PYMNTS Intelligence: SMBs Turn Toward Banks Offering Digital Solutions

Small- to medium-sized businesses (SMBs) were already shifting toward digital solutions before COVID-19 disrupted daily life for businesses and consumers around the world. The pandemic has turned this digitization effort from a walk into a sprint. Now more than ever, SMBs are driving sales through eCommerce and marketplace platforms and adopting an array of digital solutions to streamline business operations. According to data from EY, more than half of SMBs — 56% — decided to change their business models to utilize digital channels.

In turn, the types of tools and services SMBs expect from their financial institutions (FIs) are changing. Of 260 corporate decision-makers in a Citizens survey, 83% said they expect their company’s bank to provide the latest technological tools as well as offer self-service capabilities. At the top of the list of desired services is real-time payments functionality, with 85% of business leaders ranking that as the most important factor when selecting a banking partner.

They indicated that the most common use cases for real-time payments were managing cash flow and processing payments that require “immediate attention.” Moreover, 81% of business leaders viewed the adoption of real-time payment capabilities as very or somewhat transformative to the company’s payment process.

This month, PYMNTS Intelligence examines what SMB banking customers currently demand from their banks and how FIs can increase these customers’ loyalty.

What SMBs Want

In addition to real-time payments, companies want FIs to provide tools and services that are convenient and easy to use. According to a Chase survey, 83% of small business owners feel that being easy to work with is a key attribute when selecting a financial services partner. In particular, the online platform’s ease of use and the ability to contact live support are top considerations for a significant share of small business owners — 82% and 81%, respectively. Small businesses also want advice and strategy recommendations, and 69% of owners consider it important that an FI offer “customer insights and business intelligence services.”

Another major area of concern centers around business-to-business (B2B) payments. PYMNTS’ research shows that companies face two main pain points regarding B2B payments: problems related to invoice reconciliation and a lack of supplier portals. In a PYMNTS survey of FIs, 42% identified invoice reconciliation complexity as “an important source of friction for corporate clients,” and nearly the same share cited the lack of supplier portals.

Though these friction points have been problems for a while, they have worsened since the pandemic began. This is especially true for the lack of supplier portals: Nearly one in five FIs reported that this issue has worsened during the pandemic.

How FIs Can Drive Loyalty in SMB Customers

The PYMNTS survey shows that FIs are not only aware of the problems facing SMBs, but are also actively working on solutions. Sixty-five percent of FIs are either planning on or actively implementing solutions to address the lack of dedicated supplier portals. An even more significant portion of FIs, 79%, are working to develop solutions that will provide SMBs with a single view of their “real-time cash flow management,” which will, in turn, grant SMBs a foundation for financial forecasts and effective business strategies.

FIs also need to look beyond supplier portals and cash flow tools to secure and sustain SMB loyalty. Just as consumers want quick, safe and personalized payment methods, it is clear that SMBs want the ability to harness technology to conduct business more easily. In addition, as SMBs increasingly seek digital tools, FIs must increasingly offer them. In terms of B2B payments, the most common digital solutions offered by FIs are automated account validation functionality and digital lockboxes.

There is still work to be done, however. PYMNTS’ research shows that although most FIs recognize the need to offer new digital B2B payment solutions, just three out of 10 currently offer clients the tools necessary to reduce friction in B2B payments. Whether by developing application programming interfaces (APIs) or offering real-time payment capabilities, it is essential that FIs offer an array of digital services.

SMBs are looking for long-term partners that provide business advice and effective strategies. In addition to offering specific tools, FIs must develop a broader approach to meeting clients’ digital needs. To do this, FIs must understand the specific needs of individual clients as well as their degree of digital familiarity and comfort using emerging technologies. If FIs can provide SMBs with both the digital tools needed to do business in a digital-first world and the knowledge and expertise to use these tools, they will better attract and retain their SMB customers.