Small business is big business for credit unions
There are approximately 23 million small businesses in the United States. They account for an estimated 54% of all US sales and 55% of all US jobs. Since the 1970s, small business has produced roughly 66% of all net new jobs in the US. These are impressive stats and evidence that small business, is big. Some of you have already realized small business can mean big opportunity for your credit union, and that’s great news.
But are you approaching the market correctly? Business banking needs and personal banking needs of many small businesses are no doubt interlinked. The problem is that financial institutions that say they want business relationships, likely operate with a variety of silos that fail to effectively address both the business’s need for transactional services and cash flow, and the owner’s personal, yet often intertwined, loan and investment requirements. Like banks, many credit unions are hastily pitching products rather than offering a solutions-based approach, which should be based on holistic needs of small business. The small business market may not sit around and wait for you to fix your silos. This is particularly true if your operational silos are already reflected in your product design and delivery.
Small businesses typically find few bank products outside of loans that meet their unique banking needs, and consumer products often offer too little and commercial banking products offer too much. The small business owner is stuck in the middle. Cash flow, payables, payroll and basic accounting needs are daily challenges faced by small business, and the product offerings by credit unions typically do not answer these needs. This should be particularly worrisome to those of you in the space, given that a 2013 JD Power study showed overall satisfaction among small business banking customers has decreased by 9 points. Furthermore, fifty-five percent of small business customers perceive their financial institution as technologically innovative, down from 67 percent in 2012. Why? Because non-banks are entering the space and raising the bar. In fact, several studies claim that small business owners are increasingly considering moving away from their financial institutions due to a superior mobile banking product offered at a competitive bank, credit union or non-bank start-up. Yep, even business has gone mobile.
If you planted a stake in the small business market, you’re going to need to better operationalize your credit union. And like in the consumer market, it will take more investment in technology and delivery channels to retain and ideally grow your market share.
