Since 2014 the neobank Seed has been reimagining one of the sleepier areas of banking: deposit accounts for small businesses.

Rather than walk into a branch — Seed, of course, has none — yoga instructors, food truck owners and other would-be customers can apply for accounts in less than five minutes on the startup’s web or mobile app. If approved, they receive a business debit card in the mail.

Now Seed, led by veterans of the fintech Simple, is selling banks software to help them solve one of their most pressing problems: finding a way to open accounts online as branch transactions continue to decline.

“It’s the second phase of our business,” said Brian Merritt, co-founder and chief executive of Seed. “It’s not a pivot or change.”

It’s a model a handful of fintech companies have adopted in their quest for more revenue sources. Banks license technology from the neobank Moven, for instance. The online lender Kabbage white-labels its software to financial institutions, for another.

Like other fintechs, the San Francisco-based Seed will continue to operate its own brand — which offers U.S. small business owners digital accounts, with deposits are held at The Bancorp Bank — in addition to selling technology to banks. In so doing, Seed joins Avoka, Gro Solutions, Treasury Prime and Bottomline Technologies’ Andera and others in offering banks software designed to help them pull in deposits through digital channels.

Aite survey on banks's digital onboarding for small business customers

As Merritt sees it, the stakes for letting people sign up for accounts online are as high as they get. “Banks have to go online to grow — otherwise they will die,” he said.

How they go about it can vary. Each institution, after all, has specific issues, such as whether newer technology is compatible with what’s already in place at the bank, or if a piece of software jibes with its know-your-customer practices.

Seed is offering the KYC procedures it uses — which include importing images of identity documents like driver’s licenses — but it said it can configure the software to adapt the required data, rules and risk profiles that a bank partner prefers.

Seed is well aware of how a cookie-cutter solution won’t work and views its offering as a partnership to figure out how to get the institution online. “It’s not just selling a piece of software,” Merritt said.

With over 28 million small businesses in America, according to the U.S. Small Business Administration, it would stand to reason that banks should already have an online system to sign them up.

In fact, onboarding has remained one of the thorniest challenges in digital banking because, well, it’s cumbersome at best and literally impossible at worst. According to a 2017 Javelin Strategy & Research report, only six of the top 30 banks serving business customers offer some form of digital-checking-account application, and only Capital One Financial and SunTrust Banks offer mobile-optimized capabilities.

Not every small business seeks a digital-only experience. According to Ian Benton, senior analyst of digital banking and payments at Javelin Strategy & Research, some small businesses will want to do part of the sign-up work online and ask bank employees more detailed questions in person.

Some banks may prefer to meet small-business owners face-to-face to woo them with other products as well.

“Currently, a lot of it is happening in the branch exclusively,” said Benton. “It doesn’t have to be like that.”

And the next generation of on-the-go small-business owners, including members of the gig economy, will expect an experience that doesn’t waste their time.

“They’d be aghast if told they had to come in and fill out papers,” said Alenka Grealish, a senior analyst at Celent. “That’s just a foreign world for them.”

Even today, the gap is already costing banks business. Aite Group estimates that between 5% and 15% of online applications are abandoned by small businesses because of the irritations of manual workflows and repetitive questions.

Banks are well aware of their shortcomings. According to the same October Aite report, more than 75% of large and midsize banks admit their current onboarding process is not up to speed.

Christine Barry, a research director for Aite Group’s wholesale banking practice, believes that gap is destined to change. “It’s going to be table stakes,” she said.

Already, there are signs of improvements. In February, the BBVA-backed Azlo launched a digital banking account aimed at freelancers and other members of the so-called gig economy, which of course, includes letting them sign up online. Treasury Prime, a young startup in San Francisco, is readying to roll out technology with a bank to help it onboard small businesses. Seed has signed three deals with banks (all of which are said to have pursued the partnership with the startup), and the pipeline is very promising for the neobank.

Knowing just how big the market is — and how it is only growing with the rise of the gig economy — is, in fact, why Seed wanted to sell banks the same technology it uses. Merritt views community banks as critical resources and is the first to say he wants to help them survive.

“Don’t give up,” Merritt said. “Maybe we can help you.”

Mary Wisniewski

Mary Wisniewski

Mary is deputy editor of BankThink. She also writes on a variety of subjects as part of American Banker's bank tech team.