Small and medium-sized businesses (SMBs) need help with digital transformation and financial management in an uncertain business environment, and community banks and credit unions should see this as an opportunity that conservative estimates place north of $150 billion.
“Let’s go back to times of crisis where these banks have stepped up,” Doug Brown, chief product officer, digital banking at NCR Voyix, told Karen Webster recently. “Look at the PPP loans issued during the pandemic. Great example. But there are other things associated with managing through cycles and business terms. It looks like we’re potentially coming into a cycle that might not be as rosy as everything has been. So I think now is the time for small businesses. Who are your options to go to? The community banker is the one that has your best interest at heart, has demonstrated propensity to show you how to manage difficult times.”
Difficult times are often defined by cash flow. Research by NCR Voyix and PYMNTS Intelligence found that nearly three-quarters of SMBs experience cash flow shortfalls, as detailed in “The $150B Question: Can Community FIs Capture the SMB Digital Banking Opportunity?” The research found that more than 40% of these firms choose their financial institutions (FIs) — and where they keep their all-important primary accounts — based on digital and mobile capabilities.
“This is where the banks need to seize things like merchant services and payment processing, because we see heavy runoff and even higher balances held at the third parties like Venmo and Square. If you have a full relationship and you’re providing the payment processing we see orders of magnitude increase in the primary deposit account.”
But there are distractions, and there remains some confusion, in the mix. Small business owners are focused on the minutiae of running day-to-day operations, and finding their way toward what they really need — in terms of loans and other forms of credit or cash flow management tools — is no easy task.
Serving those companies more adroitly requires some guidance as FIs educate companies about the advantages of using technology to alleviate their cash flow challenges, Brown noted. All too often, he said, it’s easy to be confused or distracted by the sheer range of digital options out there, which make everything look, well, easy.
“To make a real difference,” he said, “everything needs to be contextualized, and this is where the advisory nature of the relationships matter.”
Picture, then, the banker as “world-class therapist,” the individual who can ask the probing questions that lead to finding out what’s needed by the small business — and when. Platforms such as NCR Voyix’s, he said, offer the banks real-time data analytics that help keep a finger on the “pulse” of the company, which in turn can lead to productive discussions about credit advances, receivables factoring and other options. It’s a point of intercept that leads to growth for the small business, and the community bank, too. In a situation where delayed payments continue to hamper operations for small businesses, this data can be critical. According to the PYMNTS Intelligence report, in the final quarter of the 2023 calendar year, SMBs waited 29.1 days on average to receive payment, a nerve-racking average of 9.6 days late — both up from the previous quarter. For small businesses, timely payments are not just nice-to-haves but essentials for survival and growth.
As Brown told Webster of NCR Voyix, “there’s a healthy inventory of these tools — paired with additional capabilities around partnerships with FinTechs.” But, he added, there’s a lack of awareness on the part of the SMB about what those tools are and how they might effectively be used.
“It all comes down to what we might call a little bit of parenting,” said Brown. “We’ll call it that the banker’s obligations are to the small business community.” Brown believes community bankers must put in the time and effort to reach out to SMBs (who may not know the questions to ask) and move beyond the basics, examining the historical data they have at hand to extend personalized advice and offering tangible solutions that can help those companies. The small business banker who does their proverbial homework in advance is able to do conduct a “pre-run” of data and pinpoint the optimal products and services. A virtuous cycle ensues, where trust grows and the SMB is open to new ideas (and offerings) down the road.
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