B2B Buzz
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B2B Buzz

Community Banks and SMBs

Small Businesses Need Personal Service + Digital

I was visiting some great Independent (aka Community Banks) this week and was thrilled to hear that one of them calls their service for SMB customers Concierge. As the simple icon diagram above makes clear, this is the epitome of a Community Bank + Digital service for SMBs.

What does it mean to say this?

Let’s first look at the fantastic job that the Community Banks did in processing PPP loans for small businesses recently. This chart from the SBA’s website shows that Banks and S&Ls under $1B did well above program average in Rural lending. Also true for the next tier of banks at $1B to $10B.

It is generally accepted in banking circles that this is a great moment for the Community Bankers of America. They rose up and delivered in the time of need for America’s small businesses.

The best example is of course the fabulous Jill Castilla, CEO of Citizens Bank of Edmond Oklahoma that fought for SMB customers and even got the attention of Mark Cuban to help deliver the loans.

The great story from American Banker about Jill Castilla working with Mark Cuban to get a PPP forgiveness site up and running.

https://www.americanbanker.com/news/mark-cuban-banker-jill-castilla-create-site-to-streamline-ppp

I also have to add that the number of Community Bankers I spoke to that said, the PPP lending bonanza was a blessing BUT required all hands on deck, because they were not yet digital. Good news, next time (god forbid) it can be better because of Digital Tools.

NOW is the time for Community Banks to add digital SMB services. In my work as the Managing Partner for Forty Grand, I look at all sorts of Fintechs and have a set of some that I really like for banks to offer for SMB Finance.

Remember SMB operators do not want to be bogged down with accounting after they close up shop at the end of the day, so the more a bank can do for them, the more the business owner is going to be connected to the bank.

First things first, your bank will need a data strategy. In one of my meetings this week, when I was asked which Fintech to engage first, a banker was shocked when I said “ First get a data strategy in place.”

I explained that getting disparate new Fintech solutions plus your core operating all at once, your data stores are going to get very complicated and fixing this later will be difficult.

Sounds basic but shockingly few small banks have an actual data strategy. I like this model from McKinsey on “How to Build a Data Architecture” as it accounts for current Core systems and how to connect them.

Why do you need a data architecture you may ask. Later bankers will want to know

  • Which customers are growing fastest
  • Which customers are running into a cash crunch at the end of the year
  • Which customers shrinking in revenue or profitability or payroll
  • Lots more criteria that will come up in the future

With this in place now I want to see banks get their SMBs basic accounting and finance data into the bank. Years ago at First Data we attempted this with minimal success, however today there are a number of options. Railz and Codat are both great choices to integrate your SMB customer’s accounting data into the bank’s systems. Now you can have reports on how your customers are doing by month, quarter and more.

www.codat.io

https://www.railz.ai/

Another one that I recently came across is Monit, they are focused more on the analysis of the data although they also connect to your SMB customer’s accounting programs.

https://www.monitapp.io/

I will cover more in the future about what you do once you get access to the data, but this is a huge step for banks and SMB customers to really connect and allowing your bankers to become true strategic partners.

It all starts with not asking your best clients to send over via email, their latest Quickbooks outputs. Once your bank has permission to get this data, it can just keep going. Analysis of the data with tools like Monit will help your bankers determine cash flow needs and lending requirements. Also now imagine a banker can determine risk on an SMB loan without requesting anything but a signature.

It all starts with Data.

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Blogs, articles and musings about B2B payments including Treasury, CFOs and how payments move from one business to another business and around the world.

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Dion F. Lisle

The Rosetta Stone between Legacy Banks and Fintech. My career is the culmination of working between the worlds of Fintech Innovation and Banks www.fortygrand.co