How Open Finance Fuels Innovation and the Democratization of Data
May 3, 2022 | 2 min read
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Small businesses too often feel misunderstood by their bank. Specifically, only 37% of small business customers say they feel their bank appreciates their business and only 32% say they feel their bank understands their business, according to a J.D. Powers survey.
It’s somewhat surprising, considering that business banking generates the majority of revenue, including interest income, at many financial institutions. In other words, businesses keep banks in business, but they still feel unappreciated and misunderstood.
This pain is particularly acute for small business clients, which typically run short on the time and resources needed to dynamically track cash flow. Offerings within financial institutions have historically been focused on consumers (which are high in volume but low in revenue generation) and commercial (which are low in volume but high in revenue generation), leaving the vast number of small and medium-sized businesses (SMB) without the services they need to better manage and grow their businesses.
Part of the problem is that it’s simply difficult for banks to get the right insight into their business clients — especially when it comes to providing a global view for both the business owner and the bank. Because of this, SMBs often turn to external providers who offer the services they need to more efficiently and effectively manage the cash flows of their business (collections and payments, including payroll) and typically at a higher cost than a bank might offer.
When it comes to the SMB experience at financial institutions, transactional data is typically disorganized, confusing, and nearly impossible to analyze and interpret.
The effect is that small business owners eventually pay more than they otherwise would and financial institutions lose non-interest income opportunities. It doesn’t help that, according to Accenture, 42% of small and medium-sized businesses now say they believe they can get better service from an alternative provider. It’s no wonder that 35% of SMB customers say they’re willing to leave their current bank provider for a better digital banking offering, according to Barlow Research.
Without the ability to accurately organize and analyze SMB customers’ spending, saving, and borrowing behaviors financial institutions could be missing out on growth opportunities — not to mention lost cross-sale opportunities — as these customers look for other solutions.
First things first: Financial institutions must understand that their business clients are hungry for digital-centric services. This is particularly true after 2020, which saw the percentage of business customers defined as digital-centric rise from 33% to 45% and the percentage who said they’d visited a branch in the last three months 71% to 59% drop from from 2019 to 2020. Digital resources were already in high demand. Now, after 2020, they’re essential.
This is where the MX Business Data Suite comes in. By creating visibility into the small to medium-sized business space, financials can dynamically and accurately understand who they are doing business with and how these businesses are behaving to better meet their needs.
The Business Data Suite enables financial institutions to:
In a year where small and medium-sized businesses experienced more pain than they have in decades, it’s more critical than ever to give them the guidance and support they need — backed by true, data-driven understanding.
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