A look ahead at what's next for small business banking

Banking And Financial Messaging

Erik 2021 Picture

Erik Nilsen

Apr 22, 2021

In the last quarter of 2020, the Metlife & U.S. Chamber of Commerce Small Business Index suggested that half of small businesses anticipated operating for a year or less in the current business climate before having to close permanently. Imagine if it were your business. The dramatic turndown last year affected every aspect of how small businesses operate. Serving customers, paying employees, maintaining supply chains, managing cash flow—safely and securely, all of it disrupted. They’ve first needed help to survive and now, to recover and thrive. Banks, community institutions, credit unions and fintechs that were ahead of the natural disruption served as lifelines for small businesses. But what about those that were not?

“I think this crisis has really solidified the role that community banks have in sustaining our small business communities,” Jill Castilla, President and CEO of Citizens Bank of Edmond, explains in Bottomline’s Helping Banks Help Small Businesses video series. “We are always aware of how a small business can optimize their cash flow, so we are digging into their balance sheet and seeing what their payables look like, their receivables, and whatever expenses, and we are always trying to help them optimize their operations.”

By nature, small businesses want to rely heavily on their banks to assist them with managing their finances. But too often, small businesses are served more as consumers and not the businesses they are—with very specific needs across the payments and cash lifecycle. This opens up a big opportunity for banks to expand their services and offerings to small businesses.

This starts by understanding exactly what small businesses need before they do. We looked across data from third parties, government reports and our own experience with customers to outline trends we’ll see in small business banking. Here’s what we found:

  • Digital transformation in small businesses will accelerate – the pandemic forced small businesses to react to fewer face-to-face customer experiences and in-person, physical payments. This forced businesses to quickly shift to contactless interactions with customers, including the way they accepted payments. Many were ill-equipped to do so. Banks that are in the process of digitally transforming services and the way they are accessed will be well-positioned to prepare businesses for the future.
  • Small businesses want fit-for-them financial management solutions – we’ve heard it said, “I want everything I love to manage my business offered in one easy-to-use experience.” Small business owners are increasingly tech-savvy, but their businesses need business banking solutions, not solutions meant for consumers. That means more than just banking and checking accounts. It includes cash flow visibility tools, invoicing, receivables, electronic payments, accounting, and financial management tools.
  • Cash forecasting and visibility – small businesses need to know where their cash is at all times, whether incoming or outgoing. A true banking partner will not only provide single-view visibility into cash flow across different accounts but also be able to offer guidance and tools for optimization.
  • Alternative payment options – retailers’ use of contactless payments options grew by 69% since January 2020. This trend will likely continue and expand as demand for electronic invoicing, real-time payments, and electronic payments grows. The successful bank will be able to let businesses choose how they want to pay and get paid.
  • Increased fraud threats – the pandemic introduced a new challenge for small business customers: the management of a workforce largely unused to working from home and without on-premises security measures in place. Taking advantage of the situation, criminals honed their business email compromise (BEC) and social engineering tactics. Banks that adopt measures to protect their customers and their customers’ customers will be well-positioned to retain existing and attract new business.
  • Supporting small businesses with future state and federal assistance programs – the Paycheck Protection Plan helped many businesses during the height of the crisis. Going forward, small businesses will expect banks to be prepared to help them navigate and capitalize on future programs with simple, smart, and secure processes to open accounts, apply for funds, grants, and loans, as well as fund their accounts through easy-to-use connected experiences.

According to Cornerstone Advisors, the Covid-19 crisis and its subsequent impact represent a $370B opportunity to provide accounting and payment services to small and medium-sized businesses. That translates into a huge win/win opportunity for banks that step up to meet the needs of their small business partners and service this vital piece of their communities.

The road to recovery may be long, but banks are uniquely positioned to provide small businesses guidance on the journey.


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Erik 2021 Picture

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Erik Nilsen

Erik Nilsen, SVP Small Business Solutions at Bottomline, is a marketing and product management leader with 20+ years of experience in financial services and financial technology, including a wealth of experience in the small business segment. He is currently leading the Small Business Segment for Bottomline technologies, focusing on small business solutions that will help Financial Institutions and their clients better serve the needs of small businesses everywhere.
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