The Small Business Isn’t So Small Anymore

 Eric Arnold, ErArnold@profitstars.com

In an age where small businesses are continuing to grow, often faster than we realize, they’re learning that their businesses have distinct needs – a mix of cash flow management tools and payment capabilities. Credit unions, in particular, have an unprecedented opportunity to proactively offer these small businesses the tools they need.

While some institutions are beginning to take advantage of this untapped market opportunity, unfortunately many credit unions still do not fully grasp the value of offering a tailored small business solution to meet existing and potential small businesses’ needs. At the end of the day, credit unions are simply falling behind the competition and even losing ground to nontraditional service providers.

Additionally, many credit unions feel they can’t effectively market these services or have a need for them. However, in thinking about CUSO or Member Business Lending activities, some credit unions have built-in (or growing) Commercial Lending clients and activities. This is a natural progression to strengthen the depository or business services options to these members. Many of these members may feel the credit union only “wants them for the lending revenue” and this can be a drop point in the ability of the credit union to truly generate member loyalty and a viable long-term relationship with that small business. This also works in the reverse, because if you start offering world-class small business services, you can open the door to other potential businesses that would want to underwrite and borrow through that CUSO or Credit Union MBL program. It’s a win-win!

Small business members can be your most profitable ones. They simply need tools that can generate operational efficiencies and more effective cash flow management. And not only that, they are willing to pay for these services.

Let’s take a quick look at the facts:

• 5.9 million small businesses are a prime target for business online bill pay.¹
• 78% of the target are willing to switch institutions to get business online bill pay.¹
• 72% are willing to pay a fee for business online bill pay.¹
• Approximately 53% of small businesses that bank online pay bills online, and an additional 35% are interested in doing so. ²
• More than 25% of small businesses that don't currently use their bank site to manage their cash would be more likely to do so if their bank offered cash-flow forecasting tools, more graphical capabilities (illustrating balances, spending, etc.), and cash-position reports.²
• While price-sensitive, many small businesses are willing to pay for bank products and services that save them money (55%), save them time (49%), and/or increase convenience (46%).³

While the small business segment remains largely unsatisfied and underserved, credit unions can act quickly to gain the greatest opportunities to win market share away from competitors.

Consider the market statistics above and how they could add up for your institution. Take time to focus on the increasing needs of small businesses and how consumer solutions do not offer the functionality and automation they need. In an ever-changing competitive landscape, it is vital for credit unions to stay “ahead of the game” and be recognized as an innovative institution that members want to do business with.

By effectively serving today’s small businesses, credit unions can see incremental fee revenue, improved retention, greater cross-selling success, while also being positioned as a partner to enable future growth. With growth comes increased revenue for the credit union and more business from these valuable members.

Perhaps a not-so-small opportunity after all?

¹ ”Small businesses, big opportunity. Examining the market demand for business online bill pay.” iPay Technologies white paper, March 2011
² Aite Group’s report, “Building the Case for Migrating Small Businesses Onto Business Online-Banking Platforms,” December 2011.
³ Aite Group’s report, “Small-Business Customers: What Makes Them Tick (and Get Ticked),” March 2012.