The banking industry is changing fast, and traditional financial institutions face mounting pressure to serve small and medium businesses (SMBs) more effectively. These businesses need specialized tools and both operational and financial support that goes beyond the typical products and services offered by banks and credit unions.
Some financial institutions are discovering a powerful solution: strategic fintech partnerships. Rather than building expensive internal platforms from scratch, forward-thinking banks are partnering with specialized fintech companies to bridge critical service gaps, retain valuable customers, and strengthen their competitive position.
The SMB Service Challenge Banks Face
Traditional Banking Limitations
Most traditional banks excel at core financial services like lending and deposits, but they often fall short when it comes to comprehensive business management solutions. Small and medium businesses need more than just basic banking – they require integrated tools for invoicing, inventory management, financial reporting, and professional client interactions.
The challenge? Building these comprehensive platforms internally requires significant investment, specialized expertise, and ongoing maintenance that many banks find difficult to justify for their SMB segment.
But here’s why banks should care: when financial institutions solve their customers’ most pressing operational challenges, they earn deeper loyalty and stronger relationships. SMBs spend countless hours on manual processes, struggle with unprofessional-looking invoices, and lack the financial visibility needed to make smart business decisions. Banks that help solve these pain points become indispensable partners rather than just service providers.
The demand is clear: 79% of small business owners prefer their bank to provide digital solutions for banking, payments, and administrative tasks, and 80% prefer providers who can bundle these tools together. Yet less than 50% of SMBs currently get their commercial enablement tools through their primary bank. This gap represents a significant opportunity for banks willing to meet this unmet demand.
(Source: U.S. Bank 2024 Small Business Perspective, McKinsey)
The Cost of Inaction
When banks can’t provide modern business tools, they lose SMB customers to neo-banks and specialized fintechs. The shift is significant: neobank transaction volume has grown from $4.96 trillion in 2023 to a projected $10.44 trillion by 2028, with business accounts representing over 65% of neobank usage.
However, recent surveys reveal that SMBs still overwhelmingly prefer traditional institutions when given comprehensive service options. Small business satisfaction with traditional banks surged 20 points in 2024, reaching 705 on a 1,000-point scale, and traditional banks continue to dominate SMB relationships thanks to valued relationship lending and branch-based services.
This presents a clear opportunity: banks can retain these valuable customers by meeting their comprehensive business management needs through strategic partnerships.
(Source: Statista, J.D. Power 2024)
How Fintech Partnerships Bridge Critical Gaps
Comprehensive Business Management Solutions
Strategic fintech partnerships allow banks to offer complete quote-to-cash workflows, inventory tracking, and professional financial reporting without the massive internal development costs. These all-in-one platforms go far beyond simple payment processing to provide the comprehensive business management tools that SMBs desperately need.
For example, when a bank partners with a platform like Finli, their SMB customers gain access to professional invoicing, project management, and financial reporting capabilities that instantly elevate how they present themselves to larger clients.
Risk Management and Intelligence Benefits
Enhanced Underwriting Capabilities
Fintech partnerships provide banks with deeper visibility into business operations, cash flow patterns, and overall financial health. This enhanced data strengthens lending decisions and helps banks better understand their SMB portfolio performance.
Rather than relying solely on traditional credit metrics, banks gain real-time insights into how businesses actually operate, manage cash flow, and handle client relationships.
Reduced Operational Risk
Automated business processes and real-time financial reporting help banks monitor their SMB relationships more effectively. When business operations are streamlined and transparent, both the bank and the business benefit from reduced operational risk and improved financial predictability.
Operational Efficiency for Financial Institutions
Resource Optimization
Strategic partnerships allow banks to focus their internal resources on core banking activities while their fintech partners handle time-intensive SMB operational support. This division of labor maximizes efficiency and ensures customers receive expert attention in all areas.
Simplified Implementation
Modern fintech platforms are designed for ease of use, requiring minimal training investment while enabling relationship managers to offer sophisticated business solutions. This simplicity means banks can quickly deploy comprehensive services without extensive internal restructuring.
Market Positioning and Revenue Strategy
Non-Competing Revenue Streams
These partnerships generate fee income and increase customer stickiness without competing with core banking products like loans and deposits. Instead, they complement traditional banking services while creating additional touchpoints with SMB customers.
Strengthening Core Relationships
When banks provide comprehensive business solutions, they become more integral to their customers’ daily operations. This deeper integration makes it much less likely that businesses will switch to competitors, even if they offer slightly better rates on individual products.
Implementation Best Practices
Choosing the Right Partner
Successful FIs look for fintech partners that complement rather than compete with their core services. The best partnerships involve platforms that enhance customer relationships while providing valuable data and insights back to the bank.
Customer Education and Support
Rolling out new capabilities requires clear communication about the benefits and simple onboarding processes. Banks that succeed with fintech partnerships invest in helping their customers understand and adopt these new tools.
Integration and Data Sharing
The most valuable partnerships involve seamless integration between the bank’s systems and the fintech platform, allowing for efficient data sharing that benefits underwriting, relationship management, and customer service.
Key Takeaways
Strategic fintech partnerships represent a smart, efficient way for financial institutions to serve their SMB customers more comprehensively without massive internal investment. The most successful partnerships focus on:
- Filling genuine gaps in business management capabilities that banks typically don’t develop internally
- Strengthening customer relationships by providing tools that make businesses more successful and professional
- Improving risk management through enhanced visibility into business operations and financial health
- Creating operational efficiency by allowing banks to focus on core competencies while partners handle specialized needs
- Generating additional revenue through fee income and increased customer retention
Financial institutions that embrace strategic fintech partnerships position themselves to better serve the evolving needs of small and medium businesses while strengthening their competitive advantage in an increasingly complex marketplace. The key is choosing partners that genuinely enhance customer value while complementing the bank’s core strengths and strategic objectives.
Partner with Finli to Transform Your SMB Relationships
Finli provides the comprehensive business management platform that bridges these critical service gaps. Our all-in-one solution offers quote-to-cash workflows, professional invoicing, and financial reporting that helps your SMB customers grow while giving you enhanced visibility into their operations.
Ready to strengthen your SMB relationships? Contact our team to learn more about partnership opportunities with Finli.
