SMB clients generate $150 billion in annual revenue for the US banking industry. These businesses need digital tools and financial support, but legacy banking technology and fewer branches can weaken long-standing customer relationships.
Relationship managers often struggle to understand their clients deeply, especially with tens of thousands of small-business customers they’ve never met. This can lead to poor customer perceptions, with clients feeling that banks don’t understand or care about their needs. Repeatedly providing the same information to access different products exacerbates this issue. Banks need new systems to leverage data effectively, strengthening relationships and providing the right tools and support at the right time.
Catering to Small Business Still Makes a Lot of Sense for Banks
Today, banks are still the preferred advisors to SMBs, as 75% of small businesses prefer financial advice from a banker over an accountant. 66% of small businesses would switch banks for better digital services.
The opportunity in working with small businesses is significant:
- 21.76 million small businesses were created in the last 5 years.
- 99.99% of all firms in the US are small businesses.
- Small businesses account for 43.5% of GDP.
Time is ticking though, as younger business owners, who are about to run these businesses expect more digital financial management opportunities:
- 51% of US small businesses are owned by people older than 55.
- 70% of America’s 12 million privately owned businesses are expected to change hands in the next 10-15 years.
As long-time business owners retire, their successors will expect digital tools. Banks must have the capabilities to meet these expectations and retain the next generation of business owners.
Key Strategies for Banks to Enhance Business Deposits
Understanding market dynamics, tailoring product offerings, building strong client relationships, leveraging digital transformation, and optimizing risk management are crucial strategies for banks. By implementing these tactics, banks can enhance liquidity, profitability, and competitiveness, ultimately driving sustainable growth in business deposits.
Addressing Competitive Dynamics
The financial landscape is shifting rapidly, with traditional and new rivals challenging banks more intensely. As more customers become open to nonfinancial institutions, banks need to reassess their approach to deposits, especially considering the combination of higher deposit costs, lower policy rates, and constrained loan potential affecting net interest margin (NIM) in 2024.
Prioritizing Non-Interest Income
To compensate for the shortfall in net interest income, banks should focus on non-interest income. Regular conversations with financial institutions reveal three primary goals: capturing and retaining sticky deposits, boosting non-interest income, and competing with fintechs and neobanks. Evaluating the true cost and longevity of new deposits is essential, as many solutions promising growth may not offer lasting results.
Types of Innovative Solutions
- External Solutions: Integrate banking services into non-financial platforms to create embedded banking experiences. However, this approach comes with regulatory scrutiny and compliance challenges.
- Partner Fintechs: Collaborate with fintechs like Finli to provide digital tools that support customers while minimizing regulatory risks. Finli enables banks to offer comprehensive digital-first experiences, meeting evolving customer expectations without outsourcing core operations.
Out of these 2 possible solutions, partnering up with a digital payment system like Finli has proven the most beneficial, as it comes with many extra opportunities.
Finli helps banks attract new business clients, deepen existing relationships, and improve their digital experience. By partnering with Finli, banks can:
- Capture and Retain Sticky Deposits: Offer a streamlined solution that replaces the need for multiple digital tools, ensuring business customers remain loyal.
- Boost Non-Interest Income: Provide value-added services like invoicing, customer management, and inventory management, creating additional revenue streams.
- Compete with Fintechs and Neobanks: Deliver competitive digital experiences without significant investments in engineering talent.
Solutions Provided by Finli
- Effortless Invoicing and Payments: Finli enables instant invoice creation and zero transaction fees, helping SMB customers get paid faster and grow their deposits.
- Intuitive CRM: Finli’s digital CRM platform securely stores customer information, enhancing client relationships and operational efficiency.
- Inventory Management: Automated inventory tracking and reorder triggers help SMB customers maximize revenue.
- Quotes and Proposals: Finli’s quote management system streamlines the proposal process, allowing businesses to bid on projects and manage negotiations seamlessly.
While traditionally small business need to pay around $340/month just to run their business (invoices, payments, CRM, etc.), with Finli, you can offer them a complete suite of a digital back office with a fraction of this cost.
Enhancing Bankers’ Capabilities with Real-Time Data
Finli bridges the data gap by providing real-time insights into customers’ financial health. Bankers receive valuable data on invoicing volume, transaction quality, and more, enabling informed decisions on revenue-based financing and cross-selling opportunities.
Unique Differentiators of Finli
Finli offers integration options with digital providers like Q2 and Banno, as well as a no-integration option for quick deployment. This flexibility allows banks to quantify the value added by Finli before investing in deeper integrations.
Conclusion
Finli empowers banks to compete against megabanks and neobanks by providing innovative digital tools and solutions. By partnering with Finli, banks can attract, acquire, and retain valuable business clients, enhance their digital experience, and develop a robust non-interest income strategy, ensuring sustainable growth and profitability.
