Financial institutions (FIs) have historically viewed small businesses as a less profitable part of their own business, not necessarily worth troves of time, investment and innovation. Competitive pressures from the B2B FinTech ecosystem are beginning to shift that mindset, but for banks, a lack of resources to dig deep into small business customers’ needs — and the technologies that can meet them — remains a tall hurdle to a better business banking experience. Increasingly, these FIs are turning to FinTech partners to identify and fill those service gaps.
While it may seem like an inconsequential tidbit of information for small business bankers, it speaks volumes about what small businesses need from their FI partners — and can reveal information about what banks must do to address a changing SMB customer base. In a recent conversation with PYMNTS, Chan explored the opportunities available to banks in processes like onboarding and customer data management to enable them to remain competitive with FinTechs.
The SMB Experience
The implications of a rise in small business loan applications around noon and 6 p.m. are vast. For one, it signals that small business applicants are short on time, using their lunch breaks and free time after-hours to access financing. The tendency to apply for a loan at dinnertime is also indicative of the need for digital-first experiences after-hours, without the need for bank branches and physical meetings with representatives.
For small businesses today, user experience and convenience are paramount. According to Chan, that’s especially true when it comes to onboarding small business customers.
“That is kind of a litmus test of what the relationship with the bank is going to be like,” he said, adding that today, it can still take five to 10 days for a small business to open an account. It can take even longer — up to 90 days — for a bank to process a loan application, a fact Chan said can be traced back to the lack of standardization in small business loans.
Adding more complexity to this issue is that, contrary to what some might assume, the onboarding process isn’t a one-time occurrence. With banks expanding their small business product offerings beyond the standard account services, the onboarding experience now happens multiple times along the customer journey, whenever they want to make use of tools like accounting, B2B payments, accounts payable (AP) and accounts receivable (AR), cards and other solutions.
Keeping Track Of Data
In an effort to streamline and accelerate interactions with small business customers, banks are increasingly interested in technologies that can automate the onboarding process. Prelim recently released one such tool: its digital account opening (DOA) offering, in conjunction with the rollout of its Status Center solution, which helps banks manage the data of their SMB clients.
Because onboarding can occur throughout the customer lifecycle, data management is imperative to enhancing the onboarding experience, according to Chan. “At the end of the day, the customer expects you to actually have the data and understand who they are,” he said, noting that FIs have an opportunity to take advantage of the data at hand as the result of their small business clients using more apps and services. A holistic understanding of that client can mean faster onboarding and loans for the next product — including small business loans.
“You should be able to understand their cash flow in and out, and that allows you to not only understand your customer better, but [to also] help provide advice and solutions to make sure they’re successful as they go through the lifecycle from a small business, to a medium business, to a larger corporate entity,” Chan added.