Small businesses play a vital role in the U.S. economy with almost 50% of workers employed by businesses with 20 or fewer employees. Yet economic uncertainty, persistent worker shortages, supply chain challenges, stubborn inflation, and concerns around bank stability following the rapid demise of Silicon Valley Bank, Signature, and First Republic has the confidence of small businesses at a 10-year low—all coming at a time when strong banking relationships are critical for small business success (if not outright survival).
On the banking side, the small business segment often represents 20-45% of a regional or community bank’s total deposits, positioning this segment as vital to most banks’ health—and yet, banks have historically struggled to serve the segment profitably and efficiently.
A constellation of problems commonly occurs throughout the management of this segment, including: developing product offerings that are not purpose-built; leveraging risk models, sales and servicing processes designed for larger commercial clients; relying on organizational models and decisioning designed for commercial clients; and utilizing disconnected and siloed enabling technologies.
The small business segment is neither a large commercial client nor a typical retail client, often rendering it an afterthought to most banks. The result? Increased costs and complexity to the bank and a poor experience on the part of the customer. This environment has also left the segment ripe for disruption by both the largest banks and fintechs.