There is a significant “sea change” in financial services, as many banks attempt to re-align their approach to the small-business market.
This highly profitable, but clearly unde rserved market represents an incredible growth opportunity for all banks, but in particular community banks.
According to Aite Group, a research and advisory firm focused on the impact of business, technology and regulatory issues on the financial services industry:
At least 20 percent of small businesses, with revenues between $1 million and $10 million, will likely switch their primary institutions in the next two years.
More than 75 percent of mid- to large-sized banks are average to very weak in determining when to migrate their small-business customers to a business banking platform
Sixty five percent of the customers surveyed currently using a U.S bank with revenue greater than $9 billion saw their banks as average in understanding small-business needs and prescribing solutions to meet those needs.
How can banks fully utilize this opportunity for organic growth and successfully re-align current resources to meet the needs of small-business owners? Collaboration and partnership. Small-business owners want to work with a bank they can trust, who will invest the time to understand them and become a proactive partner in supporting both their personal and business needs.
State Of Your Bank
Wondering if your bank fits this profile? Start by capturing a “current state” of your bank. Ask front line and management the following questions:
What does your bank offer to encourage small businesses to go to you?
What external barriers exist to your bank being more successful?
What internal barriers exist?
How prepared are your staff (business bankers, branch managers and branch staff), that come in contact with small-business owners every day, to engage small-business owners, and win/expand relationships?
Once you know your current state, the key to differentiating your bank is to deliver a “best in class” small-business customer experience. Your bank’s ability to create a competitive advantage hinges on:
Providing consistent value at the point of customer contact. Ensure your staff can engage small-business owners in a “business issues” discussion, collaboratively working with owners to provide the right solution, at the right time.
Developing a targeted strategy for roles and responsibilities for customer-facing staff. There must be a clear demarcation for what they will be responsible for, based on business size and/or loan exposure, with stated accountabilities for achieving desired outcomes and results.
Creating high-quality communications between customer-facing teams and underwriting. Make sure the right information is gathered, lending opportunities are expedited quickly and front line staff can effectively communicate why a loan structure meets the client needs, or why a loan is denied, and still retain the relationship.
The most successful banks are able to align their teams to fully meet the needs of small-business owners. Though there is no perfect delivery infrastructure, the best structure and approach is one that drives a memorable customer experience as defined by the needs and preferences of your customers.
Be Prepared
Unprepared business bankers and branch staff will cause small businesses to seek other alternatives. Frontline staff, while highly proficient at understanding a consumer’s needs, will need new knowledge and skills to make the transition to a trusted small-business advisor and provide real value for small business owners. Your staff’s competence and confidence in conducting a business issues discussion and ability to ask the right questions on how a small business operates and competes in their marketplace, will help them identify needs based on a broader range of financial solutions, not just lending needs.
Developing a successful small-business strategy is an evolving process. It is important to align all key stakeholders across retail, wealth management and lending functions to agree on the bank’s goals and define an action plan before you begin changes. Everyone involved must understand the reasons behind the changes and the intended outcome. This includes defining your vision and go-to-market strategy, setting up training to ensure that key credit, sales and coaching skills are in place, providing ongoing learning reinforcement through management practices, and measuring and rewarding success.
With a strong understanding of both the small-business market and your bank’s ability to service it, your bank will be perfectly poised to turn small business into big business.
Lisa Engley is vice president/senior relationship manager at Omega Performance.
