Supporting banks and credit unions to empower small business

Banks and credit unions are missing out on a $500 billion opportunity.ⁱ  That’s how much small businesses are sending to non-traditional providers for financial services.

The reason businesses are turning to these providers is clear. Many financial institutions still do not offer the services they need.

However, banks and credit unions have an advantage. In many cases they already work with these small businesses and are trusted partners. By providing the services these businesses demand, they can retain, win and even expand the business being diverted to the new players.  Here is how they will do it.

Uncovering the disconnect between financial institutions and SMBs

Despite their size, small businesses have the same needs as larger organizations. The real difference is that they are trying to accomplish the same amount of work with fewer staff and often lower budgets. As a former small business owner myself, I understand the time crunch these individuals experience, as well as the income uncertainty.

When I opened my business, banking became a matter of convenience and support. I was fortunate to have a bank manager who understood my needs and introduced me to the technology I needed to streamline important business functions such as payments to suppliers and invoicing to my clients.

Unfortunately, many small business owners do not have this opportunity. They must rely on third party providers to obtain tools that streamline everything from generating invoices, paying bills, and even predicting cash flow.

The reason for this is simple. Most financial institutions are still serving SMBs from consumer platforms that lack the capabilities businesses need to ensure consistent and positive outcomes.

However, banks and credit unions do not need to remain on the outside of small business relationships. It is possible to empower SMBs with the tools they need for success using the digital options available to financial institutions today.

Financial institutions meet the digital challenge

If empowering small businesses is as simple as providing the technology tools they need, then there has to be a simple way for banks and credit unions to gain access to the digital capabilities necessary.

Fortunately, technology has come a long way since the early days of digital banking. It is now easier than ever for financial institutions to deliver on SMB technology demands.

One way is to layer on digital capabilities. A bank or credit union may start by adding a digital payment solution, for example, and expanding into other services. If existing core contracts prohibit the adoption of best-of-breed solutions, it is still possible for financial institutions to add solutions individually.

As banks and credit unions seek to gain access to more advanced tools and to provide real-time capabilities to SMBs, there has been a growing shift toward Software as a Service (SaaS) and Payments-Platform-as-a Service (PPaaS) models. These cloud-based solutions make it possible for banks and credit unions to rapidly adopt and deploy the top-line services SMBs need without building out technology infrastructure or taking on the obligation of new software purchases.

Using SaaS and PPaaS solutions, financial institutions can provide the time-saving services that SMBs traditionally adopt from third-party providers, while incorporating all of the business’ existing data from banking core systems. This approach simplifies SMB financial management and provides financial institutions with the edge they need to gain SMB business.

I’m proud to be part of Finastra’s mission to provide banks with the tools necessary to help their small business customers survive and thrive.

Discover more in the Redefining Finance series

_{ⁱ Ron Shevlin. “The $370 Billion Small Business Opportunity for Banks.” Forbes, Jul. 1, 2020. Web}