While community banks remain the pillars of small and medium-sized business (SMB) success, megabanks and nontraditional financial services firms like Shopify are targeting this valuable sector with SMB loans and supplementary offerings.
“There are all of these companies soliciting our customers and offering free equipment to get them through the door,” acknowledges Becca Knowles, SVP and COO of $630 million-asset Yampa Valley Bank in Steamboat Springs, Colorado.
Yampa Valley, like many community banks, has responded by ramping up its merchant services offerings to turbocharge its relationship advantages with SMBs.
What sets community banks’ offerings apart is the combination of efficiency-boosting technology and the relationship-focused business model. “We offer merchant services from a perspective of enhancing the relationship,” Knowles says. “We can be a trusted advisor and couple that with other services. We tell SMBs to bring their whole relationship over to us, versus these piecemeal options.”
Here’s why and how merchant services solutions can make community banks winners in the marketplace.
Comprehensive payment processing solutions
“Small businesses want the convenience of offering collection in the form of digital wallet and credit and debit cards with chip and tap,” says William Loving, CEO of $775 million-asset Pendleton Community Bank (PCB) in Franklin, West Virginia. “From our perspective, we want to find the solution that works best with the customer.”
Effective merchant services make this possible. PCB uses FiNet’s merchant services program to accommodate the variety of payment alternatives. The FiNet program offers card processing, guaranteed funds, e-commerce, recurring payments, virtual terminals and mobile processing capabilities.
Savvy community bankers know that comprehensive payment processing services provide an essential convenience for SMBs. “We need to help our customers, and a one-stop shop is very convenient for them,” says Abdul Hersiburane, president of $2.2 billion-asset MainStreet Bank in Fairfax, Virginia. “We have a full suite of payment software that is tailored to meet unique payment needs.”
From cash flow to operations
Cash flow is one critical area of focus for community banks that want to secure a long-term relationship with SMBs. Cash flow is king for small businesses, and that means it’s a time‑consuming task.
By providing merchant services that offer online cash flow solutions, community banks can help entrepreneurs free up time, letting them focus on growing their businesses and doing what they do best.
Data analytics is an underused tool that can help small businesses identify opportunities for efficiency. “With better data, entrepreneurs can run their businesses more effectively,” says Steve Dow, founder and CEO of Monit, a fintech that provides integrated cashflow tools for banks to offer their SMB customers.
Monit’s white-label tool, which is integrated with several digital platforms, provides accounting and transaction data that gives SMBs a speedy and comprehensive overview of their financial status.
Minneapolis’s Northeast Bank is one community bank that has partnered with Monit. The $805 million-asset community bank offers Monit’s white-label tool to its customers as Business Insights, which helps SMBs in a variety of ways. These include up-to-date cash flow forecasting, peer benchmarking and modeling for various scenarios, such as equipment purchases and the cost and effect on sales, explains Eva Rasmussen, chief strategy officer at Northeast Bank. “So many entrepreneurs have a great idea, and the banking has to work, but it’s not their focus. We’re excited to have tech solutions that support them.”
Customizing solutions and attracting deposits
Community banks know that one-size-fits-all is never a winning approach for their customers, and this is especially true for small and medium-sized businesses. SMBs range from “solopreneurs” at farmers markets to business-to-business equipment suppliers, making it critical for community banks’ offerings to be tailored to each client.
Merchant services can be customized to meet an SMB’s unique requirements. Knowles notes that Yampa Valley Bank, through its merchant partner, offers an à la carte portfolio for SMBs. “You pay for different services, and that’s part of the initial conversation,” she says.
PCB takes a similar bespoke approach. It uses the Banno digital platform for online banking, and Loving reports that the platform allows the bank to tailor capabilities to its customers’ needs. “It provides ease of direct deposit, payroll, automated wires [or] direct deposits for employees,” he says. “We bundle services for small business customers and provide a solution that is turnkey for that customer.”
Merchant services aren’t just about transactions. They also provide analytics that give community banks better visibility into their customers’ needs and aid in cross-selling. For example, a bank may learn that a client’s key equipment is aging out, making that SMB a candidate for a loan.
“Instead of sending blanket offers, you can send really targeted, meaningful offers that help the owner,” says Monit’s Dow.
Rasmussen reports that Northeast Bank uses the insights from its merchant services platform to prepare for customer meetings.
“If a customer writes a lot of checks, for example, we might talk with them about a business card program or using positive pay for fraud protection,” she says. “[Monit’s Business Insights tool] also allows us to present offers and targeted campaigns through the bank portal.”
This approach deepens the customer–community bank relationship. “We’re a partner in their full business,” Knowles summarizes. “We’re not just a vestibule for their money to sit in.”
SMBs gain an advocate
In a competitive marketplace, merchant services offer opportunities for increased revenue for community banks, such as through accounts payable, receivable, card interchange and higher deposits.
Hersiburane reports that merchant services have helped attract deposits to MainStreet Bank, which has downstream benefits. “We’ve gotten a lot of noninterest-bearing accounts, and that allows us to lend at a lower rate of interest,” he says. “That helps us stay competitive.”
Knowing their community bank has their back when dealing with payment processing vendors can be huge for SMBs, too. “We lead with the personal approach,” Loving says. “If you need something, contact us directly versus having to deal with a national firm or a toll-free number. We’ll be your advocate in fixing the problem.”
Overall, offering up-to-date business tools evens the playing field for community banks.
“A lot of big banks have built their own tools,” says Dow. “Being able to offer tools like this makes community banks look like they’re punching above their weight.”
Rasmussen agrees. “One of our earliest users said they were happy to be working with a local bank, and this wasn’t the kind of tool they expected us to have,” she reports. She says that merchant services technologies support the role of community banks as local small business partners. “It reinforces to our customers and the market that we prioritize the small business market.”
The digital demands of next-gen SMB owners
Small and medium-sized business (SMB) ownership is changing hands as baby boomer owners turn over their businesses to millennials and Gen Zers.
These younger demographics aren’t just more comfortable with digital banking solutions; they demand them. To retain these accounts, community banks must keep up with their technology expectations. Younger SMB owners want technology that:
Allows them to do everything digitally. Banking must be available from any device, from smartphones to computers. “Our model is we put our bank [in your office],” says Abdul Hersiburane, president of MainStreet Bank in Fairfax, Virginia. “Every service you need, from wire to deposits, we are on top of it.”
Adapts to their needs. “Younger SMB owners come to us and say, ‘Here’s what I need; make a product that works for me,’” says Lindsey Bonner, operations risk and project management officer at Yampa Valley Bank in Steamboat Springs, Colorado. “They’re not conforming their business to technology. They want the technology to move with them.”
