New report reveals that community banks and credit unions can increase SMB market share by enhancing digital platforms and offering personalized services.

i2c Inc. and PYMNTS Report: Community Banks & Credit Unions Poised to Attract More SMBs

Aline Riemenschneider
Senior Director of Brand and Communications at i2c
media@i2cinc.com

i2c Inc., a leading provider of banking and payments technology, released a new report in collaboration with PYMNTS titled SMB Growth Report: Community Banks Appeal to Small Businesses, revealing a significant opportunity for local banks and credit unions (CUs) to attract more small to medium-sized businesses (SMBs).

The report reveals the potential for local banks and credit unions to grow their SMB customer base by addressing their growing demand for digital and personalized banking. According to i2c, as these financial institutions focus on adapting their services, they stand to become increasingly attractive choices for small to medium-sized businesses seeking modern, relationship-based banking services.

“With the right technology solutions, these institutions can overcome traditional limitations by enhancing their digital platforms and offering more personalized services, delivering the competitive, customer-focused experiences that SMBs increasingly expect from their financial partners,” said Al Taylor, senior vice president, FI solutions at i2c Inc.

The report, based on data collected from more than 500 SMBs across the United States, highlights several key findings:

• Strong Demand for Local Banks: National banks dominate the SMB market, with 58% of businesses opting for them as their primary financial institution. However, 23% of SMBs already use a local bank or CU, particularly businesses in rural areas or with less than $150,000 in revenue. Local banks are valued for their personalized service, while national banks are preferred for their better loan rates and advanced product offerings.
• SMBs are Open to Switching to a Local Bank: Approximately 15% of SMBs are highly likely to switch to a local bank or CU within the next five years, with two in ten smaller SMBs considering the move. Key motivators for considering a new provider include better customer service, more personalized banking experiences, and the local nature of these institutions.
• Community Involvement is Highly Valued: Local banks and CUs stand out for their strong community involvement, a factor that resonates with SMBs looking for a more personal connection with their financial institutions. However, these smaller banks are at a disadvantage when it comes to digital offerings, an area they must improve to compete effectively with larger institutions.
• National Banks Have the Edge in Digital Services: While local banks excel in customer service and community engagement, they lag behind national banks in offering advanced financial tools and digital services. Geographic limitations also pose a challenge, with SMBs citing a lack of branches and ATMs as a drawback. Meanwhile, national banks face criticism for high fees and a lack of personalized banking solutions.
• Personalized Services are a Key Driver: SMBs, particularly those generating higher revenues, are increasingly looking for banks that can offer customized solutions tailored to their specific needs. Offering personalized services will be crucial for smaller financial institutions aiming to attract larger businesses.

"Local banks and credit unions are well positioned to capture a larger share of the SMB market, especially if they can address the current gaps in digital banking and geographic reach," said Taylor. "Personalized banking experiences and community-focused approaches are significant differentiators for these smaller institutions."

As SMBs continue to evolve in their financial needs, the ability of smaller banks and CUs to offer both high-touch customer service and modern digital capabilities will be key to their future success. The report underscores the importance of investing in digital infrastructure while maintaining the personal, community-driven approach that makes local banks attractive to many small businesses.

Find the full report here.

About i2c Inc.

i2c is a global provider of highly configurable banking and payment solutions. Using proprietary building block technology, clients can easily, quickly and cost-effectively create, launch and manage a comprehensive set of solutions for banking, credit, debit and prepaid programs. i2c delivers unparalleled flexibility, agility, security and reliability from a global, unified banking and payments platform. Founded in 2001 and headquartered in Silicon Valley, its next-generation technology supports millions of users in more than 200 countries/territories and across all time zones. For more information, visit i2cinc.com and follow us on LinkedIn at @i2cinc.

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