7 minutes
Consider courting small-business members using these four steps.
It’s the year of wanting deposits.
While most credit unions are dreaming up ways to gather more retail deposits, an increasing number of institutions are eying a less explored market: small businesses.
According to Cornerstone Advisors’ “What’s Going On in Banking 2023” study, 39% of credit unions said small-business deposits were a high priority in 2023, up from 2022 when only 12% of credit unions said the same thing.
This presents many opportunities. In 2022, the number of small businesses surpassed 33.2 million, according to the U.S. Small Business Administration. Moreover, almost 4 million U.S. small businesses have revenue under $500,000. Local or big community financial institutions are underserving them. That ought to change.
Small-business owners’ balances run higher than consumers’ balances. On a month-to-month basis, many run average checking account balances of around $20,000, and they are willing to pay a small fee for their account if it helps them grow.
Cornerstone Advisors’ research shows that many small businesses act more like consumers about the products they need. They want business checking, small lines of credit or credit cards, and a robust digital banking offering. Instead of ignoring the market, explore banking them as members. That way, your CU will have an opportunity for large financial growth.
To serve these members well, think about staff, technology, credit policy, business acumen and, arguably most important, the value proposition. Here’s how to do it.
1. Define Your Target Audience
Defining the target audience for your business services offerings is just as important as how you select your consumer segments. For example, suppose your CU serves workers at select employee groups or residents of specific counties. It must consider using the same approach it uses to target individual members to even more carefully refine which banking business members it wants to work with.
A good pathway might be to study the market by segment (say, retail, professional services, construction or healthcare), and use that information to determine which of those businesses are the right ones to serve. Then the CU can determine the products and services it needs to offer.
The decisions will be based on factors like the CU’s risk profile. (Does it want to bank cannabis businesses or other heavily cash-based businesses?) In all, the executive team needs to have a clear strategic vision of which types of businesses the organization wants to bank and develop the strategy to serve those businesses.
2. Collect Leads
Having an integrated marketing strategy with objectives and quantifiable outcomes will help ensure a CU’s success in drumming up leads for a business services launch.
To find leads, your CU will need various tactics, such as account-based marketing, lead generation for sales staff and social media marketing. Assigning measurable outcomes to each of these will allow your organization to develop benchmarks and implement any modifications needed to achieve the goals.
Don’t forget existing members who already do business with your CU. Analyze data from your current portfolio to find them. Then, use that data to put these members on a journey for communications about the next best product the credit union can offer.
The relationship with business owners is one of the most important factors for credit unions’ lead generation. No matter what size a business is, it needs a financial services consultant to help it grow. CUs can provide that advice. The organization’s reason for being is to expand the membership base with a great member experience in multiple delivery channels, offering a plethora of products and services to enable members to become financially secure, and to be there for all their life stages. This core strategy segues perfectly into offering services to small-business members.
3. Train Your Staff
When employees from the front line—whether in the branch or contact center or on the lending or operations teams—hear the term “business” or “business member,” they often feel apprehensive about having the necessary conversations. They fear not asking the right questions or giving a wrong answer. That’s why it is important to train your staff about business banking. By giving employees a good baseline and helping them build their confidence, the credit union can remove the fear.
First, teach the differences among business entities. For example, explain how sole proprietorships, single-member limited liability corporations, S corporations, C corporations and partnerships differ from one another. Help employees understand what is important to know about each business and develop a business-at-a-glance questionnaire. This document can be used when a business owner is in front of an employee and comes in handy for cross-selling. The answers business members give will help employees complete the documents the credit union will need and point to what products and services to offer a particular member. Questions to consider including on such a document are:
- How many owners does your business have, and who are they? (Answering this question will help with beneficial ownership details—who benefits from the earnings and profits of the business.)
- What deposits do you make on a month-to-month basis, and do you use remote deposit and check writing?
- Who will need access to the business’s credit union accounts? And what type of access—digital or in-branch?
- How do you pay the business’s bills? How many transactions is this each month? Will you need automated clearinghouse transfers, wires or bill-pay?
- What does your cash flow look like? Will you need credit cards or revolving lines of credit?
Asking these questions will not only help the credit union but also help the business look to the credit union as an advisor and/or business consultant to help it achieve its goals. Weave this approach into other employee channels, especially those working in the contact center. It adds credibility by demonstrating that the credit union understands a small business and the employees care about the owner.
4. Consider Technology Matters
In the wake of Silicon Valley Bank’s collapse, all kinds of startups opened bank accounts elsewhere. Big banks and fintech companies, like Brex, Lili and Bluevine, were reporting an influx of deposits. Among the reasons why: They provide great digital tools.
If your CU is dreaming of winning over small-business deposits, it’s essential to make signing up for accounts online as simple as possible. There’s room for improvement. By nCino’s count, financial institutions can take up to two weeks to onboard a new business customer and, worse, require them to come into a branch multiple times.
Small-business owners are busy building their businesses and don’t want to waste time trying to open and fund checking accounts. A Cornerstone Advisors study conducted during the pandemic found that of the 88% of small and medium-size business deposit accounts opened in the branch, only 32% were ready to be used within an hour.
Sure, an ongoing challenge to letting people sign up for accounts quickly is the risk of fraud. But companies like Alloy and Verafin strive to help financial institutions address these challenges.
Opening a deposit account is just the first step. Your small-business members may also want additional digital features, like cash flow forecasting, confidential balances and expense management.
According to a 2022 report by American Banker, the No. 1 thing small businesses want from their primary bank providers is a set of digital tools for managing their accounts. The study found that almost half of those surveyed (46%) said digital tools are critical, while another third (35%) said they are very important when choosing a primary bank provider.
Here, vendors like digital banking companies Alkami, Q2, Lumin, NCR and Apiture and account opening platforms like Mantl and Terafina can help your credit union compete for business.
Right now, credit unions have a big opportunity to serve business members. Each credit union’s value proposition is an advantage in attracting local businesses as members. Create a win-win by helping small businesses grow with the credit union as part of their journey. cues icon
Amanda Swanson is a senior director for delivery channels, and Mary Wisniewski is an editor-at-large and director of content for CUESolutions provider Cornerstone Advisors, Scottsdale, Arizona.
