Do SMBs lean toward specific financial service providers, and can they manage multiple relationships effectively?

I recently explored how financial firms are recognizing SMBs’ growing interest in investing in AI and digital payment solutions to address their challenges. 

This leads to a variety of questions about SMBs’ capabilities:

• Although many SMBs are keen on adopting these technologies, how prepared are they to embrace technological advancements? 
• What types of financial services providers are they leaning toward? 
• And, can they effectively handle relationships with multiple financial service providers simultaneously?

To unpack these questions, I reached out to senior executives across different financial firms including TD Bank, Bank of America, Intuit, American Express, and Visa to gather their perspectives based on their interactions with small and medium-sized businesses.

SMBs are early adopters of tech, but they want simple tools

“We’ve found SMBs to be early adopters of new technology, as they are always looking for solutions that will improve their business and better serve their customers,” said Amy Dinkar-Patel, Head of Small Business & Commercial Distribution at TD Bank.  

A survey by TD Bank found that almost half (49%) of business owners identified having tech products and services that help them manage their business as a top function they look for in a bank.

This indicates that SMBs are early tech adopters and desire user-friendly, convenient tools to manage their payments and stability. According to Dinkar-Patel, service providers who can offer these features are more appealing to SMBs.

Dinkar-Patel also observes that SMBs are now working with multiple financial service providers as different financial institutions and fintech companies often specialize in specific niches, catering to the diverse needs of small businesses.

Young entrepreneurs’ tech fluency shapes their business tech choices

According to a recent survey by American Express, Millennials and Gen Z small business owners, who have grown up surrounded by technology and social media, are greatly influenced by it in the way they run their businesses.

One-third (33%) of Gen Zers and Millennials cited technology solutions as helping them navigate the past few years vs. 18% of Gen Xers and Boomers. 

“These younger generations are leaning into their digitally-native upbringing by using technology in every aspect of their business, from their inspiration and ideas, to how they market, to how they access suppliers and more,” said Gina Taylor Cotter, EVP & GM, of Small Business Products at American Express.

According to Cotter, small businesses seek financial service providers offering the best solutions tailored to their needs. The type of provider is less important than their ability to help businesses address challenges and achieve growth.

“SMB owners are the jacks and janes of all trades and while they often juggle multiple service providers, they prefer to consolidate whenever possible because it saves them precious time,” noted Cotter. 

Prioritizing improvements over differentiation

Many small businesses are proactively seeking ways to adopt new technologies that not only differentiate them from competitors but also optimize their strategies. 

“Online banking apps, accepting cashless payments, and bolstering social media presence are some of the current ways in which small businesses are adapting to technological advances,” said Sharon Miller, President and Co-Head of Business Banking for Bank of America.

While small business owners may want to consider diversifying their account mix, it’s crucial they carefully evaluate all options when selecting financial providers, according to Miller. One significant challenge they can face is the potential loss of efficiency from managing multiple accounts simultaneously. Having to juggle different service providers, statements, and systems consumes time that could be better spent on more productive business efforts. Miller believes consolidating assets and statements into a single platform streamlines access and oversight, providing a clearer understanding of financial resources and how they can best serve the business.

One-stop-shop solutions take the crown

Small businesses are interested in working with financial providers who will serve their unique and evolving needs, ultimately helping them grow their business and provide a better customer experience. That said, the more streamlined and integrated these services and providers are, the better, noted Veronica Fernandez, Senior Vice President and Regional Head of Visa Commercial Solutions for North America.

“Small businesses want to focus on what they love – their business – and prefer to have an easy, one-stop-shop provider,” said Fernandez. 

According to Fernandez, one clear example of what’s working is embedded finance offerings. Embedded solutions enable businesses to provide smoother experiences that customers expect, while also gaining a comprehensive overview of money flow to improve cash flow management. For instance, if a small business utilizes accounting software, it would prefer to handle invoicing and payments within the same platform.

“Small businesses are used to juggling multiple balls at once, but that doesn’t have to be the same for the number of financial service providers they use,” said Fernandez.

“We’ve seen great success for small businesses that have adopted embedded solutions, which can reduce the number of financial providers they need to manage and opt for a streamlined one-stop solution,” she further added.

Digital solutions are the way forward

“We’re seeing increased adoption and investment in digital tools that can take a business to the next level of growth while making the owner’s life easier and more manageable,” said David Talach, Senior Vice President, of QuickBooks Platform and Money Offerings at Intuit. 

Talach believes there is no one-size-fits-all for the types of financial services providers that SMBs prefer – different businesses just have different needs. However, the range of choices available today has significantly expanded beyond traditional options.

For instance, while some business owners may still choose traditional bank loans, not all have that option. The good news is that there are more alternatives available today, with fintech platforms increasingly expanding access to capital for small businesses. These platforms analyze vast amounts of small business data intelligently, including cash flow trends and P&L statements, rather than relying solely on metrics like credit scores. This holistic approach provides a more comprehensive view of a business’s finances, leveling the playing field in credit decisions and making financial service providers that consider this data more attractive to SMBs.

It’s ultimately up to the business owner to determine how they would like to manage their financial service providers, but there are benefits to consolidation, which include having their business data all in one place for smarter insights and oversight, according to Talach. 

“As small businesses increasingly turn to integrated digital tools to manage their finances, pay their employees, accept payments, and so much more, the data insights this creates can open up a wave of other opportunities, such as faster payments or the ability to access capital,” Talach added.