How does data create successful small business banking relationships?

What has data and embedded banking got to do with building stable relationships with your small business customers? This question has been a hot topic for our BankiFi Americas CEO Keith Riddle, with our very own blog post on the subject, as well as a recent article published by Bank Automation News.  

Here are the highlights from that very article that you may find useful when considering the necessity of Embedded Banking for your small business banking strategy and how data acquisition comes into play. 

Situational Context of the Industry 

We are all aware by now of the existential threat that third party providers pose to financial institutions across the world. If not, we will briefly break it down.  

There has been a ‘battle’ in recent years as to who will be the ‘go-to’ place, or the ‘front door’, for small businesses (SMBs) to manage their business workflows and finances, all from one place.  

So far, third-party providers have been winning this battle, successfully providing SMBs with payment services in a way that SMBs need financial solutions to work for them. The successful provision of these financial services can be accounted for by 2 factors: the availability of resources (e.g. technology) and sufficient funds to build such capabilities. On average, SMBs are spending around $225 billion on these financial services from third-party providers each year according to a Cornerstone report. 

Keith shares how this has created a ‘paradigm shift in the world of open finance and financial technology.’ On one end of the spectrum, there are the large banks and fintech's who have all the factors and capabilities in place to offer their SMBs the technology they need to manage their business from; allowing them to take a piece of the $225 billion pie. On the other end of the spectrum, there are the community financial institutions (FIs) who may serve or wish to serve a plethora of SMBs, however their technological capabilities and their level of funding does not allow them to achieve what those big banks and fintech providers achieve. Hold that thought.  

Embedded banking + data = stronger relationships and higher revenues. 

There is a way that community FIs can leverage technologies – more specifically, Embedded Banking – so to serve their current and prospective SMB customers better and in line with larger FIs. It starts with understanding the value of integrating financial management workflows (from order to cash and procure to pay) to the FIs small business banking model as well as being able to provide this information holistically. All these terms: ‘Embedded payment workflows’ and ‘Embedded Banking’ are just the start of what is a ‘promising payments opportunity’ for financial institutions. 

Keith sums this equation for an ideal small business banking up perfectly in this article, stating: 

“By leveraging automated technology that instantly tracks customer invoices and bank data, banks can amass a large amount of valuable information from their SMB customers. Everything from accounts receivable and payable data to information related to the financial institutions’ operating accounts, and data related to the specific SMB are all useful for banks to monitor.’ 

Once FIs gain unique insight into their SMBs from this data acquisition, a competitive advantage over market challengers/non-bank providers will form. The benefits don’t stop there. FIs can also: 

• Anticipate liquidity needs for the SMB in the future 
• Provide additional financial services in conjunction to help the SMB to soar. 

At this very moment, FIs have all the opportunities that implementing an Embedded Banking strategy can afford them and all while serving their SMB customer base, strengthening those relationships simultaneously.  

We’ve spoken a lot recently about building relationships with your SMB customers as an FI; as well as data and opportunistic narratives that all come under the umbrella of Embedded Banking.

Check out these blogs below to read more on these topics. 

Speaking with Scott Harkey from PayCLT on their Payments Hub podcast, BankiFi Americas CEO, Keith Riddle, discusses the BankiFi journey as a provider of Embedded Banking solutions to financial institutions (FI’s), from the past, the present and future. 

What is the current state of FI and SMB relationship? How can embedded banking improve this relationship? Find out more in this BankiFi blog.