CreditUnionTimes recently reported that three megabanks have cornered almost half of the small business market for payments and accounting services. Credit unions, they reported, only serve 18% of this market.
These numbers may seem disheartening, but what they really represent is an opportunity. Big banks aren’t known for their agility or for their personal touch. For all their technology budget, they lack flexibility. And, often stuck between a no-frills consumer platform and an overly complex commercial platform, SMBs are increasingly using non-bank point solutions and fintech providers to handle their finances—while their banks sit somewhat idly by.
JP Nicols of FinTech Forge put it bluntly: “If banks cannot truly be customer intimate, they are doomed to be just dumb commodities, acting behind the scenes, like utilities.”
While name recognition and feature functionality gave large FIs a head start in the commercial market, inertia won’t secure their customers’ loyalty indefinitely. Most business owners carry their consumer preferences with them to work, meaning they are not necessarily loyal to their existing institutions. For example, roughly two-thirds of Amazon Prime members are willing to engage in banking services with the giant retailer. Consumers—and the businesses they run—will seek out services where they’re convenient and, when possible, personalized. Over 80% of SMBs use QuickBooks for accounting. They use apps like Square and PayPal for payments. They even use nontraditional lenders, despite higher interest rates, because the user experience is faster and more convenient. Getting them to engage with your credit union is a matter of offering services and integrations in a way that’s convenient, accessible, tailored to their needs and preferences, and—more often than not—digital.
A study by Raddon recently dug into the relationship between SMBs and FIs, finding that more than half of small businesses that don’t currently use a community FI were “very” or “extremely likely” to consider using one in the future. While reported likelihood falls short of a promise, the same study revealed that 92% of SMBs valued quality of service extremely important. And in the ongoing era of digital transformation, exceptional service is built on the ability to understand, engage, and serve their business members in digital channels. It’s a matter of tailoring services to fit specific needs, business sizes, and verticals by using data-driven, comprehensive sets of digital solutions.
The best part? This approach is scalable, meaning small businesses are just the beginning. CUs who might’ve considered larger businesses out of their league might just find, if they embrace digital transformation, that it can be simple to win, onboards, serve, and grow stronger commercial relationships of all kinds and sizes.
If you’re interested in learning more about the opportunity commercial banking holds for innovative credit unions, and if you’re headed to CUBG’s August 2022 conference, be sure to check out Q2’s breakout session. I'll be presenting, “How CUs can Compete and Win in Commercial Banking through Digital" on Tuesday, August 9 at 2:15 PM PT. More details about this CUBG annual conference can be found here.
The breakout session will discuss how the commercial banking market is shifting towards digital innovation hot on the heels of massive digital transformation in the consumer market. As these changes take place, established competitors are likely to struggle to transform existing processes to digital, giving credit unions an opportunity to differentiate. CUs who haven’t yet entered the commercial market will have a particularly big head start over existing commercial banks. A clean slate makes a much easier starting point than the tangle of legacy processes that commercial banks currently utilize.
With a digital-first approach, future-minded CUs can expand their relationships with member business owners and grow more profitable with higher-revenue solutions. To learn more about this approach, click over to Q2 Catalyst, our comprehensive solution set for delivering tailored digital commercial banking and lending services.
Written by Debbie Smart
As a senior product marketer at Q2, Debbie Smart serves as the voice of the modern banking customer and the evolving financial services industry. With more than 40 years of banking and cash management experience, Debbie works to deeply understand Q2’s existing and desired customers, leveraging market research and competitive intelligence to forge new partnerships and influence product capabilities across Q2’s business product suite. In her free time, Debbie is an avid scuba diver and traveler. When she’s not out on an adventure, you can find her curled up with a good book at home.