Santander’s Patrick Smith on the state of SMB banking in the U.S.

Small business at Santander

The Small Business Group at Santander has been around for a long time. We've been in the business of serving small businesses across our seven state footprint for a very long time now. We have about 150,000 clients in our small business portfolio.

I have a long background in financial services -- retail banking, specifically. I joined Santander just over two months ago. And I've been around this segment, in different capacities, throughout my career. A lot of my experience has been doing digital, running digital product teams, digital strategy, digital small business, digital segment, product, channel strategy, and a bunch of different parts of retail banking that supported small business in very different ways over the course of my career.

SMBs during the pandemic

Like lots of other parts of the economy, I think there is something underlying that has been exacerbated. And I think there are some trends that have been accelerated. And I think there are some other needs that have emerged.

In terms of underlying needs, I think small businesses, on the smaller end of the spectrum, have always had a greater need for holistic financial advice. That's been exacerbated in the crisis. There's more of a need now than ever among small businesses for financial advice to help guide them in their businesses through the pandemic.

Obviously, digital has been the place where there's been an acceleration. There was a trend already towards small businesses moving more to digital. A lot of small businesses have done a great job of really adapting their model, but it's really to adapt their business to a more virtual, contactless world. So, things like contactless payments and electronic invoicing have really become more of a need for small businesses than ever before.

Need for advice

We just reorganized our support model across our branch network for small businesses, and we're introducing a new job family -- the senior relationship banker -- that's focused on small businesses. And these folks have been deeply trained. They received nine days worth of intensive training, along with a bunch of follow-on training in how to service small businesses. We've gotten really focused on making sure that we have professionals in our branch network across our footprint that are equipped to service and support small businesses.

The other thing is that we're investing more and more in digital. And so, over the course of the next year, we're enhancing quite substantially our investment in digital to be able to support small businesses. I think the third thing is we've been actively participating in the Paycheck Protection Program, delivering about 12,000 loans to small businesses. We are gearing up to be supportive in the next round of funding. We're hoping that becomes available to small businesses to continue to support them during a really troubling time for many of our small business clients.

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SMB experiences

Small businesses don't look for a bunch of bells and whistles in digital experiences. They just want a really intuitive, easy to use experience. We've invested disproportionately in things like that. And so we made sure that our core digital banking experience, both our application as well as our online banking experience, is really easy and intuitive. Small businesses are worried about keeping the lights on, supporting their employees, keeping the business running and maintaining solvency -- the last thing they want to do is worry about navigating their banks' digital channels.

We've spent more time focused on the core experiences, like the ability to actually make payments. We've really focused a lot on those things as ways to make sure our small businesses have the tools that they need to help them through this time.

The senior relationship banker role

While small businesses will continue to adapt their businesses and their business models to a digital age, we don't see the need for advice, for direction, for guidance, going away anytime soon. And so what we want to do is offer both those avenues. Small businesses consistently engage with us digitally and through our digital properties and experiences, but we want to make sure with the senior relationship bankers, that small businesses have someone that they can turn to when they want to pick up the phone, when they want to talk to someone.

Future of banking

I think what banks will do in the future depends on your strategy and what your approach is. There are some folks that are switching to kind of a banking as a service model. That's not our model. We think we have lots of points of value to our firm. We have relationships with our clients that we believe very strongly in, and we've had a good reception from our clients, too.

We envision that there will be more activity in the marketplace among big tech and fintechs. Around creating partnerships that look and feel differently than banking services have been presented before. Our focus is on adapting our model so that we can continue to offer the best of digital capabilities, the best advice and guidance, the best solutions and support for our clients in many different ways.

And we can enable capabilities a whole bunch of different ways: through partnerships and through alliances. Our ability to actually be in our communities sometimes gets overlooked. When we talk about digital, when you talk about small business, the idea of being in the communities and being accessible and being involved in their businesses is really important. Small businesses are opposed to the anonymity of just a digital experience -- I think that matters, and that's going to continue to be a big part of our model. That's why we introduced the relationship bankers, that's why we're committed to being the bank that that provides personalized and individualized service. And when the time is appropriate for face to face services again for our clients, they'll have the best of digital and branch capabilities in the marketplace. We think that that combination is what's going to be required by small businesses for some time to come.

Challenger banking

We certainly see more challenger banking occurring and we'll have to see how that plays out. There's going to be a lot of competition from both bank and non bank players. Tech and non tech alike. I think increased and heightened competition, that's the new normal for this space. For us, it's less about trying to react to every single sort of emerging business that comes up, than having a clear sense of what you are trying to do, and who you are trying to be and what purpose you're trying to serve in the lifecycle of small businesses.

Managing channels

I just don't see a version of this in the intermediate future that there won't be a need for small businesses to pick up the phone and call someone, for them to walk and seek in-person advice. We're saying that we're going to be there to serve our clients in every way that they want us to be there for them. And and we've invested across the board in all those experiences.

Staying true to mission

You don't go out and evaluate every capability and then decide what your strategy is. You decide what you're trying to do, and then you develop, you evaluate all these capabilities through the lens of your strategy. And so that's what we do. Over the last week, I had like four or five conversations with different folks who are servicing small business in different ways. There are things out there that we think are better for us to access through partners, and others that we want to build ourselves. I think you can easily give yourself whiplash worrying about every single thing that comes up.

Looking ahead at 2021

It looks like there's this kind of gathering momentum in Congress to pass a next round of stimulus, including another round of Paycheck Protection Program funding. And so we are geared up and prepared to support our small business clients being able to access those funds as soon as they're available. So that's number one.

We'll continue to do that for as long as those programs are made available, however long it lasts. We're going to focus on contactless payments and electronic invoicing and electronic payment, receipt, all those things -- we want to make sure that we have support here. And we want to do that in part by continuing to invest in digital. We're investing next year as much as we ever have in small business digital and we'll continue to do that.

And I think the last thing is that we want to make sure we continue to partner, not just with fintechs and big tech, but also with community organizations and with CDFIs, to make sure that we have provided as much support through as many vehicles as we can for our small business clients.