Digital-First Banks Well-Positioned to Win Small Business Hearts and Minds

Traditional FIs are at risk of losing their business banking relationships — especially with smaller firms.

Doug Brown, president of NCR, told PYMNTS’ Karen Webster that the typical small and medium-sized business (SMB) owner “is really time starved. They  don’t have a lot of time for explanation and learning things” when it comes to banking. “They want it all to work – and work simply.”

And in a nod to how financial institutions (FIs) are faring in the bid to keep things simple — they’re coming up short.

Joint research from PYMNTS and NCR show that 41% of SMBs are interested in using banking services from a digital service provider.

“The takeaway,” Brown told Webster, “is that these consumers are not being fully served by digital banking.”

In order to fulfill those unmet needs, said Brown, there are two paths that FIs can take to grapple with the challenges from these digital-only upstarts: The FIs can use an open banking mechanism “to infuse and inform the other apps” that SMB customers are using. Or they can add capabilities to their existing business banking suites.

Fine-tuning their SMB offerings is critical, according to Brown — because these smaller enterprises are all-too-often given the “heavyweight and sometimes clunky” treasury and commercial programs that are geared toward large enterprise. In other cases, SMB banking offerings are simply souped-up versions of consumer banking tools.

Right-Sizing the Technology

These software offerings need to be right-sized, he said — and he noted that NCR is working to craft partnerships with firms like Autobooks to integrate invoicing and cashflow management tools so that FIs can embed those functions into their own banking platforms through open APIs.

In another example, a year ago, NCR acquired Spoke Technologies’ FinTech intellectual property (IP) in order to support personalization and customer-led experiences for smaller entities. Looking ahead, and with some discussion of the Spoke acquisition, Brown said, “We’re using [the company’s IP] outside of North America, but the intention is that we’re going to fine-tune it and perfect it and leverage it across the North American base.”

The partnerships, he said, can help banks sidestep screen scraping (in the crosshairs of the Consumer Financial Protection Bureau) in favor of embracing APIs, with minimal technical heavy lifting.

The data-driven and SMB-focused initiatives and partnerships can be leveraged to function even within branch settings.

And that last point, he said, offers a glimpse into the advantages that community banks and credit unions have, with a hybrid model that has brick-and-mortar in the mix.

“You want to be digital first — but you don’t need to be digital–only,” said Brown, who added that “Sometimes you need cash and coin in the till. Sometimes you need cashier’s checks.” The branch setting also enables customers to stage appointments while using digital channels to start loan applications and other processes.

The small business owner may need the help of a live human to figure out the best ways to deal with supply chains or working capital concerns — and the rich data flows ensure that time spent with the FI is time well spent. To make it all seamless, the data flows must be rendered in real time, aided by open banking that avoids the batch processing that has been a mainstay of banking back end processes for decades.

Along the way, Brown said, a marketplace construct begins to take shape through the partnerships, tied to APIs and digital-first capabilities that surround the small business with the tools they need.

The credit unions and community banks will continue to cement their position as “the trusted destinations and the trusted starting points for many business problems … less hassle, more convenience, and saving time is the winning formula for winning the hearts and minds of small business.”