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Traditional business banking services for larger companies have been a profitability mainstay for many financial institutions, but this typically isn’t the case for the small-business segment.

In this diverse group, the profitability challenges include price sensitivity in general and an aversion to fees overall. All of this occurs in an environment where technology takes center stage and business owners may consume retail (for their personal accounts) as well as business services at a given financial institution.

In spite of these challenges, small businesses (which the Small Business Association defines as businesses with fewer than 500 employees) make up a significant customer segment. Some studies estimate that there are 28 million small businesses in the U.S., representing more than $6 trillion in revenue. Those numbers are sure to grow, as surveys suggest that millennials are more likely to avoid traditional 9-to-5 jobs in favor of being entrepreneurs.

In this environment, how can financial institutions serve small businesses more profitably?

Revenue, while a challenge, is a part of the answer, especially for value-added services beyond payments and balance reporting. Those services can include anything from working capital and other types of loans to additional features such as positive pay. The key is to understand the businesses’ needs in order to upsell and cross-sell effectively through targeted marketing and promotions.

However, revenue is just one part of the equation. Cost and efficiency play even more important parts in contributing to the profitability of serving the business segment. This can come from two areas: the efficiency of the back office in serving all customers (including small businesses), and the efficiency of online banking solutions for small businesses. Let’s look at each of those areas separately.

All financial institutions have constraints on the number of employees they can deploy to support their customers. In order to maximize training and knowledge sharing, the ability to offer a single platform across segments provides a way to simplify and leverage operational support. This is especially true for small businesses, which can grow over time and demand additional business services. A platform that can help a financial institution meet those needs, without requiring the staff to learn a new solution with potential language and process differences, can increase operational efficiency.

Hand in hand with back-office efficiency is a solution’s ability to be easy to learn for businesses themselves. This means an efficient workflow coupled with “business lite” terminology, which will allow businesses to be up and running with their solution as quickly as possible. This approach also allows the solution to be more intuitive, which cuts down on the businesses’ own training (for those who will use the system) and makes usage easier for businesses whose activity is more infrequent.

By focusing on a business banking solution that allows both a revenue upside and an efficiency boost, a financial institution can improve the profitability of its small business segment while providing a road map for future growth. In this scenario, both the financial institution and its customers benefit — and that’s the ultimate goal.

About David Potterton: David serves as the Director of  Business Banking at Digital Insight, an NCR company. He has 25 years of financial services industry experience. David has served as a product strategist at JPMorgan Chase, Bank Boston and Wachovia, a well-connected industry analyst and advisor with Cornerstone Advisors, IDC Financial Insights and Meridien Research, and as a financial services technology provider with salesforce.com.



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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp


Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.