Why Neobanks and Fintechs Are Winning Over Small Businesses

The survival of small businesses should be a top priority for banks and other companies that serve these organizations, which are particularly vulnerable in their first few years.

Small businesses are essential to the United States economy, yet 22% will fail within the first year, and 50% don’t see five years of existence. Often because of inexperience with finances and managing a business, the odds are stacked against small business owners.

The ultimate goal for any business is to not only survive the first five years but to thrive. Everyone wants to focus on success, but you have to get past survival mode to do that.

Whether we realize it or not, we all depend on small businesses. There are over 33 million small businesses in the U.S. today, accounting for nearly half of all jobs — not an insignificant number.

This information alone should be enough to incentivize banks, fintechs, and small business platforms to serve these customers better and help them survive their rocky first few years in any way possible.

Everything in one place

Unfortunately, established institutions aren’t known to change very quickly. Traditional banks, which have been functioning pretty much the same way for decades, aren’t very agile when it comes to keeping up with the fast pace of technology and evolving customer needs.

Small businesses want more from their banks, fintechs, and vertical SaaS providers. According to 90% of small businesses surveyed, they want a full range of credit and non-credit products, more sophisticated mobile banking capabilities, real-time payment options, and robust reporting capabilities.

Small business owners want their financial institutions to check all the boxes. They want a one-stop shop. Neobanks have the foundation but need to add more accounting and reporting features that allow business owners to manage their finances in one place rather than moving information to an expensive accounting system, which adds extra work, cost, and burden for the business owner.

Neobanks are currently doing a better job than traditional banks. They’ve got the foundation right, but they definitely need to do more if they want to stay ahead.

Traditional banks generally offer retail options for individuals and consumer options for large businesses, and small businesses don’t really fit into either category. They need more than individual accounts but don’t need the services large companies require, nor do they need to pay extra for them.

Traditional banks are not addressing the issues

The small business owner is genuinely lost in this paradigm, and fintechs and neobanks are doing a better job of giving them what they want — everything in one place. They don’t have it perfect yet, but at least they’re working toward what customers need.

Traditional banks either don’t seem to get it or they’re just too big to evolve with the speed of technology, and that’s why neobanks have taken off and are thriving. Small business owners are not getting what they need from their old banks, and fintechs and vertical SaaS platforms aren’t quite hitting the mark yet.

Through Tight’s API, these organizations can offer customers the robust services they’re looking for, including invoicing, expense management, financial reporting, accounting, and income tax preparation — services that help small business owners manage one of the biggest challenges to survival: their finances.

If a small business can overcome initial obstacles to survival, they have a much better chance of reaching the thriving stage. By providing financial products and business management tools, banks, fintechs, and vertical SaaS platforms serving small businesses can help give these important customers a better chance at survival. You have to survive before you can thrive.