I was particularly interested in a recent article from The Financial Brand that focused on how small and medium-sized businesses (SMBs) receive banking services. The story highlighted how while these businesses have unique needs and represent an important customer segment, there is still a disconnect between the services SMBs desire and the services they believe financial institutions (FIs) provide.
The story cited how, “Megabanks have the lowest satisfaction rating among small business owners. So why don’t they use smaller institutions? According to research from FIS, one in five small businesses say it was because their local community bank or credit union didn’t offer the products and services they wanted.”
Did you catch that? Smaller financial institutions don’t “offer” the products and services SMBs want. So the issue may not be they don’t have the features, but that SMBs just don’t know about them. This indicates to me the features an FI may be able to provide for an SMB are often hidden or undisclosed. If the FI fails to inform the SMBs of their available features and functions, why would the SMB assume the FI has it?
This highlights two issues: one, the capability of an FI to properly market its services; and two, their ability to identify an SMB’s unique needs and market to them. Let’s examine these two issues independently:
Marketing Cash Management/Treasury Services
In my experience with community banks and credit unions, smaller FIs are generally unorganized in a sales environment. Even the dreaded four-letter “s” word is rarely used. In fact, there is rarely any title or department in a financial institution with the word “sales” in it. Regardless of whether we use the word or not, though, a sales culture is based on identifying prospects, making presentations and demos, creating proposals, and establishing pricing and closing deals (ie: getting signatures on agreements). In a sales culture, there are expectations (often referred to as quotas) which codify what is expected from each sales representative. Does your organization set expectations for the volume of desired new business? If not, then it’s unlikely you have a sales culture.
From a cash management/treasury perspective, it is critical for you to know all of your institution’s services and capabilities, and then convert that information into a compelling presentation–this can showcase how you align with the needs of an SMB. However, this is only the first step–you’ll also need a great presenter. You must also ensure you have the right audience by identifying companies interested in learning about alternative banking services (this step may be completed by those other than the presenter–the larger the organization, the more likely they will practice such task specialization).
If you have SMBs in your market who are not banking with you, start thinking of ways to change this. Create a sales culture with a systemic effort to identify prospects. Make a compelling presentation about cash management services offered by your institution, and develop closing techniques to get SMBs to sign account agreements. If you do not take these steps, it’s likely there are SMBs who won’t believe you have the capability to process their account. It doesn’t matter whether they are correct or not–perception becomes reality in the absence of a compelling argument as to why your institution is the best fit. Remember, studies reveal they want to do business with you, so you are already halfway to success–just take the initiative to create and deploy an effective sales process.
Targeting Specific Needs of an SMB
The ability for any FI to understand the tools a small business needs is key–this is what proves the viability of your institution as a partner. When FIs are neither experienced in nor discuss issues such as acquiring payments (including web payments), handling exceptions and returns, or posting payments to cash in an accounting system, SMBs may reasonably assume an FI would not be able to handle their unique requirements. In other words, give the SMB confidence that their specific issues will be addressed.
An example would be the posting of payments into an accounts receivable accounting module. SMBs are driven by cash flow, but there is a difference between money in the bank account (ie: received payments) versus what is posted to their accounting system. If a payment cannot be posted, the revenue is not available for ongoing business purposes. In today’s environment, there are numerous electronic payments that can be received (ie: ACH, electronic check, wire, etc.) and, more frequently, the remittance information is decoupled from the payment. In other words, the payment is made without designating which account is being paid.
Say an automated clearing house (ACH) credit is executed to make a payment, but the client of the SMB sends an email to an accounting email address about which account to post the payment to. The business has manual steps: get payment information from the FI, go find the email with the remittance information, and manually post the payment to the accounting system. The time and money associated with this process is a drain on the company. If the FI recognizes this unique SMB opportunity, they could offer an integrated receivables solution to the company that would access all sources of payments and remittances and create a single file for posting cash–all before the SMB brings up the subject.
The ability for you as an FI to bring solutions to SMBs is key to increasing their confidence in your institution as a viable partner. Add this topic to your strategic planning process in an upcoming senior management meeting and ideate on it. Whatever you brainstorm, take the outcome and establish internal processes with two specific goals:
- To create an environment where your FI is seen as a viable option to any SMBs in your market.
- To create a sales culture within the FI to capitalize on sales opportunities to SMBs in a professional and systemic way.
What can you do to increase the level of confidence potential partners have in you?
I encourage you to read the whole Financial Brand article here – https://thefinancialbrand.com/72541/community-bank-credit-union-small-business-banking-lending-trends/?edigest.