As part of our ongoing efforts to make sense of what the hell is going on in the worlds of our clients (and ourselves), LevLane commissioned some research on what small businesses were looking for from their banking partners (you can read more about it here). A couple of things got me thinking.
One had to do with the statistic that 71% of the respondents felt there was a growing gap between what banks think they need to provide to small businesses and what they were actually providing.
Now, of course, people always think service is worse now than it was. But even with that caveat, the word “gap” is intriguing. It implies a dissonance of expectations. That the banks think what they’re offering is satisfactory and that their customers think it’s not.
One explanation is that this could just be a matter of degree. With more things being automated, with the rise of chatbots and the constant drumbeat of cost-cutting, small businesses may feel that the level of attention and thoroughness and service has diminished – “you’re no longer holding my hand all the way through the transaction, just halfway” for example. Perhaps. I think it might be something else.
Businesses small and large have changed in fundamental ways since Covid. The idea of hybrid work, for example, was a wild pipe dream on the outer fringes of what employers, at least in the US, were seriously considering offering their employees. Now, it’s literally the compromise to employees who have been working remotely for the past couple of years (which wasn’t on ANYONE’s radar in 2018, by the way) and don’t want to come in at all. How is that affecting small businesses, what they expense, what they have to spend money on, what they can write off?
Or how about something as apparently innocuous as curbside pickup? Once available at the kinds of shops that only Thurston Howell III shopped at, now it’s standard operating procedure for every brick-and-mortar from public libraries to Walmart and Target. Does this require different kinds of employees, different training, different parking lots and building configurations for storing the goods to be picked up? And speaking of “picked up” – what about restaurants, who saw their business crater until they figured out that they could just about replace their dine-in revenue with delivery and takeout – which they are not going to give up now that people are sitting down in their restaurants again.
I’m certain that every industry can point to similarly significant disruptions and expenditures that they incurred – and are continuing to incur – because the nature of their business (that is, the way people like you and me want to buy goods and services from them) has changed.
So if their businesses have irrevocably changed, isn’t it entirely possible that their banking needs to meet those fundamental changes have changed just as radically too?
But have banks acknowledged that? Have they adapted? One thinks that if they had, 71% of respondents probably wouldn’t be complaining of a growing gap between what they need and what they’re getting.
Businesses tax burdens might have shifted, their revenue streams might have changed, their personnel and the actual jobs they hold may be profoundly different than they were before Covid – all of which may have significantly changed their financial exposure. Have their banks adapted to any of these things – and more? Have they sat down with their clients and done an assessment, compared their needs now to 3 years ago? And not just a “so, how are things different?” but an informed comparison, one that helps the business think deeply and objectively about what’s different now and what help they need? So they can actually do something about it, and not just have this vague sense that, somehow, there’s a gap between what they need and what their bank is giving them.
And to be clear, I am not blaming the banking industry for this. There’s a significant element of “boiling the frog” at play. Businesses responded to the disruption of Covid on the fly, in real time, manufacturing stop-gap solutions, some of which became permanent, some of which did not (did any of us really think that sidewalk dining in December under reconstructed tents was going to last no matter how many space heaters they pointed at us?)
Businesses and their solutions evolved over time. Which is why this is a great time for banks to get on the front foot and make that assessment. To sit with their small business clients and say “okay, here are the services we were providing to your business before Covid. And here are the needs your business had before Covid. What’s missing from the first list now? What’s missing from the second?”
And if companies feel that their businesses have changed on some very fundamental levels, then why wouldn’t they assume that their bank’s business has changed on similarly fundamental levels? Ways that might not be to their advantage. And this is the second concern that statistic raises. Are they still as solvent as they were? Is their cash flow still strong? Are they over-exposed in ways they never would have been had Covid not happened? Has digital and online banking become so much more important now and is their bank robust in those areas?
And we’re not even talking about other non-Covid events that may be on their minds – like say, the impact of high interest rates or bank closures. We’re only talking about how businesses function differently post Covid and how that has impacted how banks do business with those businesses. (of course, layering those other things on top certainly don’t lessen concerns).
That’s probably why more than half of them said that “more help” from their bank would make them feel like it was a “trusted partner”. But hold on.
If small businesses businesses have changed because of Covid (which we as the customers of those businesses have definitely seen to be true) and if small businesses feel a “growing gap” between what they’re getting and what they expect from their banks – a gap that would be closed significantly if they offered services that better align with this new world order – then how can small businesses really trust that their banks are helping them prepare for, or prepare against, the next big Covid-like thing that’s coming – whatever that may be?
Or said another way, if their banks haven’t adequately responded to what is in these small businesses rear view mirror, how can they believe they’ll help them with what’s coming down the road at them? What’s coming down the road that they can’t see because they’re too busy dealing with the day-to-day of, you know, running their businesses.
Curiously, this is the real opportunity for banks that this survey identifies. The opportunity to be the forward-thinking economic resource for their customers. A resource that can aggregate observations from across the industries of their many other clients to give a local perspective that complements the national perspective on threats and opportunities that they can get from others. Which can in turn, become proprietary observations and information that will help them attract more clients who will find it more valuable than ever in a post-Covid world.
The banks that start doing this now will be able to close that gap more effectively and faster and earn the trust of their clients sooner than their competitors. Which is a competitive advantage that may make all the difference in the coming years.
For them and their clients.