Small Business Banking Is on the Brink of an Evolution

Small business is a fast growing and evolving market. With over 30 million small businesses across the U.S., even previously remiss providers are jumping on the small business bandwagon. Who doesn’t want to participate in helping to build an account holder’s “American Dream”?

Between the dotcom boom and the ability to ship across the world in a matter of days, small businesses are becoming easier to start and faster to grow. When it comes to selecting a banking partner, two-thirds of small business owners opt for a large bank, according to Raddon. Previously, most small business owners would hide out on an institutions’ traditional “retail banking platform.” It didn’t quite fit their needs, but it was less expensive and most business owners could access via their computer.

A few years later, as the smartphone emerged and mobile banking became an expectation, and no longer a novelty, we saw the launch of mobile business banking. Even with the ability to make payments on the go and approve ACH and wires on the golf course, there wasn’t a huge increase in mobile banking usage for business. According to Forrester’s “Digital Disruption on Small Business Banking,” although 77% of U.S. small business owners and their employees use their mobile devices to help run their businesses, far fewer use these devices for banking transactions. Just 29% pay bills using mobile banking, and even fewer make transfers through their bank’s app or mobile site.

Why? Malauzai’s Monkey Insights found that the longer a person is expected to bank, or the more complex the person’s transactions are, the more likely they will be to use a large format device (like a computer instead of a smartphone). Ultimately, when people spend more than five minutes doing their banking, which often occurs in business banking, they want to see it on a large device.

With the evolution of technology, emergence of fintechs and growth of a “service me now” lifestyle, it is surprising to say business banking hasn’t changed that much. Sure, it has evolved. But, when considering the explosion of e-commerce, or the adoption of fintechs like Venmo, business banking in comparison has been utterly neglected.

We do know that business owners tend to bank with the same institution that holds their retail accounts. Or, they may move their retail accounts to the same institution that holds their business accounts. Either way, the growing expectations of consumers will spill over into business account expectations.

As these businesses continue to expand, especially into global trade, more robust services will be needed. Digital banking must evolve in order to address the growing needs of the small business market.

Open platforms, like Finastra’s FusionFabric.cloud, could be the gateway to business banking innovation. Currently, there are more vendors out there that are initiating payments to our customer’s customers, with additional information pertaining to that payment. Could a faster payments engine be on the horizon?

I think so. And, I think account holders are going to use their institutions to do it. A true digital banking partner has visibility into datapoints that other ancillary providers wouldn’t.

Michael Abare is Principal Product Manager, Digital Business Banking for Finastra in Austin, Texas.