Small to mid-sized businesses (SMBs) are contending with a perfect storm of financial difficulties: outdated payment systems, persistent inflation and delayed payments.
These issues disrupt cash flow and hinder growth, exacerbated by inefficient manual accounting practices and reliance on paper payments. As inflation pressures margins and payment delays become more frequent, SMBs are under intense pressure to modernize their financial operations.
In response, SMBs are seeking banking partners that offer digital solutions to meet their evolving needs. Frustrated with traditional banks and credit unions that fail to provide sophisticated digital tools, many small business owners are prepared to switch to institutions that offer better financial management solutions.
Community banks and credit unions have a prime opportunity to step in by providing digital services and partnering with FinTechs to enhance their offerings. Those that can adapt and deliver these digital solutions will be well-positioned to secure and retain SMB clients.
A recent PYMNTS Intelligence report, The $150B Question: Can Community FIs Capture the SMB Digital Banking Opportunity?, in collaboration with NCR Voyix, provides insights into the evolving financial landscape for SMBs.
Financial Shortfalls Plague SMBs
SMBs are experiencing financial strain from late payments, inflation, and antiquated payment systems — delayed payments average 29.1 days, exacerbating cash flow issues.
With 76% of SMBs under $10 million in revenue facing inflationary pressures and 71% experiencing cash shortfalls, many resort to personal savings or loans to survive. Outdated manual processes, including paper payments, further complicate financial management and hinder efficiency, underscoring the need for digital solutions.
SMBs Seek Digital Remedies for Cash Flow Pain
Frustrated with their current banking relationships, many SMBs are ready to switch to institutions that offer modern digital tools. Over 70% of SMBs are interested in comprehensive cash management services, and 90% demand seamless digital payment options.
As dissatisfaction with traditional banking increases, community banks and credit unions face pressure to provide digital solutions to retain clients and capture a larger share of the $150 billion SMB banking market.
From Traditional Banks to Trusted Advisers
To meet SMBs’ evolving needs, community banks and credit unions must embrace digital transformation and forge partnerships with FinTech firms. By collaborating with technology providers, smaller financial institutions can enhance their offerings, accelerate innovation, and improve customer experiences.
This strategic shift enables community banks to transform from basic service providers into financial partners, addressing the specific needs of SMBs and securing long-term client loyalty.
Looking ahead, community banks and credit unions face a pivotal moment: the chance to redefine their role to indispensable digital partner for SMBs.