The Battle for the Small Business Customer blog series.  

Increasingly, small businesses are choosing the digital channel for their financial needs. Online and mobile banking, along with fintech business solutions, are winning small businesses over. And with the Next Normal taking shape, small businesses will continue to look to digital for their own unique, tailored digital banking solutions and experiences. 

‘One Size Fits All’: an ill-advised approach to small business banking 

Many FIs have a “one size fits all approach” to small business banking—an approach based on a shaky premise that small businesses typically only need consumer banking, with slight variation at best, to meet their needs. This premise may have been accurate years ago, but not today. Small companies are becoming more comfortable with procuring and utilizing digital financial solutions to meet current and future business needs and objectives. 

Segmentation: a strategy to win small business

The impersonalized experience most SMBs get as a result of the "one size fits all" approach leaves them feeling underserved and under-appreciated. With the help of modern technology, though, FIs can build simple segmentation strategies in order to capitalize on this underserved market. 

Keep in mind, businesses with less than 20 employees make up almost 90 percent of American businesses and many of these businesses and their staff are a growing part of the gig economy.* 

There are three main reasons why FIs have not developed the segmentation strategy they need to reach and win small businesses and become their trusted partners.

First, FIs have been reactive to market needs and have not listened to small business customers or allowed them to help guide product development. Second, FIs and their vendors turn out siloed products and maintain siloed organizations when a holistic approach to bringing sought-after financial experiences to small businesses should be their focus. And last, they lack analytics to understand their market and portfolio. Too many FIs fail to leverage the transaction and behavioral data they have collected to identify customer’s problems or opportunities to expand relationships. 

The Q2 eBook “The Battle for the Small Business Customer” goes into more detail about the factors shaping small business banking today and provides a strategic approach for winning prospects and retaining existing ones in the Next Normal. Find out why digital technology has unrealized potential to help better segment, target, sell, and serve small businesses.    

* U.S. SBA and leading research organizations, 2019-2021

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Written by Q2