Guest Editorial by Julie Morlan, Senior Managing Director of Digital Solutions at Jack Henry
May is National Small Business month, a time to celebrate the value small businesses bring to our local economies. As of 2023, the U.S. Small Business Administration reported 33.3 million small businesses in the U.S., accounting for 99.9% of all businesses. Small businesses employ 61.7 million Americans, totaling 46.4% of private sector employees, and these figures are expected to grow as Americans filed 5.5 million new business applications in 2023.
Traditionally, credit unions have not been big commercial players, but there’s no better time than today for them to build on their strengths: innovation, relationships, affordable financial services to attract and serve this growing market. Supporting small businesses will help fuel local economies and boost overall financial health. It will also help credit unions grow deposits and diversify their membership base, especially since small businesses are projected to represent a $13.7 billion revenue opportunity for the financial institutions who have the right technology to serve them. Many credit unions are already starting to understand the benefits of catering to this market – with 62% of credit unions planning to expand their business services and target a business niche over the next two years.
To serve small businesses, credit unions should start by developing a business banking strategy. Businesses today are more focused on digital baking capabilities than location, fees, or product variety when choosing their primary financial institutions. The following key features and functionality are important for credit unions to consider when investing in technology for their business strategy.
A scalable digital platform that makes it easy for members to transition from a retail to a business-oriented experience. This is especially important as they move from consumer to gig-worker, solopreneur, or new business owner. Businesses want a solution that grows alongside their needs. Likewise, credit unions need to easily add new products, services, or digital functionality to support this growth.
Fraud prevention tools such as positive pay and wires or ACH batches secured behind a fully authenticated channel to eliminate the risk of fraudulent activities like phishing. Small businesses also appreciate in-app communication tools to securely discuss and approve transactions, especially high-dollar and high-risk transactions, without having to use email. This can prevent the threat of business email compromise attacks, which have increased 175% over the past two years, while making it easy to handle transactions.
Embedded invoicing and payment capabilities to help businesses manage their cash flow and receivables. For years, small businesses have used non-bank providers like Square, PayPal, and Venmo to collect payments; however, only $1 of every $8 makes its way back to the primary financial institution. Providing this functionality in the digital banking experience can protect the credit union’s balance sheet while growing deposits.
Flexible controls and entitlements allowing businesses to give the right level of account access to new employees or financial stakeholders like accountants or tax advisors.
Tools tuned for specific needs so small businesses can only see the functionality they need. For example, solopreneurs, gig workers, and early-stage startup companies might need less complex financial tools and feature-heavy interfaces compared to small-to-medium businesses. Tailoring offerings for each member’s needs will provide a more user-friendly experience.
Cash position and reporting helps businesses understand their financial picture quickly, giving them the ability to make informed decisions.86% of U.S. small business owners indicated that they need a consolidated place to check in on the financial health of their business while 87% wish they could better use their business’ financial data to make informed decisions.
Supporting small business members involves not only the right technology but also a thoughtful onboarding plan that drives awareness about the credit union's offerings. This plan should include adoption marketing, secure in-app messaging, fraud prevention best practices, digital lending opportunities, and personalized one-to-one service. Credit unions can enhance adoption through personalized onboarding pages and graphics, educate members on fraud prevention, and make businesses aware of lending opportunities to preempt funding gaps. Additionally, they should remind businesses of available support options like authenticated chat, video chat, and screen sharing to help them learn new processes or tools.
Credit unions can win over small businesses if they’re intentional about their strategy and tools. It’s time they see small businesses as an opportunity to grow deposits and expand their membership while further supporting their local communities.