Community Banks Drive Innovation For SMBs With FinTech Collaboration

Small- to medium-sized business (SMB) banking has faced an uphill battle over the decades. Often viewed as too unprofitable to justify major investments, the SMB client has historically fallen somewhere between a consumer and corporate in the eyes of the traditional financial institution (FI).

In recent years, this meant FinTechs had an opportunity to step in and fill that gap. While this paradigm initially pitted those FinTechs in direct competition with banks and credit unions (CUs), today, the ecosystem has seen a shift in favor of the SMB.

Increasingly, FIs are embracing the chance to improve the SMB customer experience. And while in decades past, it might have been too expensive to invest in research and development to create better products, it can be efficient to collaborate with FinTechs to drive innovation.

NBH Bank Holdings Executive Vice President and Chief Digital Officer Valerie Kramer spoke with PYMNTS about why it can be especially valuable for smaller community banks and CUs to embrace the collaborative spirit, and which technologies she views as particularly impactful for the SMB community.

Invest In Collaboration

NBH Bank operates under a variety of community bank brands throughout Colorado, Missouri, Texas, Utah and New Mexico. The firm recently announced two FinTech partnerships that will enable its banks to integrate the third parties’ offerings and collaborate on product innovation.

The first partnership is with Finstro, a digital platform that connects SMBs to lines of credit to support their working capital needs. Kramer noted that the technology speaks to SMBs’ need for more integrated financing technologies that fit within the platforms they’re already using, “providing that overall ecosystem that we’re trying to get to, where we can bring faster and more convenient payment solutions to our clients, while offering the alternative lending component.”

The second partnership comes in the form of a strategic investment in Figure Technologies, which aims to support NBH Bank’s exploration of blockchain technology for its SMB clients.

“We’ve been watching blockchain for quite some time,” said Kramer, noting that the bank remains in the “whiteboard phase” of developing use cases for the technology.

While many bank-FinTech pairings form with use cases already defined, this blockchain tie-up will allow NBH Bank to embrace a broader range of possibilities that may suit its banks’ SMB clients best. Kramer noted that efforts will include applying blockchain to B2B use cases but will more broadly look to support the overall maturity of the technology.

“We want to make sure we’re bringing the best solutions and products to the table for our clients, and if that means implementing and working with regulators to better understand blockchain, we will,” she said.

Mixing Personalization With Technology

The legacy narrative of bank-FinTech collaboration often focuses on the ability for larger banks — FIs with deep pockets and broad resources — to work with FinTechs, or even invest in or acquire them. Meanwhile, smaller regional and community banks are said to have the advantage of a more personalized relationship with their clients, SMBs included.

But Kramer highlighted the ability for NBH Bank to gain the best of both worlds, investing in FinTech collaboration and innovation while retaining that customer relationship.

“We’re providing that flexible technology with the human touch,” she said. “We want to make sure that if there is a paradigm shift, if there is something that’s moving technology forward, that we are bringing our clients to them.”

Technology is indeed a vital component of the paradigm shift happening in SMB banking. But increasingly, financial service providers are also turning their attention to the importance of the SMB user experience within the digital solutions they present to market.

Connecting SMBs to a fully digital, integrated financing tool, or developing a hypothetical SMB payments solution built upon blockchain, can create valuable efficiencies. But these tools can also elevate their experience.

“When you think about the SMB space, user experience is very important,” noted Kramer. “It needs to be easy to use and understand, and provide them with all of the information that they need to have at the click of a button.”

User experience doesn’t stop at the digital platforms SMBs use, however. What can be just as important, Kramer added, is the human connection between a bank representative and an SMB owner.

It’s that mix, she said, that will propel the SMB banking and B2B finserv space forward.

“There are problems to be solved in the B2B space, especially for SMBs,” Kramer noted. “We want to demonstrate our commitment to our clients by letting them know that we are here to bring quality services and solutions, even if that means partnering with FinTechs. Traditional financial institutions can’t do it alone.”