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Digital Banking

Small Businesses Lead to Big Deposit Opportunities

Erin Davis
Aug 18, 2023

The small- to medium-sized business (SMB) market is a $370 billion revenue opportunity.

Yes, that’s Billion with a capital B. And in terms of the SMB markets’ impact on the economy, small businesses aren’t actually that small. In fact:

  • There are 33.2 million small businesses in the U.S. – accounting for 99.9% of all U.S. businesses.
  • Small businesses are credited with just under two-thirds (63%) of the new jobs created from 1995 to 2021.
  • In 2021, a record-breaking 5.4 million new business applications were filed in the U.S. with nearly 5.1 million filed in 2022.[1]

It’s no wonder 65% of bank and credit union CEOs plan to expand their services to small businesses.[2]

With the downward pressure on retail revenues and widespread deposit attrition and displacement concerns, serving this key segment effectively has never been more important.

It’s a tall order, considering the top 25 banks in the U.S. now account for 84% of primary banking relationships with SMBs. Unfortunately, community and regional financial institutions have seen their share of primary business banking relationships shrink from 28% in 2018 to 16% in 2022 – an astounding 43% drop.[3]

The problem isn’t whether community banks and credit unions can satisfy and retain their accountholders. They can, and they are. However, they face a massive loss of market share because they’re struggling to acquire the large volume of businesses that form each year.

Embracing a Digital-First Mindset for Businesses

Digital account opening is vital for acquiring new business accountholders – providing an open door for longer-term personal banking.

New deposits translate into lucrative lending opportunities as well as fee-based commercial solutions like payments and financial management services.

The average financial institution sees 13-35% of consumer accounts being used to run small businesses – primarily solopreneurs. With 59 million freelancers, gig workers, and sole proprietors in the U.S., community banks and credit unions have a unique opportunity to serve this demographic, yet they're often left to languish on personal banking platforms or forced to make the jump to an overly complex business or commercial banking account.

A “tweener” product for sole proprietors enables new business owners to transition from using personal accounts to business-specific products without forcing them into ill-fitting and potentially high-priced traditional small-business services.[4]

Account application availability and the user experience are vital to growing business relationships, and no longer has to be a complicated or clunky process. The key is simply understanding that user preferences are as wide as they’ve ever been – making it imperative to provide business owners with more than one path to get where they need to go.

The online channel provides the flexibility to fit the needs of each individual business. One size does not fit all; one size fits many.

Business-Specific Workflows

You must evolve the business account opening process from “find a branch” to “apply now.

From there, a streamlined sign-up process is key. This includes the ability to apply on any device – anytime, anywhere – and the option for applicants to pause their application and pick up where they left off on another device later.

A branded account opening workflow also reassures the applicant that it’s your financial institution that’s collecting their information.

The user experience should fit the needs of both the business owner and your financial institution by streamlining the application with:

  • Account options like business checking accounts, savings accounts, and other specialized accounts.
  • The ability to easily enter business details, like the legal business name, tax ID number, industry or business type, etc.
  • Information about the business owners, partners, or directors, as well as the authorized signatories on the account. This may include their names, addresses, Social Security Numbers (SSNs), or other personal identification details.
  • The ability to easily upload digital documents like business registration (e.g., certificate of incorporation and articles of organization) and identification documents (e.g., passports and driver's licenses)

It’s vital your financial institution stands ready with an efficient and secure application and onboarding process.

Embracing online account opening for businesses aligns with the ongoing trend of digitization in the banking industry. By providing greater convenience, faster processing, cost savings, and a competitive advantage, you can create a more attractive and robust offering for businesses... all while helping your institution meet your deposit goals.

[1] Cassie Bottorff and Kelly Main. Small Business Statistics of 2023, Forbes Advisor, accessed August 2, 2023.
[2] The 2023 Strategic Priorities Benchmark Study, Jack Henry™, accessed August 2, 2023.
[3] Ian Benton and Gregory Magana. Redefining “Community”: How Small Banks and Credit Unions Can Compete and Thrive in Business Banking, Javelin, accessed August 2, 2023.
[4] Six Keys to Building the Future of Business Banking, Jack Henry, accessed August 2, 2023.

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