What Do Small Businesses Really Want From Their FI?

In 2009, Domino’s Pizza faced harsh criticism from customers who called its pizza tasteless and low quality. Rather than ignoring the negative reviews, Domino’s embraced the criticism, launching its 2010 “Pizza Turnaround” campaign. The company revamped its recipe with a new crust, sauce, and cheese, while publicly acknowledging its shortcomings in ads featuring real customer reactions to the revamped pizza. This bold approach led to a 14.3% sales increase in the first quarter of 2010, improved brand reputation, and long-term growth, turning Domino’s into a leader in the global pizza industry.Taking customer feedback to heart and being willing to go back to the drawing board can actually make or break an organization’s success. Of course, community financial institutions (CFIs) are already pros at listening to their customers. But how do they get to know what their potential customers are looking for? BAI surveyed 600 small business owners to learn about their banking preferences. Their responses can help you refine your strategy to attract more small business customers effectively. You can also use these insights to deepen your relationships with your existing customers by offering more of the types of products, services, and digital tools they say they really want.PrimacyA sizable majority (86%) of small business owners use the same financial institution for both their business needs and their personal needs, according to the survey. In fact, 71% of those business owners actually established their personal banking relationship first.“It’s difficult for many financial institutions to bridge the gap between personal and business banking, but it’s an important point because that personal relationship usually begins first,” says BAI research director Mark Riddle.That trend of blurring the lines of personal banking and commercial banking is likely to increase as more people start “nano-businesses” in their homes, preferring to work remotely — particularly millennials and Gen Zers, says Eric Tran-Le, a vice president with NICE Actimize. Take the example of more and more young people making a niche for themselves as social media influencers — some of them, like YouTube’s enormously successful Kara and Nate, have branched out into multiple business ventures.“This is a moment in time for financial institutions, because these are very small nano businesses that grow up and become bigger ones,” Tran-Le says. They’ll increasingly need cash-flow management and other treasury management solutions, including access to faster payments — and even wealth management. “Every financial institution wanting to grab some of that market needs to have a digitization strategy and offer new banking solutions,” he says.Switching InstitutionsShould I stay or should I go? Roughly half of small business owners will remain at their primary institution for the next six months, while the other half “are at least thinking about a change,” Riddle says. What would prompt them to switch institutions? Lower fees top the list, followed by the ability to earn higher interest rates on account balances, whether the new institution has “a positive institutional reputation,” and the ability to get personalized support for business operations.Channel PreferencesBy 2027, which channels would small business owners likely use the most? Surprisingly, it’s not unanimous: just over half (52%) of those responding to BAI’s survey said digital and self-service channels. According to BAI research director Jason Mencias, there’s a shift that is drawing more small businesses to human-assisted channels.Indeed, small business owners, particularly those in the younger generations, prefer to seek advice in branches about budget forecasting, cashflow management, and other issues critical to getting their businesses off and running, Tran-Le says. However, to better compete for these customers, FIs need to improve their 360-degree view of all of those customers’ activities, both in their personal lives and day-to-day business dealings.Branch ProximityLarge majorities of small business owners of all sizes want a branch close to them, much more so than consumers. This is often due to the nature of how businesses tend to process checks and cash far more than consumers. They need easy access to a branch so they can transport the funds quickly and get them deposited so they can use those funds for business operations. Improving Digital CapabilitiesWhile the overwhelming majority (81% to 91%) of new online account openings are completed by small business customers who have an existing relationship with the bank, sizable percentages (16% to 20%) of small business customers responding to BAI’s survey started to open an account online but had difficulties completing the process. Half of those respondents had to go into a branch to get their identities verified, while the other half just abandoned the online process due to technical glitches or being frustrated that the FI couldn’t verify their identity online.“Younger generations can’t understand why they just can’t scan their picture, and have their bank compare it automatically with identity verification databases — like they can do with Facebook, WhatsApp and TikTok.” Tran-Le says. “The technology is there. Banks just need to streamline it and make it an end-to-end solution.”Survey respondents ranked the top 10 ways FIs could improve digitally: 

Generative AIBAI also asked about the use of generative AI. More small business owners are becoming increasingly comfortable receiving advice about financial products via AI, according to the survey. Generative AI can also be leveraged to provide 24/7 customer service.What do your small business customers want? Consider surveying existing customers and prospects about their needs and wish lists. Engaging them on preferences like digital banking and using the same bank for personal and business accounts can help tailor your offerings. This approach strengthens relationships, boosts customer loyalty, and positions your CFI for new opportunities in a competitive market.