The New Frontier in SMB...

The New Frontier in SMB Banking

As seen in FinXTech

In an era where small and medium-sized businesses (SMBs) face dynamic challenges and rapid market changes, traditional banking services are no longer sufficient. The competition among financial institutions to acquire and retain SMB clients is intensifying, pushing banks to innovate beyond basic offerings like mobile applications and promotional incentives. Today, the new customer incentive is data-driven, proactive advice. This tailored, anticipatory service is becoming essential for SMBs seeking banking relationships that add value.

In a 2023 study by McKinsey & Co., the most important criteria for SMBs when selecting a primary bank was robust management and servicing. The outdated one-size-fits-all approach falls short of meeting the growing needs of SMBs as they look to their banks to mirror the customized and personal experiences they receive from other service providers. Data-driven insights can bridge this gap, from cash flow management to strategic growth initiatives. With an understanding of the financial health and history of a business, banks can offer specific strategies or products that align with each business’s unique goals and maintenance.

The Benefits of Proactive Advice
1. Enhanced customer retention: By anticipating needs and offering timely solutions, banks can forge deeper relationships, reducing churn and enhancing customer loyalty.

2. Improved financial outcomes: Data-driven strategies allow banks to provide SMBs with insights into market trends, competitor analysis and financial health checks. McKinsey found up to 25% improvement in earnings before interest and taxes for businesses leveraging data to drive growth compared to their peers.

3. Customization of financial products: Utilizing data analytics, banks can tailor products like loans, lines of credit and insurance policies to fit the precise needs of SMBs. This customization improves uptake rates and ensures that SMBs feel understood and supported in their financial journeys.

Finding the Data
This approach to SMB banking, however, requires data to achieve it. Leveraging technology like AI, automation and machine learning, banks are finding creative ways to access data and surface insights efficiently and to offer SMBs this new incentive. But if data is the new oil, knowing where and how to mine it effectively is key to finding its value. 

“You can’t manage what you don’t measure,” says Trevor Greenway, cofounder and CEO of interVal, a platform designed to integrate this new practice. “Using technology to sift through stacks of paperwork, this real-time financial data can be combed to surface only the important things, and then presented on a silver platter to SMBs looking for direction from their banks.”

As new technologies emerge in the space, it is imperative banks build a thorough tech stack that doesn’t overwhelm an industry already inundated by the pressure for technological advancements. Transforming customer interactions to make them more personal happens through the right use of information, data processing, AI and fintech solutions. 

Despite the benefits, the shift to data-driven banking for SMBs comes with challenges. First and foremost, data privacy and security are still a hurdle for many consumers. As banks collect and analyze vast amounts of personal information, they must ensure robust security measures to protect people and maintain trust. It’s important to center this data security infrastructure in marketing narratives and initiatives. Positioning yourself as proactive to potential and current clients means showing them that you’ve thought about their data security and have active plans to protect them from risk. 

Effective positioning will need technology infrastructure and investment, and thorough implementation is integral if it is going to stick. When concluding the results of their Digital Transformation in Banking Global Customer Survey, Deloitte found “to capture the hearts, minds, and wallets of customers, banks will need to accelerate their digital transformation and reconfigure each channel to serve every need customers have.”

As the banking industry evolves, so must the services it provides to SMBs. Data-driven proactive advice is no longer a luxury but a necessity for banks aiming to stay competitive in the SMB sector. By offering customized insights and solutions, banks enhance their value proposition and empower SMBs to thrive. As this trend continues, the banks that invest in understanding and predicting their clients’ needs through data will be the ones that succeed in securing a loyal and satisfied customer base.


Author: Matt Beecher