Emerging partnerships are challenging traditional market share for SMB deposits and loans

Tech and ecommerce providers are making clever financial alliances to enable SMBs with easier, smarter, and faster financial management that can accelerate deposit and loan growth. Financial firms that fall short of new industry norms will experience challenges in their business growth, especially with SMB customers.

Three SMB tech developments stand out as benchmarks for the financial services industry. When reviewing each example, consider the overall strategies your company is taking to address this competition and whether you should re-evaluate innovation priorities across business, marketing, operations, and IT teams to meet rising SMB expectations.

Intuit QuickBooks Cash

Intuit, a leader in SMB accounting solutions, announced the launch of a new business bank account, QuickBooks Cash. Intuit partnered with Green Dot Bank to provide its millions of Quickbooks Online customers with the capability to open and manage an FDIC-insured bank account fully within the software.

QuickBooks Cash hosts many benefits such as online account creation in five minutes or less, free accounts with no minimums, and high-yield interest rates; however, there are three very notable benefits Intuit provides that have the potential to shift SMB expectations:

Instant invoice deposit: The Green Dot partnership enables Intuit QuickBooks Cash customers – upon passing a security check – to receive payments instantly when invoices are paid through QuickBooks Payments. SMBs typically need to wait 3-4 business days for payments to process into a bank account and an additional 2-3 days thereafter for funds to be accessible. Now, it’s instant—and it’s 24/7 instant. Whether the invoice is paid outside business hours or during the weekend, funds can be accessible the moment the payment is made.

Virtual envelopes: QuickBooks Cash allows SMB owners to set up virtual envelopes to partition earmarked money while depositing it into the account and QuickBooks system. Virtual envelopes are inaccessible to debit card spend and can be separated as if they were contingency cash funds kept hidden away for safekeeping. Customers can access virtual envelopes and move them instantly when needed.

AI-powered cash flow analysis: QuickBooks has extensive AI capabilities, for which the addition of the deposit account will allow Intuit to offer a more sophisticated analysis of each company’s financial condition, including automated advice based on data that is both external and internal to the company. Cash Flow Planner, in tandem with QuickBooks Cash, can evaluate potential cash flow for the next three months and provide proactive alerts and recommendations if potential liquidity challenges are on the horizon.

The Intuit/Green Dot partnership enables SMBs to simplify day-to-day operations by combining financial accounting and management within QuickBooks. Funds can be transferred directly with the QuickBooks Cash account rather than logging into banking portals to make the transfers. QuickBooks Cash can provide a more convenient, seamless experience to SMBs and will challenge deposit growth at traditional banks and credit unions.

Questions for banks to consider:

What are your company’s current capabilities in delivering smarter SMB financial insights?
How do your offerings compare to QuickBooks Cash capabilities?
Are any build, buy, or partnerships under evaluation that should be accelerated based on the QuickBooks Cash launch?

Shopify Balance

Another technology / banking alliance has emerged to enable SMBs to plan and transact in a single offering: Shopify Balance, in partnership with Affirm and an undisclosed banking partner. SMBs have been a significant contributor to Shopify’s major growth during the pandemic, as various businesses launch ecommerce websites. Shopify doubled revenue and achieved a $117 billion valuation as of early September 2020. Shopify Balance is the next step in broadening its support of SMB business operations.

There are ample benefits to Shopify’s Balance platform, such as tracking cash flow and paying bills directly. There are a few standout benefits to Shopify’s Balance platform beyond the already impressive benefits of the seamless integration between selling and banking:

Dedicated business account: About 40% of all Shopify merchants use their own personal checking account and credit cards for business transactions. This platform allows merchants to draw the line between their personal and professional lives, creating more easily accessible business tracking for expenses and sales growth.

Rewards program: Shopify is planning to offer a cashback rewards program to Shopify Balance customers. They’ll receive discounts on business-related purchases such as shipping and marketing to entice platform users. This could be an excellent cost-saving measure for ecommerce shops.

Flexible financing: Shopify is introducing Buy Now, Pay Later (BNPL), powered by Affirm. Merchants on Shopify can utilize the built-in partnership with Affirm to broaden payment options instead of having to directly contract with a BNPL provider. Customers of Shopify merchants can divide up payments for goods into four equal bi-weekly, interest fee payments. The full value of the purchase, excluding Affirm fees, is provided to the merchant and Affirm manages payment collection.

Shopify has reacted to shifting market dynamics and now offers customer-centric features to both the vendors on their platforms as well as their customers’ customers. Banks can anticipate another substantial competitor in growing deposits.

Questions for banks to consider:

What added value options and/or incentives are in place for someone to manage an SMB account with your company?
To what extent does your company utilize an SMB rewards program as a benefit?
What’s your firm’s current outlook and role in the “Buy Now, Pay Later” market?

Amazon Lending

Although Amazon has had a lending practice for a number of years for its merchants, Amazon recently formed a partnership with Marcus by Goldman Sachs to provide SMBs with credit lines of up to $1 million. Amazon had been exploring a small business lending exchange of which Marcus was in consideration to be one of its participants; however, the companies agreed to form an exclusive partnership.

Amazon will share merchant data with Goldman Sachs upon a seller’s consent, and Goldman Sachs will use this data to help determine who should be approved for a Marcus Business Line of Credit. The line of credit is offered at a competitive, fixed rate and candidates will receive invitations to formally apply based on consent and data analysis.

Key aspects of the partnership:

Privacy concerns noted: Amazon made it clear that seller data will only be given to Goldman if sellers consent to it. Additionally, Goldman will only utilize the data for the loan-qualification process.

Expedited, digital loans: Given that the loans are enabled on a fully digital platform, loans will be distributed more quickly than traditional methods and on an easier-to-use platform.

Personalized, flexible options: Funds can be used for online and offline reasons, such as staffing, operations, inventory, product development, or expanding their marketing efforts.

The Amazon/Goldman Sachs partnership creates another potential competitor for business loans given its ease of access and broad remit of how the credit line can be utilized.

Questions for banks to consider:

What’s the speed and ease of access in which SMBs can obtain credit access from your company?
What percentage of your SMB loans go beyond commercial real estate and support business investment?
What’s the current state of your pipeline for loan and credit access?

It’s absolutely critical for financial institutions to deliver customer-centric experiences, especially when it comes to SMB clients. SMBs’ banking expectations continue to rise as tech companies such as Amazon, Shopify, and Intuit further expand into the financial sector. Banks must consider how they can offer more services, incentives, and functionality to SMBs.

Check out our other posts in this series, Benchmarking Bank Account Sign Up Experience and Navigating the Evolution of the Fee Free Business Model.

New SMB fintech alliances