Community Plus Convenience: How Banks Can Grow and Retain Business Relationships in 2022

By Nathaniel Harley

With fintech firms driving innovative experiences and banks pouring resources into new products, community and regional banks are fighting a challenging battle for the consumer market. This is why small businesses will become the new leading retail banking customer in 2022.

According to a study by Cornerstone Advisors, small business deposit accounts are top priorities for 41 percent of community banks in 2022—almost twice as important as other retail deposit accounts, which were a top priority for only 21 percent of respondents.

However, banks admit their current business account opening process is broken: 40 percent of banks rate their business account opening process as “somewhat or very poor” and 53 percent of banks say their account opening process limits their ability to grow business deposits.

Just as small business relationships grow more valuable to community banks—they also grow more vulnerable. An increasing number of small-business owners want—and expect—the same digital convenience available to consumers. Community banks must address this expectation gap in order to grow and retain key business relationships.

Here are three considerations for effectively targeting small businesses in 2022:

Digital is no longer optional. Online business account opening is no longer a nice-to-have feature for banks: 57 percent of small-business owners say they will not do business with an institution that does not offer online account opening, regardless of whether they prefer to open an account online or in-person. Notably, more than half of small business owners (59 percent) with $1 million to $25 million in revenue also require online account opening.

Online account opening is not the only area where community banks are falling short of small-business owners’ expectations.

A clear majority of small business owners want mobile transfers and mobile check deposits (71 percent) and instant notifications for large purchases or potential fraud (65 percent). But 45 percent of community banks are currently unable to deliver what their business customers want, in large part because they don’t have the infrastructure to support it.

Digitizing their business offerings should be a major priority for community banks. Despite the fact that only 8 percent of small-business owners trust digital-only banks more than they trust traditional banks, 43 percent—including 71 percent of millennial small business owners and 100 percent of Gen Z small business owners—say they are “somewhat or very likely” to open an account at a fintech company in the next 12 months.

Small businesses want community plus convenience. For years, community banks were well-positioned to offer both community and convenience. Small-business owners could bank at a community bank just as easily and efficiently as they could at a national bank. That is changing.

When compared to large national banks, regional banks and credit unions, small-business owners rank community banks highest on providing 1:1 support for their businesses and for having the biggest local impact. However, owners do not perceive community banks as being convenient. While nearly half of community bank executives believe that their digital services are more convenient than big national banks, small-business owners do not agree. A full 40 percent say that large banks offer the most convenient services for business account holders.

In an increasingly competitive banking landscape, low fees and superior service are not enough to maintain a strong foothold in the small business market.

Omnichannel is the opportunity. A record number of U.S. bank branches closed in 2021. Fueled by digital transformation, the banking industry is mirroring the retail industry where a hybrid approach—both physical and digital—is critical to effectively targeting and servicing customers. This is especially true for business customers and it is vital that banks have the capability to bridge the digital and human-to-human experiences.

Omnichannel is the answer and how community banks can create excellent business banking experiences. Ultimately, bankers must meet businesses where they want to bank—whether it’s in-person, online or mobile—and deliver the same experience across all channels. Banks must ensure that processes—like a new account application—can start, resume and be completed across any and all channels with minimal friction. This will help create the seamless, convenient customer experience that the modern business owner expects from a bank.

Community banks have built incredible goodwill with the small business community but they must digitize to meet growing business demands for omnichannel banking experiences. By meeting small-business owners where they want to be met, community banks can deliver something truly unique in a crowded competitive environment: a modern digital experience informed by a deep and abiding connection to both people and place.

Nathaniel Harley is CEO of MANTL.