The findings: Twenty-three percent of US small and medium-sized businesses (SMBs) currently use local banks or credit unions, and 15% say they’re “highly likely” to switch to a local financial institution (FI) in the next few years, per a September 2024 i2c and PYMNTS Intelligence survey.
Community banks and credit unions can take advantage of the SMB growth opportunity by providing more of what these businesses are looking for.
Why the switch? Key motivators that SMBs cite for finding a new provider include:
- More personalized banking services
- Closer proximity, which means easier access to services
These factors may weigh even more heavily for SMBs in rural areas, who can be more isolated from national branches than their urban counterparts.
- 49% of rural SMBs bank with a local FI, while just 25% choose national banks.
What’s preventing some from choosing local FIs? According to the study:
- Some SMBs turn to national banks for better loan rates, advanced product offerings, and superior digital services.
- Local banks and credit unions have smaller branch and ATM networks.
- Local FIs may simply suffer from lower brand awareness.
Our take: A few big banks are making strides in offering the types of digital features SMBs have been asking for, but none currently offers it all.
- More advanced cash management tools and better integration with third-party apps are uniquely important to these companies.
Smaller FIs looking to win SMB business should prioritize offering these features and develop targeted marketing campaigns around them.
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