Research shows that more than four out of five U.S. small and medium sized businesses want more from their business banking providers.1 No longer content to make-do with legacy services plagued by inefficiencies and poor user experiences, today’s SMB owners increasingly are demanding access to the same sleek, convenient digital banking tools they’ve come to expect from their consumer accounts. But SMBs also need integration with their everyday business activities, as well as essential access to credit and liquidity options to help them scale and grow.

Serving the full range of those demands is a tall task, but the vast potential of the SMB market has attracted steadily growing attention from fintechs, challenger banks and established financial institutions–all of whom are angling to stake out a claim in the highly lucrative segment.

Scott Johnson, head of Strategic Expansion for Galileo Financial Technologies, recently sat down with Brian Riley, head of Mercator Advisory Group’s Credit Advisory Service, to discuss the hottest trends in the SMB banking market.

During the 60-minute webinar, Johnson provided insights into some of the key questions around SMB banking:

Amid increased attention on serving the SMB segment, how should financial services providers differentiate themselves from the competition? Is the key to offer the widest range of services as possible, or do a relatively narrow scope of things very well?

We’re seeing some incredibly innovative and really detailed offerings that might have a more narrow focus, and I think that there's definitely a market for those players that have been successful in some of these narrow-focused use cases. But where we're really seeing the bigger growth is in these use-cases that have broadened out. Now, having said that, you can't be all things to all people. If you go too broad and you're not good at anything, well, then you're creating a different set of problems. But I do think you want to be a little bit more wide than narrow, to be able to offer additional products and services. It doesn't mean that you have to be all things to all people from day one, but I think you need to have a vision of how you’ll grow your product over time to be able to solve these challenges SMBs are facing. Small businesses want to solve their financial services problems, typically with one partner or one provider. They don't necessarily want to have five or six different apps that have very, very narrow use cases. I do think that I would lean a little bit towards having a broader view of the product offering.

https://www.youtube.com/watch?v=G3EnY1BQGFY

For many SMB owners, brand-name banks instill the most customer confidence when it comes to data security. How can newer entrants earn the trust and confidence to break traditional banks’ stronghold on the data security question?

I do think banks have had a very good track record in being viewed as offering a higher standard of data security. But there are so many different applications of technology now for user authentication that I think can make an end consumer or a small business owner more comfortable. You think of being able to just authenticate through a mobile device or a one-time passcode, those types of things. I think that's the key: being able to look at the level of data security and being able to really get comfortable with that part of the service offering. I think it’s also important to keep in mind some of the regulations you see in the EU, and California and some other states around data privacy, that enable you to choose who you share what data with and where you want to share it. I think over the next three to five years, you're going to see a lot more of that. So that's another area that you have to layer into how you think about this; making the small business comfortable from a data sharing perspective–because ultimately businesses customers will get to pick and choose with whom and where they share their data.

How do you prioritize the engineering lift to help support SMBs? Everyone seems to be short on engineering folks. How do you decide what gets prioritized as a provider serving multiple business segments: SMB, enterprise, et cetera?

As a technology company, we're faced with the same decisions that we have to make on prioritizing around engineering resources. I think the way that we look at it comes back to looking at this holistic approach, and as you’re trying to prioritize this, I think there's a couple of key things. One: again, having the right tech stack makes the engineering effort that much more efficient or easier. I can't emphasize that one enough. But then also a matter of asking, "Listen, is there the right business case?" Which I strongly believe there is, and you can put the numbers behind it, where you see the growth that's coming in small business, you look at what's happening. If you can offer the right product across multiple types of segments, lending, payments, banking, et cetera, I think that's some of the ammunition that's needed to say, "This is how we justify getting the engineering resources." Because there will always be a lack of engineering resources. That's just how this is. I think looking at it that way really helps tell the story of "This is why we really believe that this is the product where we need to put those key engineering resources."

(Note: Responses have been edited for length and clarity)

Take a deeper dive and learn how you can exceed SMB banking expectations by watching the replay.

1SOURCE: Designing digital financial services that work for US SMBs, 11:FS