Q: What are the financial services needs of the small/mid-size business market, and how can banks meet these needs?
Peter deSilva, UMB Financial: In the area of treasury management and payments, there's a big transition going on from cash and checks to electronic and cards. The small/mid-size companies need help in that transition in order to save money and be more efficient in their operations, both in terms of collecting receivables and accelerating their availability on their deposits. Tools and technologies in the treasury management and payments space to help accelerate that include things such as remote deposit capabilities to truncate the checks, commercial credit and debit card products, and doing receivables and payables management for them.
Alenka Grealish, Celent: Small to mid-size businesses hunger for simplified financial management and credit-related processes. Financial management at most small businesses typically involves more paper than electronic-based tools. Banks can help small businesses effectively navigate their cash management and payment needs through the online channel and supplement functionality offered by accounting software.
Q: What challenges do banks face in serving the small to mid-size business segment?
DeSilva, UMB: These are organizations that have done things the same way for a long time. Inertia is one of the biggest challenges to overcome, and the way to overcome inertia is by giving them a compelling reason to change, which is to give them compelling products and services that simplify and streamline. As we move from a currency- and check-based world to an electronic world, we can accelerate things and streamline -- if we can give them receivables and payables information more quickly online and sorted the way they want, for example. These businesses are not big enough to do it themselves. They need a partner that can bring packaged solutions to them.
Margaret Bradshaw, Comerica Bank: In a rapidly changing competitive environemnt, we face an ongoing challenge to upgrade our technology in a way that can adapt to customers' changing needs. The more that we can provide tools to improve our customers' business efficiency and a one-stop-shopping approach to meet a wide variety of their banking needs, we will continue to be successful in the marketplace.
Grealish, Celent: The greatest challenge banks have faced in serving small business is banks' lack of prioritizing this segment. Successful banks have effectively generated an alchemy of organizational prioritization and effective pairing of high-touch with high-tech. Historically, banks have tended to have a low-touch approach to handling small businesses, placing it second to retail banking. Banks that have achieved the high-touch have a dedicated small business banking group with adequate financial and human resources, a compensation structure that encourages cross-selling not only with the small business group but also with the consumer banking group. Banks that have realized effective high-tech have focused heavily on usability -- simple but not stupid features and functionality.
Q: What kinds of systems and solutions are necessary to capture market share in this segment?
DeSilva, UMB: Treasury management is essential. It used to be that people would make a credit decision and then use the same bank for treasury management and credit. More and more, businesses are willing to separate the credit decision from the treasury management decision based upon capabilities to do things better/faster/cheaper. This doesn't mean that the credit banks aren't still getting the treasury management -- indeed, they are. But they have to be up to date with their treasury management products and services or they risk losing that piece to someone who's more sophisticated.
Lending at some level is a commodity. Differentiation is in the technology and the relationship. Small and mid-size companies want to be served by people and not computers. We have to find ways to help the company perform better or we don't bring value to these companies.