Building bridges: How foundational tech investments can shape a more connected banking ecosystem, feat. U.S. Bank’s Scott Beyer

A recent survey by U.S. Bank reveals that the majority (87%) of small business owners are hopeful about the future of their companies, with many (73%) reporting growth. This growth occurred even as over half (52%) acknowledged experiencing labor shortages, and more than three-quarters (77%) reported navigating a highly competitive labor market.

So, how are SMBs finding ways to sustain their growth amid these challenges?

Shruti Patel, the Chief Product Officer for the Business Banking Segment at U.S. Bank, told me that small business owners adapt and thrive amid challenges. Many SMB owners attribute their success to essential skills like work ethic, and leadership, in addition to adaptability. They cope with work stress by staying connected to their purpose and adopting proactive strategies and work habits, which are crucial ingredients of their resilience.

However, some hurdles remain in the way.

The two key challenges that SMBs consistently face are time and supply chain concerns. These limitations push most small business owners and their teams to wear many hats, leaving little opportunity to dedicate time to the creative and growth-oriented aspects of their business that initially inspired their entrepreneurial journey. Whittling it down, securing a line of credit, and handling cash flow are recurring issues for these businesses. These banking-related issues, though critical, can consume owners’ energy daily and might cut into their overall business income.

This brings us to the next question: how can financial institutions step in with solutions that alleviate these pain points, allowing SMBs to concentrate on growing their businesses while relegating banking to the background?

“I think there are a few elements of that, but since SMB customers are willing to adopt technology, that’s a start,” said Scott Beyer, U.S. Bank’s Head of Business Banking Digital Experiences during Tearsheet’s The Big Bank Theory Conference, held recently at the Mastercard office in New York.

Beyer noted that a generational change is underway in the SMB landscape, with 77% of small business owners now adopting or planning to adopt technology to enhance their operational efficiency. This trend presents a valuable opportunity for FIs to enter the scene and create engaging digital experiences that resonate with the evolving needs of these businesses.

He identified three key steps banks can employ to seize the opportunity and address existing gaps: 

• ensure the availability of products and services
• build integrations
• focus on data reconciliation and harmonization

Step 1: Availability of products and services

Banks are increasingly entering the market with varying levels of success in digital product availability and data accessibility. While banks have made these products available, the quality of user experience is still up for discussion.

According to Beyer, this progress simplifies the justification for further investments. “It’s a good step in the right direction because it’s easier to get the investment as it’s very easy to show the connection between the availability of a digital product or a solution,” he said.

Banks can demonstrate the advantages of offering digital products — such as the capability to open multiple accounts online, which reduces the operational burden on physical branches. This not only broadens their customer base by appealing to tech-savvy users but also opens avenues for monetizing various digital transactions. 

Beyers emphasizes that while enhancing the user experience is important, the real challenge lies in the underlying technology, which should be the focal point during the move to digital. If banks continue to rely on outdated systems, they will likely struggle to create a cohesive and integrated digital experience. 

“If all we [banks] are doing is investing in the experience layer but the foundational technology is archaic mainframe platforms or databases, we’re really going to have a hard time creating integrated experiences,” said Beyers.

He further elaborates that the dialogues around vertical SaaS and embedded finance solutions underscore the need for banks to reevaluate their technological foundations and strategies moving forward.

Step 2: Building internal and external system integrations

This is the stage where banks can evolve from simply offering digital products and services to enhancing their capabilities through comprehensive integrations.

“This transition introduces increasing complexity and becomes less sexy for CFOs,” notes Beyer. But as these integrations grow in importance, Beyer highlights that “they certainly require partnerships and more capital investment.” 

Internal integrations enable smooth navigation between digital platforms, allowing customers to easily transfer funds from a treasury platform, make payments, or manage credit card bills without multiple logins. This streamlined approach significantly simplifies financial management for business owners.

External integrations, whether with data aggregators or embedded payroll systems, are also vital for adding value. However, illustrating the direct benefits of these integrations can be more challenging for FIs. For instance, partnering with third-party data providers for cash flow analytics can associate stickier customers with increased revenue, but proving this cause-and-effect relationship is more complex than illustrating how product availability can lead to more account openings.

Step 3: Breaking down data silos – data reconciliation and harmonization

The third step involves data management, where banks struggle the most, according to Beyer. Banks hold a wide variety of fragmented data across multiple platforms, such as CRMs, application portals, servicing systems, and records. However, this data often lacks alignment, complicating the implementation of one-click applications.

“Aligning and harmonizing that data is critically important,” notes Beyer. 

But there’s a snag in the works.

Securing investment for these initiatives can be difficult, especially when justifying expenses that may appear as overhead. These complex costs are often hard to communicate, making it challenging for bank executives to demonstrate their value.

“Transforming the enterprise to accommodate such changes is a significant hurdle for business banking leaders trying to make a compelling case for these investments,” says Beyer.

This gap in data integration has created opportunities for fintech companies. Beyer notes fintechs are “adept at disintermediating banks in niche areas”, as they are typically vertically integrated, focusing on efficiently addressing specific customer needs.

Banks, on the other hand, have a distinct advantage: their broad range of products combined with customer trust. 56% of SMBs prefer a consolidated financial management platform that can provide a comprehensive suite of banking, payments, and software solutions, expecting banks to lead in providing these integrations.

But without investing in foundational technology and aligning their data infrastructure, banks could find it challenging to fulfill these expectations.

“As we outline our 2025 investments and three-year road maps, it’s advantageous for us as banks to spend more time making a case for foundational investments,” Beyer adds. 

“Ultimately, this approach will foster a more connected ecosystem of banking, payments, and software that SMB owners are eager to leverage for managing their operations effectively.”