Home Banking Winning Small Business: How Banks Can Tap Automation to Drive SMB Customer Growth

Winning Small Business: How Banks Can Tap Automation to Drive SMB Customer Growth

by internationalbanker

By Gerrard Schmid, President and Chief Executive Officer, Diebold Nixdorf




As banks face growing competition for their share of the wallet from challengers and international banks alike, the ability to win and retain small-and-medium-business customers may be the make or break factor in a bank’s overall, long-term business success. Why? Despite the rise of online behemoths such as Amazon and Google, small and medium businesses (SMBs) still make up the majority of businesses worldwide and are increasingly the most important customer segment for banks. In the United Kingdom alone, banks could be capturing an additional £1.6 billion in fees through value-added services. Can banks really afford to leave this level of business opportunity on the table?

The answer is no. So what can banks do? Technology is increasingly the answer. Even as both banks and businesses undergo massive revolutions, and the in-store or in-branch experience evolves, there is still a gap—a gap that is substantially larger than most of us consumers appreciate. Technology is the conduit between financial institutions and SMBs, to service and retain SMBs. But even more importantly, technology is and will increasingly be thecompetitive differentiator in attracting and capturing more deposits. Accenture stated in a recent report, “[Banks] need to invest in technology platforms to provide services that will help SMBs to manage their operations more effectively (as well as having the flexibility and agility they need to continuously fine-tune and reinvent services to meet fast-changing demands).” [1]

Banks must absolutely devote resources and effort to nurture the SMB relationship, particularly in serving merchants that still do a significant amount of business in cash. By leveraging automation-driven solutions, banks can provide the type of value-added services that SMBs are demanding.

The SMB impact on a bank’s bottom line

The SMB market opportunity is one that banks simply cannot afford to ignore any longer. SMBs represent one-fifth of global banking revenues, generating around $850 billion of annual revenue for banks, with no signs of slowing down. [2] For example, in the United States, the small-business segment represented an estimated revenue pool of around $90 billion to $100 billion across lending and deposits. [3]

This segment is growing and represents a significant number of businesses around the globe. 99.9 percent of all US businesses that are classified as SMBs have fewer than 500 employees, and as of 2018, there were 30.2 million small businesses in the US. In Europe, they also make up more than 99 percent of businesses and count for two-thirds of all employment. In Asia, more than 96 percent of businesses are SMBs, which provide two out of three of the region’s private-sector jobs. And in Africa, they make up more than 90 percent of businesses. The numbers don’t lie–and it’s clear that SMBs would be willing to pay additional fees for more services.

SMBs are also among a bank’s most frequent and engaged customers. For example, the 2019 U.S. Merchant Automation survey from Diebold Nixdorf revealed the following insights:

  • 55 percent of SMB customers use branch tellers and/or night deposit services at least twice a week;
  • 59 percent use an automated teller machine (ATM) two or more times a week;
  • 72 percent use their bank debit card two or more times a week;
  • 73 percent use web and/or mobile banking at least twice a week.

Due to the level of service they require and the frequency with which they engage in banking activities, SMB customers naturally develop a deeper and more complex relationship with their banks. Add to the equation the fact that more than half of them also do their personal banking with the same institution that handles their business needs, and it becomes clear why banks should focus on how to best serve this valuable customer segment.

For many SMB merchants, cash is still king.

When it comes to addressing SMBs’ banking needs, it is important to understand and respect their ongoing relationship with cash. Even as card- and mobile-payment options increase, cash is still one of the largest payment types. Nearly half of all payments under $10 and 42 percent of payments less than $25 were made using cash. [4] In 17 of 21 European countries, cash represented more than 50 percent of all point-of-sale transactions. [5] Among APAC (Asia-Pacific) countries, 57 percent of consumers named cash as the payment method they used most often. [6]

Cash also offers SMBs cost savings relative to other payment methods. SMB customers’ transactions are often labor-intensive and cash-heavy—and at some banks, they account for up to 70 percent of all branch-based cash deposits. Knowing that SMBs rely upon banks to manage their cash, coupled with the time constraints they face on a daily basis managing their businesses, banks need to invest in self-service technology and utilize automation as a way to make the deposit process faster and easier.

Raising the bar with automation

According to our aforementioned U.S. Merchant Automation survey, only 13 percent of SMB respondents polled said that their bank branch was meeting all of their needs. In particular, the burden of processing cash and coins was cited as an obstacle to providing the efficient, comprehensive service that SMBs desire—and deserve—from their banks. Banks can drastically improve this by changing the way their branches are set up to alleviate these points of friction. Automation technology will speed up the deposit process, saving precious time. SMBs are looking for more direct support, so creating services such as dedicated lines or automated self-service technology for this important group will improve customer retention, serve these customers faster and attract new clientele. In fact, according to our research, 36 percent of SMBs would like to see more self-service devices designed for business customers’ needs.

Self-service deposit technology is one solution that banks can implement to improve their SMB banking offerings: ATMs that allow business customers to deposit cash and coins outside of regular branch hours can help alleviate these customers’ frustrations around losing time standing in line, as well as eliminate the need to sacrifice time out of their own business hours to visit the branch. In addition, ATMs that support cash recycling offer banks the added convenience of using businesses’ deposits to replenish directly the cash available for ATM withdrawals by other customers. This is an example of automation that creates a win-win outcome.

We saw how powerful this can be through our partnership with Automatia, which operates and develops the nationwide Finnish pooled and shared ATM and deposit ATM networks. By utilizing the “ATM as the branch” approach, both private and SMB customers were able to access flexible financial services in convenient locations at times that suited them. It is now estimated that up to 90 percent of all cash transactions in Finland have been made through Automatia’s network of ATMs. Being able to process these transactions in a cost-effective manner has ensured that customers continue to have access to ATM services, while Automatia has benefitted from the improved cost-efficiency in cash services. This is just one example of how impactful these solutions can be on the bank’s bottom line.

It is important to remember that SMBs still value the option to interact with a human teller as needed and to engage with a trusted bank representative for more complex transactions and other banking needs. By enabling customers to use ATMs for simple deposits, automated self-service technology can free staff members to focus their time and energy on relationship-building and other tasks for which customers prefer human interaction.

Small and medium-sized businesses make up a critical segment of banking customers. Banks need to make serving SMBs’ needs a high priority if they want to compete effectively in today’s financial-services landscape. Understanding SMB pain points and preferences, particularly around cash transactions, reveals opportunities for banks to better meet their business-owner customers’ expectations. Finally, leveraging automation to improve the customer journey for these SMBs can empower banks to strengthen and grow these valuable relationships—in ways that may determine a bank’s ultimate success for decades to come.

Gerrard B. Schmid is President and Chief Executive Officer of Diebold Nixdorf, a position he has held since February 2018. Prior to joining Diebold Nixdorf, he served as Chief Executive Officer of D+H Corporation, and prior to D+H, he managed a $3-billion retail-banking business at Lloyds TSB in the United Kingdom. From 2001 to 2005, he was Executive Vice President and Chief Operating Officer for retail banking at Canadian Imperial Bank of Commerce (CIBC).


[1] Accenture – SME Banking 2020

[2] McKinsey & Company – How banks can use ecosystems to win in the SME market, June 2019

[3] McKinsey & Company – Reinventing small and medium-size business banking in the US, April 2017

[4] Federal Reserve Bank of San Francisco – Under $10: Nearly Half of Consumers Pay with Cash, July 2019

[5] European Central Bank – The use of cash by households in the euro area, November 2017

[6] PayPal – Digital Payments: Thinking beyond Transactions. APAC Research Report

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