Designing the digital services that US SMBs deserve
Small and medium-sized business (SMBs) with 20 or fewer employees are the US economy, accounting for 98% of all registered businesses. They’re also intrinsically linked to the powerful notions of freedom and the American Dream.
In talking to these owners during a recent research project, I found passionate, brilliant entrepreneurs who were doing all they could to make their business a success. Their ingenuity, creativity, and commitment to creating something they can take pride in has been inspiring to observe.
They’re also intrinsically linked to the powerful notions of freedom and the American Dream.
Historically, banks have played a huge role in supporting these individuals and helping America’s small businesses. But while SMBs focus on delivering exceptional service and the human touch to their customers, are they getting the same from financial services providers that serve them?
Money is the lifeblood of SMBs. Their cash flow and working capital can make or break their business, no matter how good their products or services are.
There’s a huge gap between the jobs SMBs are trying to get done and the products that banks are offering them. It’s apparent these products – accounts, loans and credit cards – have not moved on and don’t help owners in crucial areas.
Finance isn’t ‘their thing’
SMBs don’t need financial products like these. They are no different to the regular financial products they use day-to-day to buy their groceries.
That’s why so many mix account products from traditional banks, of all shapes and sizes, fintech firms, and business platforms such as QuickBooks, PayPal, Shopify, Stripe and Square. They’re finding their own workarounds to fit their requirements.
However, financial management is not business owners’ core competency nor their primary interest. Owners are often responsible for micromanaging all areas of the business from idea generation and marketing to logistics and supply chain coordination, recruitment, payroll and accounting.
This can be operationally inefficient because important tasks and activities, including finance, fall by the wayside. It can also be physically exhausting, emotionally overwhelming and stressful.
They need services that minimise their time on financial management so they can maximise their time on what matters: running their business.
The growth opportunity
There is a real opportunity for banks, fintech firms and others to rethink SMB financial services for the digital world.
A big part of the solution is shifting away from cookie cutter, commodity products towards digital services that meet the unique and diverse requirements of SMBs, with a focus on the most pressing needs:
- Managing cash flow in a coherent way (reconciling past business activity and day-to-day finances)
- Protecting personal assets from the business’s finances
- Making smarter and proactive business decisions based on their financial data to help them plan for the future.
Pre-pandemic, hundreds of non-banks were entering the market to offer new digital services to this largely underserved segment by incumbent banks. During and post-pandemic, innovation of agile digital services will only accelerate, intensifying competition.
For banks this means opening yourself up to rethinking the possibilities for SMB financial services by learning from the disruptive moves in the market.
In today’s landscape this involves observing the business platforms that enable SMBs to build upon them, such as PayPal, Stripe, Square and Xero. They’ve done this by designing propositions around end-to-end customer journeys. It’s super effective and any business can do it.
They are also truly digital so their response to the pandemic has been extremely swift. For example, within weeks Shopify launched a cash flow calculator to help SMBs with one of their most difficult jobs, cashflow, both before and during the pandemic.
However, new services won’t win just by solving the most pressing jobs. They need to connect with customers on a deeper emotional and cultural level. SMBs increasingly expect a service as personalised as the one they provide to their own customers.
This has only been heightened by the coronavirus pandemic. People expect a new level of care and support, which means banks and fintech firms will have to do more than simply supporting an SMBs finances.
Business owners will need a proactive adviser who can help guide them through a recession and throughout the recovery phase. Service providers will need to consider how their proposition or business becomes a genuine force for good.
SMBs don’t want a bank
They want to enjoy running a business that they are proud to call their own. It is incumbent on the financial services industry to create the digital services they need to support them.
Now, more than ever.
