How banks can serve small businesses with BMO's Niamh Kristufek

What can banks do to better work with their small business customers, as well as attracting more? Niamh Kristufek, head of U.S. Business Banking at BMO, sits down with American Banker Editor-in-Chief Chana Schoenberger at Small Biz Banking to discuss this customer segment and what business owners want from their bank.

Transcript:
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Chana Schoenberger:
Welcome to the Arizent Leaders Forum. So I'm Chana Schoenberger. I'm the editor-in-chief of American Banker. I'm here at the Small Biz Banking Conference in Nashville, 2023. Woo-hoo. And I'm here with Niamh Kristufek, who is, what are you in charge of exactly at BMO?



Niamh Kristufek:
I'm the head of our US business banking segment, which is our small business base that serves customers with revenue size up to 10 million.



Chana Schoenberger:
Awesome. Okay. So BMO has been in the news a ton this year because you went and bought Bank of the West, and we covered that extensively of course, because it was two women on our Most Powerful Women in Banking lists doing a deal together. It's very unusual. Super cool. Nandita and Ernie. So how is that integration going?



Niamh Kristufek:
Well, I would say integration was fairly or really successful. We survived integration and conversion on Labor Day weekend, and so I feel like that went really, really well. No part to our technology and digital partners, but also a really robust communication strategy for our customers, which involved banker outreach as well as communications, as well as social to make sure they were really prepared. But I think the most exciting part is I think we're a really good cultural fit. Our passion for the customer, our passion for diversity, passion for green enterprises, all of it really aligned. And so we kind of made a joke that you would get on these calls to plan conversion and integration, and everyone would have to introduce themselves because you wouldn't know who was legacy Bank of the West and who was legacy BMO, because we were such good cultural fits. And that's a little bit of a phenom in integrations of large companies.



Chana Schoenberger:
That's amazing. It's really unusual, especially in the M&A banking environment we have now. So, okay. One of the things we've been talking about for the last few days here at Small Biz Banking is this question of digital and the experiences that customers expect. And of course, a small business customer is just a human with a business as opposed to a corporate banking customer, which is a big company that has some humans working for it. How do you move small business banking into digital the way that retail has done? What would make it easier to do that?



Niamh Kristufek:
In a lot of ways, I think PPP pulled us into the digital space. I think customers got a lot more comfortable with self-service and working remotely. And so that brought us a lot more forward in our journey. The upside to that is that they're more willing to work with a remote banker and digital tools. The downside to that is switching is easier, and we're now compared to Amazon. I always say everyone wants the Amazon experience, but then they want a human behind it when they really need them. Banking for small business, I think is very much about, I don't want to think about my bank until I need to think about my bank, and you better be ready for me when I'm thinking about you. And so that means the digital tools have to be spot on for their day-to-day, your data and analytics have to be spot on to give you good insights, so you're ready for that human conversation.

Partnerships are a huge part of that. Making sure you're plugging in with the right partners into your digital capabilities helps you leapfrog a little bit. So we do that either with content providers. We do that with a bill.com to help with our payment platforms. We do that in educational space with a partner we have, Arena, that helps with CEO services. So I think you can do a lot with partners, but you have to also put a stake in the ground of what you build and differentiate. And we've done that with our digital platform and branches on online so that we could get faster lending decisioning combined with deposit opening.



Chana Schoenberger:
Very cool. Okay. So you've talked about how your family had a small business. Yes. Tell us about that, and what was their experience with banks?



Niamh Kristufek:
So my dad and my mom owned a contractor business, a construction contracting business. It's very much a family business. So from a very early age, 12, 13, 14 years old we're in the business, we're either working on the job site. I took over the bank books very young because my mom didn't like it. So I was in the bank with my dad and kind of always knew what was going on. My dad's banker was at my wedding because I knew him my whole life. And it was a community bank. I will say one thing is my dad was very deferential to his bank and he felt very grateful to his bank, which is great, but in some ways, I don't know if it was earned. And so I think small business owners a lot of times come into the bank and they don't make us earn their actual relationships.

And I always say to customers, put me to the test and make me earn your business. Make me prove that I'm providing value to you because it's a privilege to bank you. And I think commercial customers come in with that swagger, but a lot of times our small business owners don't, and so I always think it's our challenge to earn their business and earn the right to their business. And sometimes that starts with a micro business, and then we start paying attention to them when they're not micro businesses and they're growing. And I think our challenge is that we should be leaning into the microspace and make 'em earn that business. So my bias is get in on the ground floor, but earn their business, really be their partner to help them make financial progress. So different times in my dad's career, I felt like my bank, their bank did that, and in hindsight, in some places they didn't.



Chana Schoenberger:
Interesting. Okay. So can you tell us about an initiative you've worked on recently that's gone well, or maybe one that hasn't gone well?



Niamh Kristufek:
Ooh, that's a good challenge. I think we're doing really, really well in our Zero Barriers to Business program. And we did it in a very different, we did it in a three pillar methodology. So obvious,



Chana Schoenberger:
You talked about this at last year's conference, right?



Niamh Kristufek:
Yes. Okay. That was very, it's matured and it's gotten even better. So I think what I like about Zero Barriers to Business is it's not just access to capital because access to capital is a need, but being ready for capital is also a need that we don't speak enough about. So the three pillars for Zero Barriers is access to capital, access to education, and then also access to partnerships. And so the education is really about turning a no into a not right now and getting you ready for capital. Because when you give capital too early to a business who doesn't know how to use it, you're actually putting 'em at risk of going out of business. And so smart growth and smart use of capital is really important. We've done over 800 hours of training for our customer base through our bankers. We also have a coach in the corner, which allows everything from capital markets, commercial bankers, branch bankers, to volunteer as coaches for small business owners who sign up for coaching, which is not a sales conversation, but a coaching conversation where they can come with financial questions. And then our partners, they know what the community needs. Our partners are nonprofits, the cities we work in, the chambers, and they're great partners. So tapped into the need, but sometimes we can bring the financial acumen and the resources to help serve that need. So for me, the access to capital is the shiny object, but the real foundation, I feel like we've really pushed forward on the education and partnership front.



Chana Schoenberger:
I thought it was so interesting that, I think it was the panel you were on yesterday, someone was saying that their bank had an access to credit expansion initiative and that they had sort of lowered some of the barriers to credit and that it turned out that most of the people applying didn't even need those expanded limits. They would've qualified anyway, but for whatever reason, they were discouraged and they weren't applying normally.



Niamh Kristufek:
Yeah, we have that same experience. We have a lot of our customers who come into Zero Barriers and apply and are in risk groups that would've been approved anyway. And what that is is it is a message to the community for Black, Latin, women-owned business, native-owned business, we want your business. We see you and we value you. It's an outward indication of our commitment. And so people want to come where they know they are valued. And so it's a statement that says, come here, we're going to help you. And even more importantly, we see it in our commercial businesses. And I've had commercial clients say to me, your banking people who other banks won't bank. And when I grew into my commercial business, everybody wanted me and the same banks who never wanted me now want me, don't talk to me about them. So it's a really important step to attract all business owners and definitely ones that have been raised to not trust the banking system.



Chana Schoenberger:
No, that's a great idea. So what are the biggest issues facing your small business clients right now? And what are the issues facing small business bankers?



Niamh Kristufek:
I think the biggest issue today for small business is liquidity and making sure that you have the cash flow to support your business. We got spoiled. PPP was a lot of nice free money that was burning around in the system, so well, it wasn't free.



Chana Schoenberger:
I mean, it wasn't free. Everyone paid for it.



Niamh Kristufek:
Everyone paid for it, but it was free to the small business economy. It was a really nice prop. But I will say things are getting tighter. And so for small business owners, it's the year of really knowing your margins. I always say grow smart. You got to know your pennies and your dollars now because it's going to be a little tight this year. So I always say dust off the financial plan, dust off the cashflow, make sure it makes sense to add that extra employee, make sure your pricing makes sense.

They've got to really mind their P's and Q's because we are going to have a softening. And so when I sit down with a business owner, you might be the most skilled at your craft, but do you know your numbers? Because your craft is only as good as your numbers. And so that's really the challenge I find in the small business community. The flip side of that is, are our bankers ready to have the hard conversations? Are they really there? And do they have the skillset to coach around the no, coach around the yes, coach around, Are you really providing the tools that the customer needs because maybe it's a cashflow tool and not a lending tool that you need right now? And is it the right time? Small business is unique in the fact that the banker is really in a position to give good guidance, where maybe a commercial client, there's not so much guidance there. They already have paid professionals and CFOs and experts to help them. The consumer space, it's pretty straightforward, but the small business bankers are pretty unique animal.



Chana Schoenberger:
Great. Well, thank you so much. I appreciate you coming up here with me.



Niamh Kristufek:
No, always a pleasure.