In an unprecedented economic landscape, all financial institutions, particularly regional and community financial institutions (FIs), need to adapt to the evolving needs of their account holders. With more than 33 million small businesses in the U.S., this customer segment is as important as ever, but SMBs have unique needs and escalating digital demands. Fintechs have emerged as a strong competitor to meet small businesses’ ecommerce needs, but research shows that most SMBs would prefer to use their FI for those services if they were offered.  

In a recent webinar, Q2 joined with Javelin Strategy and Research and experienced bank leaders to discuss what FIs must do to attract and grow SMB relationships. 

Key points: 

  • Use of fintechs is growing exponentially. Fintechs are here to stay, as the percentage of SMBs using large tech companies for financial solutions has increased nearly 20% from 2020. Even though it appears companies rely on fintechs for quick and simple solutions, this silent churn shows it is no longer optional for FIs to integrate digital solutions to preserve their financial partnerships. “Every time we let them get connected to an external fintech, we're weakening the core relationship,” said Shon Cass, CEO and co-founder of Texas Security Bank.
  • Businesses are diversifying their banking portfolios. While SMB customers of regional/community FIs are more satisfied than those who use larger banks, businesses are moving cash away from their primary FIs at an alarming rate. Account holders have never been more financially literate, and digital services need to improve to meet their expectations to retain them. Fintechs make it easier for SMBs to explore other solutions they don’t get at their FI.  
  • The desire for digital, self-service capabilities is growing. More account holders operate in the technological world than ever before. While branch locations still matter, SMB owners need to bank on their time, and the ability of an FI to accommodate these expectations is critical.  The modern banking experience must offer seamless digital capabilities that busy SMB owners can access anytime, anywhere.
  • Tailored experiences are no longer a nice-to-have. Banking was never meant to be a one-size-fits-all model. Different SMBs require different services. To effectively compete in a crowded marketplace, FIs need to offer services that meet the unique needs of their target market. Understanding and addressing your SMB customers’ needs is a crucial step in creating loyalty. Nick Boron, SVP at M&T Bank, said he understands his FI needs to be data-driven. “We have to leverage the data we do have to help business owners create better decisions as they operate.”
  • SMBs are looking for better ways to run their businesses. Part of meeting an SMBs unique needs includes providing services peripheral to banking. Fintechs are not the enemy, but rather they are the path forward. Dean Jenkins, VP, Product Marketing at Q2, encouraged FIs to ask, “What do the communities I serve need?” For SMBs, relationships and trust motivate their decision-making. Fintech partnerships provide a way to safely bring solutions to account holders while also communicating FIs understand their needs. 

SMBs are a critical part of our economy, and by serving them well, FIs can create strong, long-lasting relationships that can grow as the business itself grows. But their needs are different from consumers and commercial customers. As Q2’s Dean Jenkins shared, “No matter how they act as a financial institution, you need to understand them.”  

Get more insights from the on-demand webinar, “Want to Boost the Value of Your SMB Portfolio? Make It Personal.” 



Written by Q2