July 24, 2019

By: Peter A. Gray, Executive Vice President & CBO
ESSA Bank & Trust

Small business banking is poised for change in the digital banking era. While we’re a believer that consumer and business customers want to be served by multiple channels, including in-person advice when it comes to major financial decisions, there’s no debate that the evolving digital channel has and will play a major role in how small businesses banking is delivered.

Over the next five years banks are expected to further consolidate branches nationwide due in part to becoming more efficient, but also due to emerging technologies and greater levels of adoption of such technologies. From emerging financial technology (fin tech) companies to huge technology investments made by the largest banks, change is coming at a rapid pace. Over the last few years, we’ve seen the trend in digital consumer banking accelerating at a much faster pace. Geographically, adoption has been strongest in the South and West -- where large numbers of millennials migrate -- and greater numbers of young people are attracted to these areas to live, work and play.

The small business market is following a similar path. Emerging technologies driven by big data, artificial intelligence, voice over IP, and more has created an environment where traditional small business offerings can be delivered online via desktop, tablet, and mobile. Most small business owners are entrepreneurial in nature and thus more likely to try and adopt emerging technologies. Historical growth in the digital space has come from the payments system, deposits, consumer lending, personalization, and overall marketing and engagement with customers.

The access to data and information in an understandable and useable format has created a digital banking environment that allows financial institutions to serve small business customers on a broader geographic basis to build scale quickly.

One of the most important considerations for any small business is accessibility to capital. Technology is allowing lenders to deliver this digitally as well. Integrating a pathway to loans, lines of credit, credit cards, payments and other products and services creates an easy-to-use digital experience that’s delivered faster to the end user and more economically to both the provider and user. These advancements create real opportunities and threats for financial service companies. Banks with strong small business customer bases will have opportunity to provide new products and service to their clients and new ways to deliver them. However, they are also the most at risk if they don’t keep up with adequate investments in technology.  The speed and instantaneousness of technology allow a customer to leave you as quickly as they come to you.

People and businesses expect more from services, especially banks. In the years to come the landscape of service providers will be varied.  From community banks to large national banks, fin tech to non-traditional players such as Amazon, all will be competing for small business in the digital era.


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