Pollinate interviews with nearly 1,000 banking leaders around the world have revealed that the race for SMB customer primacy between traditional banks and digital-first disruptors has reached a critical inflection point.

As the SMB and payments landscape evolves rapidly, banks and fintechs alike have recognised the scale of the small business opportunity and the value of using data and digital experiences to profitably serve them.

There is a common desire among traditional banks and disruptors to directly serve SMBs with branded and third-party products through a single hub.

However, as Pollinate’s new guide ‘SMB Banking’s Inflection Point’ reveals, traditional banks have different views to challenger banks and neobanks on their role and purpose when serving SMB markets.

For example, while digitally-focused neobanks prioritise engagement and relationship building, traditional banks rank product focused factors and operational issues more highly.

As a result, while 65% of traditional banks say a key strength is data, many admit to losing business because they aren’t turning it into insights for SMB customers.

Data is the key battleground of the market inflection; it enables traditional banks to engage more closely with SMB customers, while driving development of merchant-focused products to grow market share, strengthen relationships and enhance lifetime customer value.

This will secure revenue growth in a key market for banks; SMBs represent one-fifth (about $850 billion) of annual global banking revenues, a figure that is expected to grow by 7-10% annually over the next five years.

To succeed and win in the race for customer primacy, the guide identifies three key areas of focus for traditional banks:

  • Remove the causes of SMB attrition – traditional banks need to build on their advantages in product and distribution by delivering digital experiences at scale.
  • Focus investment for maximum impact – owning customer data (particularly both issuing and acquiring) is the foundation of stronger SMB relationships and new products development.
  • Rethink “supplier” relationships – extend relationships with FinTechs to collaborate broadly, from initial strategy to new product development and launches.

Traditional banks have the assets required to become the single hub at the centre of the SMB ecosystem that helps merchants manage and grow their businesses.

Future success will be driven through smart partnerships and leveraging strategic alliances to maximise the advantages of scale, infrastructure and data that will allow banks to compete, and win, against digital disruptors.