Responsible for about 60% of small business loans in the United States, community banks make up the lion’s share of banking support for the nation’s small businesses. But when it comes to payments, community banks are caught in a conundrum of possibilities for the same clients. 

From introducing ancillary payment solutions to implementing instant payments, today’s payments paradigm can be difficult. Experts believe the answers come in prioritizing based on customer need. 

“Community banks need to think about their target customer base and niche business segments, dive into those segments and do some journey mapping into pain points and challenges,” advises Nick Denning, senior vice president, payments industry relations, ICBA Payments. “It’s all about figuring out, ‘How can I leverage current and prospective payment capabilities to address my target customers’ pain points in a manner consistent with bank strategy?’”

Lori Shao, founder and CEO of small business solution provider Finli, concurs and points out that ancillary solutions introduce new opportunities. 

“If you talk about ACH, wire services and checks, every single bank, large or small, can provide those services. But it’s the ancillary tools that are core to small business operations,” she says. “So, then the opportunity for the community bank is in how they position themselves to continue to be the de facto, go-to, trusted advisor and partner that these small businesses, micro businesses and medium-sized businesses can lean on and turn to.”

“As a community bank, we understand that supporting our small businesses and helping them grow helps Tioga State Bank as well.”
—Susan Allen, Tioga State Bank

Tailoring payment offerings to customer needs

While that concept brings forth a lot of potential, it circles back to Denning’s initial point: Customer needs must drive community bank product prioritization. 

Consider $560 million-asset Tioga State Bank in Spencer, N.Y., which offers two custom solutions to meet the targeted requirements of its property management small business base. Dubbed Zrent and Zdeposit, the former solution offers a secure platform for easy, hassle-free rent collection, while the latter provides a quick, straightforward way to set up security deposit accounts without anyone having to set foot in an office. 

Susan Allen
Susan Allen

“As a community bank, we understand that supporting our small businesses and helping them grow helps Tioga State Bank as well,” says Susan Allen, senior vice president, regional retail manager. “Zrent and Zdeposit are both provided free of charge to our customers. This is a great benefit that can certainly help solidify a relationship.”

In addition, Tioga State Bank offers small businesses access to an accounts payable and receivable solution through its integration with Autobooks. This service provides invoicing, accounting and payment options that enable small businesses to send digital invoices and accept online payments. Through a more streamlined approach, customers have better control over their cash flow and access to a simpler payment process—benefits that small businesses need. 

“On average, a small business owner spends about four hours per week on administrative stuff,” says Shao. “So that’s where the value‑add for the ancillary offerings lies ... The community bank can be like the knight in shining armor with the solution.”

Denning agrees. “When you are focused on delivering a better experience, those ancillary services make a difference and meet a need not being met,” he says.

The case for faster payments for business

In addition to support for accounts payable and receivable, community banks should consider the potential of faster payments to meet emerging small business needs. 

“Everyone wants money faster, and if money is owed and sent to them, they want and benefit from receiving it quicker,” says Denning. “Participating in receive-only instant payments is a good, easy way—with a relatively low lift to get set up—to deliver value for small businesses.”

For Tioga State Bank, instant and real-time payments will be a key solution for its small business customers. The community bank is in the process of launching these offerings in the near term. 

“We are currently working on implementing FedNow and real-time payments,” Allen says. “In today’s world, everything is moving quicker, and we want our customers to be able to have these immediate payment services available to them right through Tioga State Bank.”

Offering instant payments may also be a noninterest-income solution for community banks. According to a PYMNTS report, 42% of small and mid-sized businesses report either already paying or being willing to pay for a service that would allow them to receive payments instantly, with 43% citing improved cash flow management as the most important reason.

Focusing on the relationship

Whether it’s a focus on additional services or speeding up payment potential, experts say that community banks should continue to prioritize the relationship-banking model. The personalized support that comes with community banking remains a chief differentiator in the small business landscape, and aligning payments offerings with that relationship‑first approach will incite deeper connections to the bank. 

In sum, Denning says, “Providing white-glove support to your small business customers can be the differentiator that supports your ability to sell and grow what you’re offering in this area.”