Small businesses want and need more digital solutions

Digital transformation trends have been guiding banks for some time, driven in part by significant changes in consumer expectations. Amplified and accelerated by the coronavirus environment, those transformation requirements have now urgently focused on the need for digital access, enablement and experiences among commercial customers, including small and mid-sized businesses.

Economic, competitive and regulatory challenges aren’t new to banks. But pressure points on delivery channels to commercial customers, especially smaller businesses, have taken center stage over the last few months and further challenged successful models of service to these clients.

For U.S. small businesses, forced shuttering and lost revenue raised concerns about cash and liquidity. While initial demand for small-business emergency loan origination services may have subsided, there’s a deeper awareness that more sophisticated access and delivery is required to serve the demands of these customers, whose needs now closely mirror those of larger commercial clients.

More digital-first services for small business customers

So, how can banks find success in supporting small-business customers? How can they be perceived as trusted, technology-led advisors? The simple answer to those questions is that banks must offer valuable tools to help them overcome their key challenges and operate more efficiently. Simply put, banks today must engage small business customers in more meaningful, digital-first ways that focus on helping them grow their business and maintain a healthy cash flow.

In the COVID-19 economic environment, in which most businesses are struggling with significantly lower-than-normal revenue, the ability to get paid faster is critical to a small business’s financial longevity.

However, while small businesses can make the most basic of payments in a consumer banking solution, they cannot do anything to facilitate getting paid on a consumer solution. Nor are typical consumer platforms able to support the requirements of specialized cash management, lending or liquidity needs among businesses when funds are tight. If a business is working on funds from a federal loan, for example, these tasks become essential to its survival.

Essential small business functions not available on consumer solutions include:

• Collection services, such as ACH debits and real-time request for payment
• Payment options that include payroll payments, employee reimbursement, child support payments, tax payments, and domestic and international wires
• Cash and liquidity management services like mobile remote deposit with multi-check capture, scheduled and/or recurring transfers, real-time payments for business and detailed remittance information on incoming transactions for streamlined cash allocation
• Fraud reduction and control services that cover dual-approval options, positive pay, stop payment and user transaction limits.

So how can a bank identify customers that might be underserved within a consumer solution? Here are some key behaviors and criteria to look for:

Deposit activity

• High volume of deposits (5+ a month)
• High volume of checks in deposits (4+ per deposit)
• Large or frequent sums of cash deposited
• 3+ “checking” accounts associated to the same customer

Transactional activity

• High volume of checks paid (>12 a month)
• High number of incoming electronic credits (> 6 a month)
• Recurring high-dollar ACH debit, which may indicate a third-party payroll service associated with this account
• Regular cash purchases at a branch
• Regular wire payments via a branch
• International activity, both incoming and outgoing

The migration of small and mid-sized business customers from retail platforms to commercial digital banking services provides significant value to banks as well. These benefits include improved competitive offerings in the face of functionality provided by neobanks and other fintechs. Digitally transformed experiences for business also create the opportunity for increased visibility into business transactional data.

Better data can help relationship managers better understand their customers’ businesses, as well as provide early indicators of business risks associated with financial stability. The more understood and fully served small businesses feel, the less likely they are to turn to a fintech or another financial institution. Service offerings focused on small businesses also stand to help banks achieve trusted advisor status.

Small businesses increasingly want, need and are willing to pay for additional capability and digital access that drives efficiency and convenience for them. During challenging times, a bank’s ability to provide value-added services fuels positive experiences that loyal customers remember in the future. COVID-19 is further pushing financial institutions to aggressively and urgently enhance the digital capabilities and integrations they offer to support small businesses in this tenuous environment.

Jessica Cheney is vice president of product management and strategic solutions at Bottomline Technologies.

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