Recapture SMB growth by thinking like a fintech and delivering like a bank

A version of this article first appeared in the August Executive Report: Delivering what small-business banking demands. Inside the report, you’ll find insight from strategists and thought leaders on relationship management trends, smarter SMB digital offerings, and ideas for improving loan servicing ease.

For financial institutions, the small business sector presents a substantial opportunity for growth and innovation. Small businesses comprise 99.9% of all U.S. businesses and employ nearly half of the private workforce. As the banking landscape evolves, banks and credit unions that adapt to the unique needs of small- and medium-sized businesses (SMBs) can establish lasting relationships and drive sustainable revenue.

In 2024, the U.S. commercial banking market was valued at $231.9 billion, with projections indicating growth to $351.8 billion by 2033. Increasing demand for tailored financial services among small businesses is in part fueling this expansion. SMBs actively seek financial partners that understand their unique challenges.

Financial institutions, however, aren’t the only ones vying for a slice of the coveted small business pie. Fintech giants like Square (now known as Block), PayPal, and Circle, among others, have thrown their proverbial hats into the financial services ring.

Today, more than half of the small firms in the U.S. are working with non-bank fintechs, which funnels business away from traditional financial institutions, significantly decreasing basic transaction accounts and low-cost business deposits.

Yet, despite this rising challenge, the FDIC notes that the community banking model remains highly competitive in the financial market. Because of the increased interest across the financial landscape in serving small businesses, banks and credit unions now have a chance to recapture market share lost to fintechs.

And that means you can chart a new course.

Meeting the evolving expectations of the SMB market

The digital revolution has reshaped accountholder expectations across all sectors, and small business banking is no exception. Business owners demand seamless digital experiences, mirroring the convenience they experience in consumer banking.

The 2025 Strategy Benchmark from Jack Henry reveals that 80% of bank and credit union leaders want to expand services for small businesses in 2025 and 2026. They plan to add payment services, digital service tools and credit/lending options for their small business accountholders.

By taking advantage of strategic tools and approaches, you, too, can strengthen support for your SMB accountholders.

Key digital features sought by SMBs include:

• Real-time payments and funds transfers. Small businesses rely on steady cash flow to operate smoothly, so real-time payments and transfers are crucial for speeding up receivables, paying vendors instantly, and avoiding delays that can disrupt business operations.
• Instant loan approvals and credit decisions. Quick access to capital can make or break a small business. Instant loan approvals and credit decisions empower SMBs to act decisively–whether it’s securing inventory, expanding services, or managing unexpected expenses.
• Integrated cash flow management tools. Managing incoming and outgoing funds is a constant challenge. Built-in cash flow tools provide real-time visibility and forecasting, helping businesses make smarter financial decisions and avoid costly shortfalls.
• User-friendly mobile and online banking platforms. Time is a precious commodity for small business owners. Intuitive digital platforms allow them to manage finances on the go, from depositing checks to paying bills and tracking transactions–without needing to visit a branch.

When you invest in these digital capabilities, you enhance customer satisfaction and loyalty. According to the 2024 U.S. Small Business Banking Satisfaction Study by J.D. Power, financial institutions that place greater emphasis on personalized, proactive support and improved credit access see higher retention rates among small business accountholders.

Building trust: The cornerstone of long-term relationships

Trust is paramount in the relationship between SMBs and their financial institutions. A report in American Banker identifies four key pillars for advancing relationships with small business accountholders: acting in the business’s best interest, safeguarding funds, protecting against fraud, and keeping up with customer demands.

However, perception gaps exist between financial institutions and their small business accountholders, particularly in areas where fintech and digital-first providers are making inroads.

Bridging these gaps requires:

Effective fraud prevention. Fraud prevention and cybersecurity are top concerns for banks and credit unions, according to Jack Henry’s 2025 Strategy Benchmark. SMBs are victims of cyberattacks as frequently as large corporations. However, these smaller operations often lack the resources and infrastructure to prevent, detect and mitigate intrusions.

You can help by implementing innovative fraud controls, such as adding a secure channel for high-risk transaction discussions within your digital banking app to facilitate approvals and discussions in a secure, authenticated environment.

Tailored, personalized access controls. SMB owners want to determine who can see what, who can complete which types of transactions, and whether specific levels of approvals apply to different accounts or transaction types.

Give your SMB accountholders the ability to customize access levels, transactions and approvals for multiple employees through a tailored and secure financial management experience. Also, develop financial products and advisory services tailored to the specific needs and life cycles of small businesses.

Streamlined financial services. Small businesses want to focus on their customers, not on juggling several different financial services relationships. In the past, that meant managing just one primary banking relationship. Now, however, each SMB could potentially have anywhere from five to eight different service providers.

To mitigate that fragmentation, you can become a one-stop financial provider for your SMB accountholders by providing a comprehensive suite of services. Invest in technology that streamlines banking processes, offers real-time insights, and provides intuitive user experiences, all toward facilitating essential integrations through an open environment.

Capitalizing on small-business banking opportunities

The small business sector represents a dynamic and growing market for financial institutions. As the financial landscape continues to evolve, if you proactively adapt, you’ll be better positioned to thrive in the competitive small business banking arena.

Toni Domingo is Digital Sales Executive at Jack Henry.