Innovation Luncheon − Bridging the Gap: Modernizing Small Business Banking Without Losing the Relationship

Small businesses are demanding more from their financial partners—speed, insights, and seamless digital experiences. But too often, those needs are being met by fintechs and software platforms that package payments and business services together in ways traditional banks don't.

In this session, we'll explore how financial institutions can reclaim relevance by partnering with fintech infrastructure to power integrated, intelligent, and scalable small business solutions. We'll show how modern platforms are enabling banks to deliver embedded commerce, real-time settlement, and unified banking and payment experiences—without overhauling their existing tech stacks.

Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Jillian Henleben (00:08):
Thank you so much for letting us talk over your lunchtime. We will try to keep it light and entertaining. My name is Jillian Henleben. I have been with Fiserv for almost nine years now. Started out in our enterprise merchant space, focused on product and product strategy. For the last three and a half years, I have been chief of staff of our merchant organization and I join you today as the head of product and product strategy for our small business portfolio through our FI partners.

Derek Swords (00:39):
Hey everybody. I'm Derek Swords. I've spent my career trying to simplify complex financial transactions and experiences for customers and software experiences. I lead the digital payment solutions products at Fiserv. Think about that as Zelle, bill pay, Cashflow Central, things of that nature. Really excited to be with you guys today. We are small business enthusiasts as well, so we are happy to be here and appreciate your time. We're going to talk about what we believe the key is for financial institutions to win in the small business space, how to compete versus the fintechs that are out there, how we are redefining the small business experience from the life cycle of the customer, and how we have solutions to help with that along the way.

(01:29):
There's been a lot of stats here today already. Fiserv is very focused on small businesses. We do that across our various business units. We believe that there's a huge opportunity, as I'm sure all of you do, for financial institutions to do a better job servicing the small business. We think that means better, stickier, more loyal customers. We think that means more revenue for the financial institution. There are 36 million small businesses. They make up 43% of the GDP of America. It's a big number. We think there's 70 billion in revenue out there waiting for financial institutions to capitalize on by providing better services at the point of need. When the small business needs those services across cards, fees, payments, merchant services, lending, and deposits, we think there's a lot of opportunity here for financial institutions.

(02:26):
We do a lot of research in talking to small businesses to make sure that we understand what their needs are. As a part of reimagining the services that we're offering in the payment space, we talk to a bunch of small businesses. What we found is that, generally speaking, small businesses aren't super satisfied with the offerings they have today. 46% of them are willing to switch if a different financial institution offers tools that better meet their needs. They're available to your competition. 33% of them would like to see more advanced fraud solutions, and 47% of them are willing to switch based upon more and better payment options.

(03:10):
Speaking of switching and other options, fintechs are a very real part of the ecosystem. There are a ton of financial technology companies out there actively providing services today, and their strategy is generally land and expand. They start with a particular need like accounting, and then they offer payments or lending or cards in adjacent spaces that are much more like banking services. While fintechs are a necessary part of the ecosystem, they're also a threat as you think about how you compete for mind share, wallet share, and revenue in the space. There is a bunch of lost revenue as a part of this. In general, most small businesses are paying at least $75 every single month to various payment providers. They're spending 2% of their card revenue; that's a revenue source you could all be capitalizing on.

(04:09):
They're opening accounts with fintechs that have a sponsor bank, so those are deposits you may miss out on. Then, of course, when the fintechs get their hooks into the small business, they've got the opportunity to cross-sell a variety of services that oftentimes compete with a financial institution.

(04:31):
What they do really well is provide purpose-driven solutions that solve the needs of the small business and easy-to-use integrated solutions. All their payments and all their receivables are all in one place. From there, they offer banking-adjacent services, whether that's cards, actual accounts, deposits, or short-term loans. We see that across Intuit, Square, PayPal, Bill.com, et cetera. The number of small businesses relying primarily only on their bank or their credit union for payment services is declining. More and more are using fintechs. You can see the growth here between 2020 and 2023; in general, fintechs are meeting the needs of small businesses more and more. More of those small businesses are going to service providers beyond their primary financial institution.

(05:35):
As a part of the research, we really wanted to understand what it takes to win the loyalty and the business of the small business. What are they looking for in the space? Being able to make payments easily and electronically, being able to send invoices and get paid easily, being able to view cash flow, and having all of this in an integrated experience is really important in an easy-to-use system. Most small businesses are juggling between five to nine different solutions for their payment and cash flow needs. They may have an accounting solution, a different merchant servicing solution, or they may be doing spreadsheets on the side. They're spending a lot of time focused on cash flow when they'd much rather be focused on growing their business and putting their attention into that endeavor instead.

(06:27):
An integrated experience that provides a more comprehensive view and solves all these needs is super important. This slide looks identical, but it's slightly different. 83%—that's the key number here. 83% of these small businesses would prefer to be working with their primary financial institution rather than a fintech solution. This really means that the financial institution, the bank, and the credit union have the right to win in this space. This is what small businesses generally would prefer, but they don't always find those services available there. Jillian?

Jillian Henleben (07:08):
These metrics that Derek just took you through are important because it keeps us up at night. At Fiserv, we are in the business of solving for small business, but we also believe our FI partners are the true heart of the SMB ecosystem. We are constantly trying to think about how we recenter those relationships because it's best for our FI partners, and we truly believe it's best for our small business ecosystem. In prepping for today, we wanted to take you through what we believe is a five-step, best-in-class approach to recentering yourselves in the small business landscape.

(07:55):
When you think about the way it works today, our FI partners do a phenomenal job of soliciting DDAs and lines of credit—core financial services—but attaching the broader merchant services at the account level has been falling short. We'll cover a bit more detail about that in a minute. If we think about the five steps to either attaching at time of setup or as a way of nurturing these small business accounts over time, we think: one, it's how you meet them at their time of needing a DDA and financing. We're doing amazing at that today as a group. Two, how do we help them pay their vendors and suppliers? This is a huge burden for small businesses today that you guys could be solving for.

(08:52):
Three is then how do we enable them to get paid by their customers? Think card payments, in-store, and online. Four, how do we give them the services they need to run, fund, and grow their business? Think customer loyalty and moving into new channels. And number five, how do we give them insight into how their businesses are performing day in and day out? For a small business owner, the heart of that is really their cash flow. These are the five steps that we see. We wanted to dive into each one of these just a little bit and then talk about how Fiserv has pulled forward our suite of solutions to help you recapture this share of wallet. Number one is setting up the bank account, giving them the financing they need, and then immediately attaching merchant services to these accounts.

(09:50):
Today, about 15% of new business DDAs are getting merchant services attached at account setup. That means it often takes more than 30 days to go back, scrub your portfolio, understand the need for merchant services, and then try and attach it post-account setup. The problem with this is 30 days is a pretty long time. By that point, one of those fintechs Derek was just talking through has already come in, won the sale, and taken yet another slice of that wallet. We believe you guys should be focused on this for two big themes on this page. Accounts that are signed up with merchant services see a two times increase in average daily balance, and you're going to see almost three times increase in revenue driven by those accounts.

(10:44):
Attaching merchant services is critical and the earlier you do it, the higher your chances of winning that piece of the wallet. Job to be done number two is setting them up to pay their suppliers. Accounts payable, making it super simple to understand who those vendors are, what is owed, and when it's due, and then giving them the payment optionality they need to go out and pay their vendors.

Derek Swords (11:14):
The way they want, when they want—

Jillian Henleben (11:15):
You got it. Timeliness and choice. As an ecosystem, oftentimes the line between consumer and small business owner blurs. Sometimes they need to be treated like a consumer; they need something super simple and easy to understand. Timeliness is critical, but the complexity comes out pretty quickly. So that's number two, enabling them to pay their vendors. Then number three, something they would probably argue is very important, is how they then get paid. This could be card payments, digital payments, or pay-by-bank at the point of sale. It could be online or the large swath of small business owners today that are heavily reliant on invoicing. How do we give them the optionality they need to be able to get paid by their customers, including accepting check and wire transfers?

(12:11):
Getting paid and having that optionality around payment type and timeliness is critical on both legs of that journey.

(12:22):
Number four, this is where it starts getting really exciting: we've done the core jobs to be done. I can pay the folks I need to pay and accept payments from folks paying me for my services, but now how do I start tackling the day-to-day job of running my business? When you think about that landscape of providers Derek was walking us through, they're coming in with point solutions: "I'm going to help you with payroll, or a website builder, or drive loyalty with your customers." Once they get that initial leg in the door, they're saying, "By the way, I can also help you with payments." Having an ecosystem where you can help your small business owners not only pay out and get paid in, but also find the services they need to run and fund their business is essential.

(13:17):
I'm talking payroll, website builders, loyalty, and vertical-specific capabilities. The services a restaurant needs are very different from those of a retailer or a contractor. Having this full horizontal and vertical ecosystem of services becomes critical. That is something we solve for in our Clover ecosystem today, and we'll talk to you about that in a minute.

(13:45):
Number five is how you then give them all of the insight into how all of these ins and outs and services are ultimately driving down to the bottom line. Am I healthy? Am I cash flow positive? Am I growing? Am I beating my historic performance? Having that insight fully integrated with their FI partner is critical. That's where thinking about your merchant services ecosystem end-to-end becomes highly important and invaluable to your SMBs.

Derek Swords (14:21):
We heard about cash flow earlier in the day and how important that is for the small business. Many small businesses fail every single year because they cannot keep on top of their cash flow. They don't have the funds necessary to run their business at the time they need them. It is incumbent on the financial institution to help them with that problem.

Jillian Henleben (14:39):
Absolutely. We'll do a quick double click into a couple of services we have available in the Fiserv ecosystem. At the end of the day, small business users need a one-stop shop, and there are not a ton of folks solving for that today. At Fiserv, we wake up and go to sleep every night thinking about how we bring these services to market and make sure they're fully connected across our ecosystem. As you take them to market, it is truly seamless for your end account holders. We'll touch on Cashflow Central, Clover, and a newer product we've just launched: digital merchant acquiring. Derek, let's walk through Cashflow Central.

Derek Swords (15:29):
So, Cashflow Central. We took a step back. Fiserv has been providing bill pay services for our financial institution customers for years. We had a historic bill payment option out there under the Checkfree brand. We did some soul searching and looked at the marketplace. We determined that we were not necessarily doing nearly as good of a job as we could, and we were very narrowly focused. We were focused on helping them make payments only in a specific, structured way, whereas there are a lot more jobs to be done for the small business. There are more challenges associated with money and cash flow and how they manage their business. What we discovered in the marketplace is that there are a lot of consumer solutions like Bill Pay and Zelle.

(16:25):
There are a lot of high-end commercial solutions for larger businesses—$10 million and above—but there are not very many purpose-driven solutions specifically in the payments and receivables area for small businesses in the financial institution category. What we also discovered is that small businesses really want and need tailored services for those needs. We took a step back and reimagined how we deliver services and build this in such a way that it's going to resonate and solve the problem of the small business, giving them the opportunity to spend less time on money matters and more time growing their business. That's really what we have built with Cashflow Central. It is a new product.

(17:23):
We have two customers live right now: US Bank and WaFd. We have over a hundred clients signed up for Cashflow Central. We're getting a couple more clients live this year and a whole slew next year. Cashflow Central is a holistic hub for the small business housed in the financial institution. Whether they log in via desktop or mobile, they can do everything they need to manage their cash flow. They will have the ability to make payments in a variety of fashions—I'll talk about that in a minute—in a way that makes sense for them. They can also send out invoices and get paid in a variety of manners. Then, they can see an overview of what's happening with their business across outgoing payments or incoming receivables, all in one place.

(18:20):
Cashflow Central is really focused on that problem, helping the financial institution offer more services to the small business to provide a stickier experience and a primary relationship.

(18:35):
When we talk about paying bills, we've always had a product that pays bills, but Cashflow Central is different. It allows for more automation of the bill payment process. It allows the small business to bring in electronic bills or bills emailed to them, which are sucked right into the system. It allows them to take pictures of their bills and invoices for paying suppliers all in one place. They can get all of that in one landing spot where they can see all their obligations and easily make payments. They can schedule that in the future. They can use their DDA or their card. Using a card is often a short-term line of credit. Oftentimes they have other incentives, like points they're going to take their family on a vacation with.

(19:30):
It's really powerful to unlock all of that for the small business. We've electronified everything. We're focused on enabling the small business to make faster, more electronic payments and get more of the suppliers they're paying onboarded into the electronic ecosystem. The small business can pay via ACH directly to their supplier or in other methods; it's a "pay anyone" model. It also has multi-user workflow. If a small business has two or three employees, maybe the owner wants to approve every payment above $1,000. Cashflow Central allows the small business to administrate that so they always have control at the right levels. Of course, Cashflow Central also enables accounting software sync.

(20:26):
It's a direct two-way sync with their accounting software because we recognize they have to keep their books. We want to make sure we give them a comprehensive view of everything happening with their cash flow.

(20:51):
The dashboard enables the small business to see all their money going in and out of Cashflow Central. It will also allow them to see money coming in and out of their account as well as external accounts in the future; we'll be adding that feature in 2026. It also integrates with Clover. With that, they can see all their money coming in and out, whether that's point of sale, an invoice paid directly, or a check deposited via remote deposit capture, all in one place. We'll also have the ability to give them projections in the future. This opens up opportunities for the financial institution to potentially upsell lines of credit. If you're empowered with information about when a shortfall might occur, the small business may choose to take a quick loan or send out invoice reminders to everyone they've invoiced so they can get paid faster.

(22:00):
I didn't hit on invoicing as strongly as I should have. One of the big differentiators with Cashflow Central is the ability to send out branded, electronic invoices. They can send them via email or print them. They can set the terms of how they want to get paid so their end user can pay them online with ACH or card through the electronic invoicing system. All of that is automated to make it easy for the small business to process and track payments against invoices.

(22:48):
Speaking of integration, we are thinking more holistically about how these solutions fit together. Cashflow Central integrates with Clover. For those small businesses using Clover as their point-of-sale solution, the two systems talk back and forth to ensure the small business can see all inputs and outputs there. Jillian's going to talk more about Clover.

Jillian Henleben (23:20):
That connectivity becomes huge because we know the jobs to be done are really specific to their business. Having this connectivity between Cashflow Central and the FI ecosystem, with transparency into their merchant services ecosystem, is a huge value point. Gone are the days of having to log into 10 different accounts to see how their business is running. They can now do it with their FI when they log into their Clover dashboard. For those not familiar, Clover is our small business ecosystem at Fiserv. You're probably mostly familiar with the white hardware, but Clover is so much more than just the hardware.

(24:22):
Clover is a tailor-made ecosystem for small business users to run and grow their businesses. They might be point-of-sale hardware first, or e-comm only, or somewhere in between. Clover gives them the flexibility to get started and, as their business grows, toggle on and off the services they need. A couple of highlights would be point-of-sale and definitely e-comm. I think the online piece gets lost because we have such beautiful hardware, but running their business involves horizontal jobs to be done. Everybody needs to pay employees or manage payroll. Having those horizontal services fully baked in is important, as are the vertical jobs.

(25:24):
We've been building out our vertical-specific software packages because we realize what a restaurant needs is so different than what a retailer or a professional services organization needs. The complexity of having to find a product, sign up for a new account, and then manage it day-to-day is eliminated with Clover. It's all built-in, whether it's our own native solutions or best-in-class third parties we've embedded. Then, of course, we give them the tools to expand—maybe moving from one channel into e-comm to make that omnichannel jump possible.

(26:12):
We give them tools for loyalty and rewards, which were traditionally very expensive add-ons, baked right into the Clover ecosystem. As you're thinking about merchant services, having a partner with a suite of services that can scale with your account holders is critical, and that's something we have been minutely focused on. I will reiterate one more metric: when you attach merchant services, you're going to see two times the daily deposits and nearly three times the average revenue. Merchant services is a massive revenue generator because it is a massive value to your end account holders.

(27:08):
A third solution I wanted to highlight really moves beyond the five-step blueprint and into how you mine your portfolio to understand where the opportunity lies. That exact process led to the Merchant Opportunity Analysis. Fiserv works with you to look at your ecosystem and understand where those account holders are doing merchant services today. If it's not with you, we give you the tools to identify those prospects, turn them into leads, and get them converted.

(28:04):
Traditionally, it has taken 30 to 45 days after account setup before those accounts move from prospect to lead to attached. That is where Digital Merchant Acquiring (DMA) came into play. Every day, your account holders are logging into their online bank or checking their mobile app to see their cash flow. You have active eyeballs where you could say, "By the way, did you know you're eligible for Clover Merchant Services?" and funnel them through a self-service shopping and boarding journey. I'll walk you through quickly how it works.

(29:06):
They're logging in to look at cash flow or account balances and now have this awareness: "Sign up for Clover; you could save money or have better solutions." They can click in and get details on what that bundle looks like, including a direct comparison to their incumbent provider. They then flow into a seamless boarding journey. We leverage the data we already have to fast-track that application. Instead of 137 fields of data to input, I think I've got it down to six fields. They can validate their account, select their hardware and software, and be off to the races, all fully embedded within your ecosystem.

(29:56):
What's really exciting is the opportunity it creates. We're starting with merchant services attach, but it's definitely an opportunity for nurturing accounts. As their business grows, how do we leverage data to say, "You might need to take advantage of a new payroll service, or it's time to think about loyalty," and also plug in your products? "Hey, you're eligible for this new line of credit; have you considered this new account type?" It creates an avenue in your digital environment to put the best products and services in front of your account holders. Those who want a self-service journey don't have to wait for someone to call. Your online environment becomes a tool for acquisition, freeing up your people to focus on those who need more handholding—the higher complexity, higher revenue account holders. We're very excited about the launch of DMA. We've got our first partner going live today, actually. I'm actively soliciting feedback to understand how you would use it.

(31:44):
How do your account holders interact with it so we can help you attach the right products and services at the right time?

Derek Swords (31:50):
One thing that is really critical and is a differentiator for the financial institution versus any fintech is your people. The fact that you have bankers who can talk to small businesses and counsel them is a key differentiator. When we talk about solutions like Cashflow Central, it's super simple for the small business to onboard and upgrade on their own. But that doesn't mean we want to take the small business banker out of the equation. We've developed specific programs around business banker enablement so we can educate and train them. They can then counsel and advise their small business customers on how best to take advantage of these products. It's not required that the banker offers it, but it's certainly complimentary and part of that relationship, which is so important.

Jillian Henleben (33:03):
Absolutely. What we hope you walk away with today is an understanding of the opportunity in nurturing your portfolio. There is anywhere between $600 and $1,200 per SMB per year in incremental revenue by attaching merchant services and small business purpose-built solutions. This helps you acquire and retain customers, drive transaction revenue, increase deposits, and create a happier account holder. There's a lot of value in recentering merchant services with your small business account holders.

Derek Swords (33:55):
And Cashflow Central.

Jillian Henleben (33:57):
And Cashflow Central. I consider it all part of the same toolkit to solve for the small business holder. Having an ecosystem that is integrated where you're giving them the tools they need to run and grow is what we want you to leave with today.

Derek Swords (34:15):
Right. Be the one-stop shop, have the primary relationship, be top-of-wallet, drive loyalty, and drive revenue for your institution. We're a little bit fast, so we can open up to any questions.

Jillian Henleben (34:30):
Are people just ready for dessert?

Derek Swords (34:38):
If you guys want to follow up, you can email either one of us. Here's our contact information. We're available for questions either now or afterwards.

Jillian Henleben (34:56):
Thank you guys for sharing your lunch with us. We appreciate it. Thank you.