How Banks can Improve Their SMB Acquisition Rate Using a Real-time CDP and AI-driven Technology

Small and Medium-sized Businesses (SMBs) represent a significant growth opportunity for banks.

There are 33.2 million small businesses in the U.S.–accounting for 99.9% of all U.S. businesses.

Small businesses are credited with just under two-thirds (63%) of the new jobs created from 1995 to 2021. 

The top 25 banks in the U.S. now account for 84% of primary banking relationships with SMBs. Unfortunately, community and regional financial institutions have seen their share of primary business banking relationships shrink from 28% in 2018 to 16% in 2022 – an astounding 43% drop.

Banks, however, face significant challenges in acquiring and retaining small and medium-sized business (SMB) customers. With fintech companies increasingly encroaching on their territory, traditional banks must leverage technology to stay competitive. Let’s look at how banks can enhance their SMB acquisition rates by embracing advanced technological solutions.

The Role of Customer Data Platforms with AI/ML Capabilities

A customer data platform (CDP) that incorporates Artificial Intelligence (AI) and Machine Learning (ML) capabilities is essential for modern banks. These platforms aggregate and analyze vast amounts of customer data from various sources, providing a 360-degree view of potential and existing clients. AI and ML algorithms can identify patterns and trends, enabling banks to understand SMBs’ behaviors, preferences, and unique needs more accurately.

A CDP can analyze transaction data to identify SMBs that are experiencing rapid growth and might require additional banking services, such as credit lines or investment advice. 

Identifying and Acquiring New SMB Customers with Intelligent Prospecting

Intelligent prospecting tools powered by AI can revolutionize how banks identify and acquire new SMB customers. These tools can scan millions of data points, such as industry trends, market conditions, and business performance metrics, to pinpoint SMBs that are likely to need banking services.

By utilizing predictive analytics, banks can target startups in emerging sectors that are likely to need financial support, thereby proactively reaching out with tailored solutions.

Contextual Product Recommendations

Contextual product recommendations involve offering the right product to the right customer at the right time. With AI-driven insights, banks can deliver personalized banking solutions based on the specific circumstances and needs of each SMB.

An AI system can suggest a tailored loan package to an SMB planning to expand its operations, based on the analysis of its financial health and market conditions.

Discovering SMB Businesses that Fit

Banks need to focus on acquiring SMBs that align well with their services and strategic goals. AI tools can assess compatibility by analyzing an SMB’s business model, financial status, and growth potential.

Using AI, a bank can determine that a tech startup with a solid growth trajectory and a need for sophisticated payment solutions would be an ideal customer, thereby prioritizing acquisition efforts on such businesses.

Statistics on Banks and SMB Acquisition

Recent statistics underscore the urgency for banks to improve their SMB acquisition strategies. According to a 2023 report, 60% of SMBs are willing to switch banks for better technology and services. Fintech companies are capturing a significant share of the SMB market, with a 35% increase in SMB customer base year-over-year compared to banks' 10% growth.

Fintechs Outpacing Banks in SMB Services

Fintech companies are often seen as more agile and technologically advanced compared to traditional banks. They offer user-friendly platforms, quicker loan approvals, and innovative financial products tailored to SMBs, which significantly enhances their appeal.

Fintechs like Square and PayPal have revolutionized payment processing for SMBs, offering seamless integration and analytics tools that banks have struggled to match.

Leveraging TCS Customer Intelligence & Insights™

Tata Consultancy Services (TCS) offers a robust solution with its Customer Intelligence & Insights™ platform. This platform leverages advanced analytics, AI, and ML to help banks improve their SMB acquisition rates by:

• Providing Deep Insights: TCS Customer Intelligence & Insights™ aggregates and analyzes data to provide actionable insights about SMBs' financial needs and behaviors.
• Enhancing Customer Engagement: By understanding SMBs’ specific needs, banks can deliver highly personalized experiences and solutions.
• Improving Operational Efficiency: The platform streamlines data processing and customer analysis, allowing banks to focus on strategic growth initiatives.

In Conclusion

To stay competitive in the SMB market, banks must embrace advanced technological solutions such as AI, ML, and intelligent data platforms. By doing so, they can enhance their customer acquisition strategies, offer more personalized services, and ultimately retain a larger share of the SMB market. Partnering with innovative solutions like TCS Customer Intelligence & Insights™ can provide banks with the necessary tools to achieve these goals, ensuring they remain relevant and competitive in the face of growing fintech competition.

Schedule a demo (Email: david.ochi@tcs.com) with TCS to see how TCS Customer Intelligence & Insights™ can help your bank acquire and retain SMB customers, build lasting loyalty, and increase customer lifetime value.

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