Fintech Insights

Reimagining the Role of Banking in a Micro-Business Economy

By Corey Gross, CEO, Sensibill (an FIS partner)

October 15, 2018

A robust banking industry needs a thriving small business community, and vice versa. In the U.S. today, sole proprietorships and micro-businesses make up 92% of all businesses in the private sector. Still, this group remains underserved by their financial services providers. In 10 years, self-employment is expected to outpace salaried work, meaning that most individuals will behave like “micro-business” owners, emphasizing the importance of addressing small-scale business needs. This expands the small business banking opportunity for banks, but also raises the bar.

To understand what this means for banks, Sensibill commissioned a study with Barlow Research Associates to understand the segment’s pain points, their relationship with their bank, and what they expect from their providers. Barlow’s research revealed that:

  1. The relationship between micro-businesses and their banks is fragmented, with customers increasingly willing to shop around for value-added services. Up to 25% of customers added a new financial institution to their list of providers, and another 25% were looking to add one in the next 12 months.
  2. Micro-business owners don’t look to their banks for advice or for help managing their business. The banks that address these low expectations first, can open up billions in new revenue streams and establish a competitive advantage against the alternative providers vying for the segment’s loyalty.
  3. Beyond transactional products, these micro-business owners showed an appetite for digital solutions that address their functional needs. In particular, 51% of business owners said it was important that banks offer them a receipt management service, saying that they would be less likely to switch banks if their providers helped them manage their laborious workflows better.

Historically, community and regional banks have been the trusted provider of choice for small businesses, and for this reason, they are ideally positioned to prioritize the micro-business segment––and capture the rewards. The success of this strategy hinges on community and regional banks reimagining their role from financial services providers to business partners.

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Tags: Customer Experience, Customer Segments, SMB