability of these features are a key consideration when choosing a bank. So, financial companies seeking these customers must focus on providing competent small business bankers and up-to-date online/mobile banking services.

The survey also found that over 40% of SMBs said they were likely to switch primary banks in the next 12 months. The three reasons given for the switch were easier access to credit, client service support and the digital experience.

Banks can attract and retain SMB clients by focusing on the following areas:

1. Provide strong and dedicated SMB relationship manager support – perhaps obvious, but often overlooked by senior bank executives. Don’t assume that branch managers and call-center personnel have the right training and skills to provide high value to SMB customers.
2. Be sure that clients have easy access to relationship managers for both loan origination and servicing. Many banks still have separate loan officer and relationship manager functions. This can be frustrating for busy small business owners.
3. Invest in digital capabilities such as online/mobile tools and integration with software-as-a-service (like RAMP, Dataiku or Meniga).
4. Offer end-to-end cash flow management services like positive pay (deters check fraud) and zero-balance accounts (funded only when needed for a transaction) as well as electronic bill payment and “smart safes” that secure and monitor cash. Bundled cash-flow management tools and partnerships with specialized fintechs are often the best solution.
5. Create a broader suite of commercial enablement tools: SMBs prefer to get everything they need from a single source, and banks can deepen relationships with customers by offering “commercial enablement solutions” (like Seismic, Clayfin or Q2 Holdings) that can help with payroll, accounting, website hosting/design and marketing/analytics. McKinsey notes that less than 50% of SMBs are getting these services through their bank.

Finally, a fundamental mind-set shift may be needed by banks and their C-suite leaders. Many are product, rate, and operations focused. Forbes pointed out in an article published late last year that growth-focused banks will need to leverage “customer-centric employees” as their key competitive point of difference.

As the article states “Advancements in intelligent technology – such as AI, automation, and machine learning – have fundamentally changed how employees engage with customers. Employees are better equipped to engage in meaningful, personalized conversations as they access comprehensive customer profiles.” This can and should be based on data.

Using these tools coupled with a robust CRM (customer relationship management platform), bank employees can move beyond selling financial products to developing genuine relationships and providing tailored offerings that meet specific customer needs. Making this leap often requires training, often best delivered today by cloud-based learning and development solutions from companies like SAP.

At Copylab, we understand the unique challenges and opportunities that community and regional banks face in the SMB sector. As a strategic content partner to financial services companies worldwide, we can help you create and implement a content strategy that addresses the needs and preferences of your SMB clients, ultimately driving revenue growth and customer loyalty. By partnering with us, you’ll gain access to a wealth of industry knowledge and content expertise that can help you engage your SMB clients more effectively and achieve your business objectives. Don’t miss out on the opportunity to strengthen your position in the SMB sector – contact us today to learn more about how we can help you create a winning content strategy.