Though it is clear that things are looking up for Small Businesses needing better banking partners and more attention to their needs, the banks themselves run the risk of leaving money on the table. Using predictive analytics to grow the portfolio and cross-sell additional product rather than just monitor risk is one way for banks to grow their share of the Small Business wallet.

Banks Hear the Cry of Small Businesses

I have spent the last few days at American Banker’s Small Business Banking Conference in Fort Worth, Texas. Though I was not in attendance last year, the people around me keep remarking that things are heating up in Small Business (SB) Banking, and that this year’s conference has all the energy, hope and focus that played second fiddle to frustration and confusion last year. It is clear that after everything the banks have been through in the last few years during this wide-spread recession, they are starting to pay attention to their small business customers. They want to get smart about serving these customers effectively and growing their share of the small business customer’s wallet.  

How are they thinking about doing this? Some are focused on the experience – and rolling out systems, processes and training/coaching to ensure that the customer receives a consistent and high-quality experience with all of its business bankers. Others are taking another look at their products – especially lending and online banking – and finding ways to make them better. Finally, many banks are looking at the customers themselves and realizing how diverse and dynamic they are, looking at leveraging segmentation and analytic techniques to understand the behaviors of their small business customers and tailor their offering to them. Bingo.

Moving From Defense to Offense

Most banks have a solid analytics platform. Even if they outsource part of the process, and even if mistakes have been made here in the past, banks believe deeply in the concept of using data on a customer to assess their risk. They understand that there are clues in a customer’s data that predict their ability to pay back their debts and use these analytics to make decisions on loans.

Unfortunately, while the banks have grown this analytic capability, they still have yet to realize its true potential. The focus is still on managing the loan portfolio – identifying when to pare back credit or offer more – instead of looking for opportunities to cross-sell additional products and services to the customer. The good news is, they’re half-way there. “Early warning systems” are the data-driven analytics that guide the management of a loan portfolio. These systems, which involve taking internal bank data on their customers as well as external data on these companies, to create behavioral models and risk scores, are the foundation of a broader analytics platform. What if that same data – internal and external – was used to look for places to sell additional products (e.g., cash management, foreign exchange, online banking, etc.) instead of just loans? The same process used to assess risk can be used as sales intelligence to provide front-line business bankers with the insight they need to offer products to their customers when they need them most.

It is clear that the best banks are doing just this. They are looking for more data by which to segment their customers for better targeting. They are rolling out training, processes and CRM systems to improve the experience between Small Businesses and their business bankers. The next step is to turn their early warning systems around and leverage them in an offensive move rather than just a defensive one. The same risk assessment and portfolio management system can be used as sales intelligence prospecting to new customers and cross-selling new products to existing ones. The successful banks will do just this, and find this is one of the ways they capture a greater share of their small business customers’ wallets. While it will require a new way of thinking – about their data and their customers – I am certain it is not actually rocket science.