- Economy & Markets, Growth & Innovation
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While sentiment in the segment remains optimistic, companies are asking for more support from their financial institutions to address competitive challenges.
Small businesses are a cornerstone of the U.S. economy. In 2026, they are operating in a more complex and competitive financial environment. Rising costs, evolving digital expectations, and heightened competition among financial providers are reshaping how these firms choose and retain their banking partners.
In a recent ProSight Banking Outlook presentation, Mark Riddle and Jason Mencias, both directors in research intelligence at ProSight, shared findings from a survey of 600 small business owners across four tiers of asset size. The data reveals a sector that remains optimistic yet increasingly demanding, forcing banks to rethink how they deliver value.
“Growth was number one, operational efficiency was number two, and cash flow management was number three,” Riddle said, pointing to the core priorities shaping business decisions today.
Small business sentiment remains broadly positive, but it is starting to soften, Riddle said. About 72% of business owners expect their financial situation to improve over the next six months. This is still a strong figure, though slightly lower than last year.
At the same time, costs are rising faster than revenues. Roughly half of respondents now anticipate higher expenses, compared with about 40% a year ago. This divergence is compressing margins and forcing business owners to make more deliberate financial decisions.
Despite these pressures, the broader ecosystem remains resilient. Business formation continues to outpace closures, suggesting a steady pipeline of new clients for financial institutions. At the same time, expectations are rising. Small businesses are not only looking for financial products; they are looking for meaningful support.
As Riddle emphasized, “you want to speak their language and really address their needs around growth, efficiency, and cash flow.”
A Central Tension
The research highlights a central tension in small business banking. Customers want both personalized relationships and seamless digital experiences, yet many feel they are not receiving either consistently.
Relationship banking remains uneven, particularly among smaller businesses. Only about half of businesses under $1 million in annual revenue report having a relationship manager, even though this segment represents most of the market.
“That’s the lion’s share of small businesses,” Riddle said. “Only 51% say they have a relationship manager.”
The consequences are visible in customer behavior. Smaller firms tend to rely on branches for guidance, while larger firms benefit from proactive outreach and scheduled advisory interactions. As businesses scale, expectations shift toward trust and expertise.
Mencias underscored how quickly this evolves: “That trust or advice comes in at number four for the smallest firms, but it becomes the number one choice” for larger businesses selecting a primary financial institution.
At the same time, digital experience is becoming a critical differentiator. More than half of all small businesses, and more than 60% of firms above $1 million in revenue, say they would switch banks for better digital capabilities. “Digital capabilities are very important. Over half of business owners would switch” a primary financial institution, Mencias said.
Awareness of digital assets including stablecoin remains limited among small businesses, with larger firms far more familiar than smaller ones, and overall adoption intent still low. As Riddle noted, the technology centers on a dollar-backed digital currency that could enable faster global payments, but practical use remains early-stage. At the same time, traditional banks are developing tokenized deposit alternatives, signaling both growing interest and ongoing uncertainty in how digital currency will fit into small business banking.
What businesses want is clear: always-on access, faster payments, and intuitive platforms. Based on survey responses, banks, however, are still falling short in some areas. Frequent interface changes frustrate users, and inconsistent experiences across channels create friction.
“If anything changes, they’re getting frustrated. They have to basically relearn how to use the technology,” Mencias explained.
Even routine processes such as account opening reveal gaps. While digital onboarding is preferred, many applications fail due to identity verification issues, technical glitches, or overly complex workflows. Average completion times, which range from 11 to 13 minutes, remain above the threshold needed to drive strong adoption.
At the same time, banks must balance speed with security. Fraud concerns remain persistent, making it difficult to fully streamline digital processes without increasing risk.
Together, these dynamics create a dual imperative. Banks must expand relationship-based advice while also delivering faster, more reliable, and user-friendly digital tools.
Rising Switching Risk and the Battle for Primacy
As expectations rise, so do the stakes. Roughly a quarter of small businesses say they are likely to switch their primary financial provider within the next six months. This represents a meaningful portion of customers who are open to change.
“About 28% might be looking for a new relationship,” Mencias said. “That’s still something to be concerned about.”
Fees remain the leading driver of switching decisions, followed by reputation and interest rates. However, digital capabilities and advisory support are becoming increasingly important, particularly for larger and more complex businesses.
Despite this risk, primary banking relationships continue to offer a strong advantage. On average, the primary institution captures more than two-thirds of a business’s deposit balances, along with a significant share of lending activity.
Another important trend is the convergence of personal and business banking. About 87% of business owners use the same institution for both, a noticeable increase in recent years.
“For the most part it’s that personal deposit. Then they decide to open a small business, and they look to their primary provider first,” Mencias said.
This creates a clear opportunity for banks. Identifying customers who own businesses and strengthening those relationships early can drive long-term growth.
A Market in Transition
The small business banking landscape in 2026 reflects a market in transition. Business owners remain optimistic, but they are also more selective. They expect stronger relationships, better digital experiences, and clearer value from their financial partners.
For banks, success will depend on responding on multiple fronts:
The fundamentals of small business banking, including trust, service, and reliability, remain unchanged. However, expectations around how those fundamentals are delivered have evolved quickly. As Riddle summarized, “business optimism is a little bit less than it was a year ago, but still pretty strong,” a reflection of a market that is shifting while still offering significant opportunity for institutions that can adapt.
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