The Jack Henry™ 2024 Strategy Benchmark reveals the escalating competition among SMB and commercial enterprises, underscoring the potential consequences for unprepared financial institutions that fall behind.
The $370B SMB opportunity
In 2023, banks and credit unions sought to reverse the progressive decline in their share of primary banking relationships with SMBs. Early in 2024, the game plan looks to be very similar.
Unfortunately, for community and regional financial institutions, the rest of the market players are also eyeing the $370 billion opportunity associated with the SMB market while actively working to defend and expand their share of the pie.
Fintechs and SMB-focused neobanks are no longer on the operational and financial backfoot we saw them on throughout 2022 and 2023 – with the top 25 U.S. banks continuing to stubbornly hold on to more than 80% of the current market. Suffice it to say, the competitive environment will only continue to heat up for the foreseeable future, with 90% of financial institutions planning to serve a niche market over the next two years.
In fact, both banks (86%) and credit unions (59%) are targeting businesses, with 78% of all respondents reporting plans to expand services for SMBs – including payments, business credit/lending, and merchant services.
Compete effectively: banking strategies for growth
Digital banking vendors have worked quickly to meet the needs of banks and credit unions, releasing a slew of banking, payments, and lending solutions to better equip you in your quest to serve businesses of all sizes.
With the availability of these new tools, you should design and pursue a digital-first technology stack that aligns with your chosen small business banking strategy.
However, these solutions represent only the second-best resources available in the fight for SMBs’ attention. Unlike nationally-focused big banks and fintechs, you can direct all your efforts to the local markets you serve – as you better understand the unique pain points of your clients, their operating environments, and what tools can best help them.
Additionally, you’re best positioned to provide both the personal and personalized service and support all growing SMBs crave. While the adoption of new marketplace tools will be key to empowering SMB client operations, it will be relationship-based banking in digital contexts that gives them staying power.
How to differentiate your financial institution
Cash management and visualization tools continue to top the list of client needs.
Understanding your clients and their cash flow while being able to preemptively identify shortages/surpluses will give SMBs the time they need to take appropriate actions – like leveraging accounts receivable (AR) tools, working capital loans in the lean times, and putting extra cash to work in savings/sweep accounts during the good times.
Real-time payment rails continue to grow in importance for SMBs, giving them more flexibility and control over all payment-related tasks (invoice collections, supplier payments, payroll, etc.), which will help shield them from any macroeconomic volatility.
Your accountholders can also benefit from many of these cash management tools for similar reasons.
When combined with other solutions like early pay, automated savings/investing, and goal-based savings accounts, you can create personalized hubs that meet the disparate financial needs of your accountholders while simultaneously combating financial fragmentation and creating stickier deposits.
Download the 2024 Strategy Benchmark to learn how you can create digital banking strategies for growth and attract more businesses.
Ready to learn more? Connect with a Jack Henry expert today.
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