B2B Payments

The Digital Race In Small Biz Banking


The edge mid-sized and community banks have historically had on the big guys is that they put a face to banking. For small and medium-sized business owners, that personal touch may be the factor that leads them to choose their local branch over a major, multinational financial institution.

Today, though, FinTech has changed the game, and new customer demands could be taking away community banks’ leg-up on their largest peers.

According to Michael Carter, CMO at FinTech firm D3 Banking, there are a few factors at play here.

One is that community banks, at least with consumers, are no longer on top when it comes to customer satisfaction. Carter pointed to a recent J.D. Power report on retail banking in the U.S., which revealed that, for the first time in the study’s six-year history, satisfaction with midsize banks dropped, while regional banks’ satisfaction levels plateaued.

Big banks, though, saw an uptick in customer satisfaction, due to a one-two punch.

“We clearly see that the customer satisfaction leaders in retail banking excel by hitting the sweet spot of providing a great digital experience backed by personal service,” stated J.D. Power Senior Director of Banking Services Paul McAdam in a statement last April.

The data suggests that large FIs have upped their game in providing more personalized services to customers on top of digital solutions, while community and mid-sized banks may have lagged on both fronts.

Carter noted that the research highlighted major banks’ continual investment in digital services over the last few years, investing in the space much more than their smaller competitors.

“To me, that’s a concern,” he said. “And it certainly could be an indicator that, collectively, mid-sized and regional banks are behind in the opinion of the consumer.”

This presents an opportunity for D3, which provides solutions for these regional and mid-sized banks to adopt more sophisticated technologies and offer their own clients digital solutions. And while the J.D. study only focused on consumer customers, Carter said there is probably a level of satisfaction with small business customers of these smaller FIs that aren’t offering better digital banking tools.

“The distinction has always been, with mid-sized or regional banks, that you had a personal touch — you knew somebody,” Carter explained. “But what we heard, both from banks and credit unions, and from small businesses, was that mid-sized, regional, gigantic, small banks — none have specific products designed or tailored for small businesses.”

What banks do instead is offer small businesses — the companies without a person on staff dedicated to managing finances — what Carter described as “dumbed-down treasury offerings,” which are still too complex for a small business, or they simply offer consumer versions of banking tools, which are similarly unfit for SMEs.

“It’s an underserved area on the digital landscape, and that goes for whether you’re the largest bank down to the community-sized bank,” he added. “No one has really cracked the code on the digital front in offering small businesses what they need.”

To banks’ credit, however, Carter said that, in just the few years D3 has been around, the conversation surrounding banking and technology has changed.

“When we came into the industry, we were still using words like ‘online’ and ‘mobile,'” he said. “That is really dying off in the industry, in the media, among research firms. Typically, banks today are talking digital.”

That means providing a seamless and consistent user experience across platforms. And while banks have always been risk-averse, he said, today, banks are moving faster to roll out digital solutions.

“In having dealt with banks, I know they move more deliberately,” he said. “In the three years I’ve been involved, I think movement has been more than deliberate; it has been quicker than that.”

Banks, including the mid-sized and regional FIs that work with D3, are asking not only for digital solutions to offer customers but to integrate products and services that differentiate themselves from the competition, said Carter.

“All of this has to be built around digital today; it’s no longer enough just to offer an online, mobile or tablet solution,” the executive added.

While the industry has been talking about the disruptive nature of FinTech players, Carter said that banks have enough competition from within the traditional FI landscape to deal with and that these disruptors are less of a threat than some make them out to be. The bigger threat may instead be banks’ inability to offer small businesses the digital solutions they need.

So far, no one seems to have cracked the code for servicing SMEs adequately. But that doesn’t mean banks aren’t trying.

“When we first came on the scene, digital was a part of retail banking; now, we’re encountering more and more chief digital officers, chief digital strategists,” Carter explained. “Banks have made a big move in a short amount of time, which is typically not their nature.”



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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