The Small Business Conundrum
Anyone who works at a small or medium-sized business (SMB) knows that every day presents its own unique set of challenges. Whether you are a small business owner, accountant, or an employee, you likely deal with constant change, added responsibilities, and an unexpected future. As work piles on, it is often the lengthy — but necessary — tasks that consume your working day, leaving little room for improving and growing your business.
Many small businesses understand that relying on manual processes and multiple spreadsheets is an inefficient and messy process. Manual methods may work at the very early stages of a company, but as an SMB grows, the implementation of automation and new technologies begin to be a point of consideration. However, more often than not, these considerations are never acted upon as small businesses may lack the time to learn and adopt new technologies. Then, after weeks, months, or even years, they fall into a state of inertia and remain stuck with their current, inefficient processes. And that’s normal.
In a way, we can draw a parallel between small businesses and human beings through the lens of Maslow’s Hierarchy of Needs. According to this hierarchy, individuals prioritize their basic needs such as eating and having a secure income before considering self-actualization needs such as getting a college degree or pursuing their life goals. On the same page, a small business first considers their cash flow and basic needs to keep themselves afloat before investing in fancy solutions that help grow their business and automate their processes.
Unfortunately, even when these businesses decide to actively search for solutions that create real changes, they are often left disappointed with cookie-cutter solutions that are either overly complicated or underdeveloped, and a lack of support from those who should provide it the most: banks.
Small Businesses Do Not Feel Understood By Their Bank
Small businesses remain the most underserved segment of America’s corporate world when it comes to banking. With the increased digital finance capabilities that FinTech solutions have brought forward into personal banking and e-commerce, businesses are finally demanding better banking experiences, with a desire for deep integrations at the forefront of these solutions. However, banks have not succeeded in meeting these pressing demands. Less than 47% of small businesses in the United States believe their primary banking institution understands their needs and more than 60% of small businesses have turned to a non-bank provider to meet at least one financial need that their bank cannot currently fulfill. Some of these needs include obtaining a better understanding of their finances, managing and staying on track of accounting reconciliations, and managing cash flow in a coherent way.
While the products that banks offer to businesses today (such as bank accounts, loans, and credit cards) are still important, small businesses are now expecting more capabilities from their financial institutions, and banks need to act fast before risking the loss of this loyal customer base and vital revenue stream.
The Importance of Small Business Banking
As mentioned in one of our recent blogs, a significant portion of FISPAN’s R&D is focused on helping small businesses as we’ve recognized the importance of small business for the economy and their need for better services. In the US alone, there are over 30 million small businesses that account for over 99.7% of firms with paid employees. Although a small business may not have a large individual impact, taken together, small businesses have a huge footprint on the economy and are key drivers of economic growth, job creation, and new innovation. If this whole segment continues to be underserved, negative externalities could be felt across the economy. Despite outside financial solutions being available to serve SMBs, these products often do not have the same capabilities of those that a bank could provide.
Banks today possess a wealth of opportunities to serve SMBs in the ways these businesses have now come to expect. Yet, financial institutions continue to find this market to be a risky and costly challenge; one that has all but set them back in the digital banking battle between banks, neobanks, FinTechs, and third-party service providers. Contextualized business banking enables new ways for banks to overcome their clients’ greatest challenges, but if banks are not ready or willing to quickly engage their SMB clients, they risk losing even more of the market to the growing threat of challenger banks.
Where FISPAN Comes In
At FISPAN, we have carried out user interviews of small business owners to obtain an understanding of their most pressing pain points and major jobs-to-be-done. We have become aware that SMBs are in dire need for integrated banking solutions that can automate or streamline interconnected business processes. This demand, paired with digital technologies, opens up a world of opportunity that banks can take advantage of to create sticky, yet profitable SMB products.
However, as banks possess a broad customer base, lack flexibility, and are risk averse (for good reason), we understand that developing SMB products can be difficult to prioritize. Small businesses often have unexpected cash flows and are often not seen as profitable customers, providing less incentive to make large investments in potentially high-risk solutions directed at them. However, as small businesses continue to outsource their banking operations and consider switching to other institutions that can fulfill their needs, not prioritizing this important segment could end up being very costly for banks.
That is why FISPAN aims to bridge the gap between the unmet needs of small businesses and the current offerings that banks provide. FISPAN establishes a unique connection with the bank and creates bank-branded, contextualized solutions that banks can offer their small business customers. FISPAN’s suite of small business tools have a very low cost of servicing for the bank but provide immense added value for SMBs. Our aim is to help small businesses enjoy better banking experiences by providing them with the financial tools that allow them to focus on doing their business, not just one aspect of it.
Learn more about how your small business can streamline its payables through FISPAN’s SMB Solutions by booking a demo.