Your community financial institution has an unprecedented opportunity to grow its share of small business customers and members, particularly among millennial-run small businesses, according to new research from Apiture and Datos Insights.
Traditionally, only a small percentage of millennials have chosen community banks (6%) or credit unions (8%) as their primary institution. However, 44% of millennial-run businesses are likely to switch primary institutions in the next two years — and more than half (55%) would prefer to bank with a community bank or credit union if it offered products and capabilities similar to a large bank. An additional 35% would consider making the switch.
If your financial institution looks to expand in this key business segment, consider the following four key strategies to help you stand out.
Offer Modern Digital Banking Capabilities
Millennials grew up during the rise of the internet, social media, and smartphones, making members of this generation highly proficient with digital technologies and quick to adopt new, modern banking tools. With 95% of millennial small businesses banking online, continued investment in digital banking capabilities is essential to satisfy this segment.
Real-time payments (37%) top the list of digital capabilities millennials-run businesses would like their financial institution to invest in. Reporting is also important, with millennials looking for an investment in custom reporting options (36%) and more relevant reports (26%). More than 70% of millennial-run businesses rely on mobile, and 35% would like additional investment in this channel.
Expand Payment Options
The financial institution that owns a customer or member’s payment business is almost always its primary institution, making it essential to offer the payment options millennial-run businesses demand.
This segment uses a wide range of payment types today, including a mix of both traditional and newer options. Half of millennial-run businesses say they would switch for more payment options.
The expectation for real-time payment options is growing. More than a quarter (28%) report using real-time payments from FedNow or RTP today, and 38% would consider switching financial institutions for real-time payment capabilities. Among businesses not yet using this payment type, 37% say it is because their bank or credit union doesn’t offer it.
Integrate with Tools Delivering Greater Operational Efficiency
A large majority (81%) of millennial-run businesses look to nonbank fintechs for capabilities like faster payments, payroll, invoicing, and money management tools, suggesting that banks and credit unions are falling short in this area.
For fastest time to market, consider working with technology providers that have established fintech partnerships and integrations with vendors offering tools that streamline operations for business owners. Enabling automation of key tasks, improving cash flow insights, and creating a seamless banking experience can help you enhance customer/member satisfaction, boost efficiency, and compete with larger institutions without the high cost of in-house development.
Contrary to popular industry belief, 73% of millennial-run businesses are willing to pay for banking products and services that help their business more effectively and accurately manage its finances. Only 9% of millennials state they are not willing to pay for these products and services. As a result, your institution is likely to quickly achieve a return on its investment in this area.
Invest in AI
Though most business bankers feel AI is still in its early stages, this landscape is evolving rapidly, and your financial institution should invest in this area now to remain competitive and meet customer and member expectations. 80% of millennial-run businesses are comfortable or very comfortable with greater use of AI within banking, and they especially value its potential to impact automation, reporting, and efficiency.
Technology partners with a demonstrated commitment to innovation and leadership in AI can help your institution navigate today’s evolving environment.
As the small business landscape continues to evolve, an influx of new business owners brings significant opportunities for community institutions. To dive deeper into millennial-run business expectations and how to attract and retain these customers and members, download our report, Winning Market Share Among Millennial-Run Small Businesses.
