Branches Still Rule When It Comes to SMBs

Back in 1974, Peter Allen, musing about how things can go out of fashion and then bounce right back again, sat down with Carol Bayer Sager and wrote the song, “Everything Old is New Again.” As one line in the song goes, “Don’t throw the past away, you might need it someday.” That sentiment rings true in today’s banking world. Though digital banking is rising rapidly, there’s still a solid need for branches and the more traditional way of banking, especially for small- and medium-sized businesses (SMBs).Branches Beat Digital in New SMB SurveyDespite the relentless growth of digital banking options, a sizable segment of the customer base still prefers branches. That’s especially true for SMB owners whose preference for good ol’ branches appears to be growing. Indeed, some key findings from a recent BAI survey on SMB trends reveal that:

It’s clear that SMBs have certain needs they think can be better met at a branch versus online, including their personal relationships with their bankers. They want someone they know and can relate to, which is why relationship bankers are so important. They also want to be able to drop by a branch without having to drive too far. Understanding and meeting SMB needs for branches can help build strong relationships, and SMBs tend to be very loyal. 86% use the same bank for business and personal needs.Branches Vs. Digital BanksThe attraction of branches to SMBs should be welcome news to bankers who may have been worried about the rise of online-only banking institutions. While digital banks can offer attractive benefits — thanks to lower overhead costs — such as reduced fees, higher interest rates, and no minimum account balances, traditional banks still hold a competitive edge in several key areas.

Source: BAI Banking Strategies Executive ReportFor many business owners, branches are preferred for activities such as taking out business loans or managing accounts. Withdrawals can be another issue. While digital banks offer ATM access, they often impose modest daily limits, which can be restrictive for small businesses, especially those handling frequent cash transactions. Whereas branch banking provides greater flexibility on cash withdrawals. In addition, SMBs often require secure storage for important documents, a service that traditional branches offer through safe deposit boxes — something digital banks are unable to provide.Finally, when it comes to banking and finance, SMBs often seek trusted advice and personalized guidance. They value relationships with bankers who understand their local market and business needs — something community financial institutions (CFIs) excel at through their strong community ties and personal connections. Digital banks, while convenient, lack those deep, personal relationships.What This Means for CFIs

The ongoing preference for branches among SMBs presents a significant opportunity for CFIs. As digital-only banks continue to grow, CFIs can differentiate themselves by leveraging the unique strengths of in-person banking and their deep community relationships. By focusing on providing personalized service through local branches, CFIs can enhance their role as trusted advisors — especially for SMBs seeking guidance on complex financial needs like business loans, cash management, and account services.CFIs should also consider integrating digital convenience with the traditional branch experience, creating a hybrid model that offers the best of both worlds. Offering digital tools that complement in-branch services — such as streamlined loan applications and appointment scheduling — will help maintain the personal touch SMBs value, while also appealing to those who appreciate digital efficiency.By reinforcing their community presence and evolving with customer expectations, CFIs have a unique opportunity to deepen relationships and build long-term loyalty, particularly with SMBs who continue to prioritize face-to-face banking.