How credit unions help members get down to business – and serve an expanding market segment

Are we on the cusp of a transformative shift in business banking? With small and mid-size businesses increasingly gravitating towards institutions offering personalized, responsive services, a unique opportunity arises for credit unions to reshape the industry, stimulate their growth and drive forward the engines of our economy.

In the United States, a significant portion of the workforce, between 39% and 42%, engage in some form of side gig. Furthermore, the economy relies heavily on the 33.2 million small and mid-sized businesses (SMBs), contributing to 44% of the country’s total economic activity. A majority of these SMBs operate with a workforce of 50 employees or less. This presents a tremendous opportunity for forward-thinking credit union leaders to position themselves as partners in business banking.

Today, 2 out of 3 SMB owners seek more help running their businesses. They know better options are available beyond deep tech investments that only mega-corporations and super-funded startups can afford.

SMBs are shifting considerably away from large banks – which hold 45% of the market share – pivoting towards credit unions that have adopted scalable, impactful technology solutions. What’s critical here is their understanding of the support SMBs require to grow and prosper.

Credit unions find themselves in a unique and exciting position to serve SMBs, allowing them to grow their market share without requiring extensive hiring or significant technology investments. In this context, integrating future-ready solutions that bridge the people, process, and technology gap has become essential.

To put it simply, it’s an opportune moment to revisit your SMB strategy, armed with new perspectives and tools. Progressive CUs are trading bulky tech stacks for more nimble, lightweight solutions that can grow in tandem with their SMB clients. By meeting these small businesses where they are and doing so without disrupting the cost-benefit balance, we can achieve the dual goal of aiding SMBs and supporting credit unions’ ingrained mission of nurturing relationships that underpin financially sustainable communities.

SMB: Overlooked, underserved and essential

My favorite corner coffee shop is one of the SMBs that make up 99.9% of all businesses in the U.S. and make the best cappuccino I’ve ever had. Their baristas are among the 61.7 million Americans who work for an SMB, and some of their staff count toward the 3.7 million jobs added to the sector since 2020

Despite their economic power, big banks take SMBs for granted. In just one example of big lenders thumbing their noses at small businesses, Brex dropped tens of thousands of SMB clients in 2022 because they weren’t “profitable enough.” These small businesses had just weeks to find new lenders, while Brex opted to focus on larger clients backed by venture capital.

Maybe that’s part of why 66% of business owners say their primary bank doesn’t get them. Yet three megabanks continue to dominate the market for SMB accounting and payments services, holding 47% of the market:

  • Bank of America
  • JPMorgan Chase
  • Wells Fargo

All community banks and credit unions combined share just 18%, while PNC and Citizens Bank alone control 10%

All told, SMBs carry an $800 billion lending opportunity for credit unions that can fill this gap and deliver the service and products smaller clients need to continue to grow. Credit unions are well-positioned to seize the moment.

SMBs say they’re looking for relationship-based banking with an institution that understands their needs. Sounds like they’re ready to become CU members to me. SMBs are looking for new ways of thinking to boost their efficiency, and 19% say they will “definitely” or “probably” switch their primary financial institution by 2025. Will your credit union be where they decide to bring their business?

In my line of work, I’ve been lucky to meet some amazing credit union leaders, and I know many of them are the kind of forward-thinking people who will lean into this opportunity to win market share. One thing they have in common is comfort with their role as independent outsiders taking on the Goliaths—and that’s key to their success.

Bridging the digital gap

In the fast-moving business landscape, SMBs require not just visionary allies but also advanced digital tools to streamline and modernize their operations. Recognizing and addressing their strategic needs is paramount for market expansion. Let’s keep a spotlight on these non-negotiables for SMBs:

  • Cash flow management: SMBs need liquidity to cover operational expenses, inventory purchases and investments in growth. They need to monitor incoming and outgoing cash, optimize payment terms and keep a strong cash reserve.
  • Access to capital: SMBs prioritize securing access to capital to fuel growth, invest in upgrades and cover unexpected expenses. They need flexible, affordable and tailored financing options to match.
  • Cost control and expense management: SMBs focus on maintaining profitability by optimizing efficiencies, negotiating favorable terms, monitoring expenses and identifying areas to achieve cost savings. They need a daily pulse on cash flow and dynamic tools to help understand cost centers.
  • Growth and expansion: SMBs allocate funds to marketing and advertising expenses, research and development, new markets, expanding offerings and hiring new staff. They need solutions that provide them with the capital and resources to pursue growth.
  • Risk management and insurance: SMBs focus on financial strategies that include insurance coverage, risk management measures and contingency plans to safeguard against unforeseen events.
  • Retirement planning and wealth accumulation: Business owners prioritize personal financial planning, seeking financial solutions that help them build long-term security.

Knowing their needs is one thing, but real, positive change happens when you offer the tools that enable SMBs to reach their potential. This challenge can seem formidable if you rely on an outdated tech stack, which might have limitations in range, measurement, efficiency or digital prowess.

Imagine transforming these challenges into opportunities. Visualize harnessing the power of modern, digital-first solutions, efficient operations and robust analytics. You aren’t limited to the old ways. Embrace the possibilities of innovative technology that drive thriving SMBs in the digitized business environment.

John Janclaes

John Janclaes

For more than 30 years, John Janclaes has successfully led strategic growth initiatives for financial services organizations. As president and chief executive officer of $2B Partners Federal Credit Union, John ... Web: Details