Small businesses are the backbone of our economy and as their needs evolve, financial institutions must evolve with them. Entrepreneurs today expect more than products, they expect experiences that help them grow and thrive. For micro and small businesses, the top priorities are simplicity, speed, and self-service. They want to open accounts, send payments, and manage cash flow without friction.
In this keynote, TD Bank's Chris Ward, head of U.S small business, will share how banks and credit unions can reimagine their approach to small business banking by focusing on the "Four S's":
- Speed: Delivering timely access to capital and quick decisioning that matches the pace of small business.
- Simplicity: Removing friction from onboarding, lending, and everyday banking through intuitive processes and digital tools.
- Safety: Protecting small businesses from fraud and risk while maintaining trust and resilience.
- Service: Providing relationship-driven support that meets business owners where they are, whether in-person, online, or hybrid.
Introduction: Holly Sraeel, SVP, Strategy and Content, American Banker Live Media
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.
Holly Sraeel (00:08):
Good morning. Welcome to Small Business Banking. I am Holly Sraeel, Senior Vice President of American Banker Live Media. AI doesn't quite get my last name correct, but that's life. Over the next two days, we're going to explore, analyze, and debate the biggest factors facing the small business banking market, including macroeconomic and credit environment pressures, technology and digital transformation, competition and changing business models, regulatory risk and fraud management issues, shifts in business client needs, deposit and funding dynamics, and more. It's my great pleasure to get us started this morning by welcoming Chris Ward, head of US Small Business Banking, and Sandy Hanson, managing partner of Barlow Research, who are going to dive into simplicity, speed, service, and safety: the four S's of small business banking. Please join me in welcoming them to the stage.
Chris Ward (01:09):
Well, good morning, everyone. I hope you are all having a nice day. Anybody notice we're in Florida and it's a little humid? I got off the plane yesterday from Charlotte and it was 60, crisp, clear, and sunny. I come to Fort Lauderdale, Florida, and it's 80 degrees at almost seven o'clock and I think the humidity was about 20,000% or so. I think that's what my Apple weather told me. And there's a hurricane just south of Jacksonville, like a class five hurricane. So get ready, right? It's still hurricane season. It is our pleasure to be here this morning and to kick off the day. You have a big agenda. We're going to talk about small business all day long, which is fantastic. I personally have been in the small business industry for about the last 20 years, and been in banking for about the last 35 plus years.
(01:56):
I hate to say it's been a long time, but small business is something I've always done my entire life. I even grew up in a small business. And I am so fortunate when Holly asked me to do this, I thought right away, I need to phone a friend. And the friend I phoned is Sandy. And what you don't know about Sandy is she's also a business owner, but she leads Barlow Research. If you don't know Barlow Research, you need to meet Sandy. They're fantastic. It is absolutely trusted information that I rely upon. Last thing, I now have only one job. I was the regional president for Mid-Atlantic running commercial, retail, and small business. Now I have the pleasure of just running small business in the US for TD Bank. Sandy, please, if you would tell them about yourself.
Sandy Hanson (02:41):
Yeah. Thanks, Chris. I'm Sandy Hanson. I'm managing partner at Barlow Research. I run our small business banking program and I'm the treasurer. So when you talk about small businesses wearing a lot of hats, the owners, that's me. I wear a lot of hats. All of us do at a small business. So I'm really excited to be here with Chris. I'm passionate about small business. I've been with Barlow for about over 20 years now, working in the small business space. Barlow Research is a B2B market research firm that specializes in small business and middle market. Our mission is to bring the voice of the business customer to you all in this room today, our financial institutions and partners throughout the United States.
Chris Ward (03:21):
And I think I figured out this morning, I've been a customer of yours for almost 19 years.
Sandy Hanson (03:24):
Yes.
Chris Ward (03:26):
So if we could go there. We wanted to talk about what is small business and how do you take care of small businesses in the US today? It's a complex environment for small businesses. We know that. If you look at the NFIB September survey, what did we find out? Optimism is down. We found out that uncertainty is up in the minds of the small business owners. You have inflationary pressures. You have tariffs. They can't hire quality labor. Yet, small businesses are incredibly resilient. They represent 44% of the US GDP and about 47% of private employment in the US. So without small business, we'd all be in a load of hurt, right? But how do you take care of small business if you're a financial institution, whether that's a credit union, a community bank, a FinTech, or a large regional national bank? Well, we broke it down into four simple things that we're going to talk about.
(04:16):
And what I'm going to ask Sandy is to give you the industry information, and then I'll give you an example or two of what we're trying to do at TD to serve our small business clients. So we will be talking about speed and how you give a quick response, quick delivery, and execute brilliantly for your small business clients. We're going to talk about simplicity. Removing friction is so challenging today. Yes, we all have technology and we're spending a lot of money on it, but this is still a bit of a people business as well, so we'll talk about that. We'll talk about safety. I've been concerned about fraud in our space for quite a while, and it is here and it's hitting all of us, and it's also hitting our small business clients. And last, certainly not least, maybe most important is about service. So if I could, I'll turn it over to Sandy.
Sandy Hanson (05:06):
Yeah. First, I want to tell you who we're talking about when we're looking at Barlow's data. I said we work in the small business and middle market space. Today, we're just talking about small businesses. We look at companies with $100,000 up to $10 million in sales. So there's about 6.7 million of those across the United States. But as you see in this donut chart, most of those are micro companies with just $100,000 to $500,000 in sales. That's where the bulk of them are. There are very different needs and service models that we need to apply to this market because it is so diverse. Those smaller microcompanies are looking for different service than those larger business banking companies—let's say $2.5 to $10 million in sales. It's different models for them, but the same themes will really apply to both markets. Now, that number might seem low to you.
(05:51):
If you track SBA, they're going to quote around 30 million small businesses across the United States, but they're definitely going below the $100,000 threshold. We like to look at $100,000 to $10 million. That's where we think they're serious small businesses using business banking products to run their business. Now, when we talk about speed, lending comes to mind, of course. First, we're looking at the average number of days they say that it takes for them to get a loan response versus what their preference is. But you need to know that small businesses are not very good at anticipating their credit need. Only about 18% of small businesses today say that they intend to apply for additional credit within the next year. They just don't think about it until they need it. So when they need it, they need it and they need it quick.
(06:39):
On the lower end, they want a response in two days. The upper end, five days. At the top of those bars, that's the number of days it actually takes to get a loan response. So it takes a little bit, one to two days longer than they want. We're pretty quick for the most part, but they want it even quicker. And I love this verbatim from a construction company. They talked about how the equipment they need is not readily available. So when they need it, they need it today, not two weeks from today.
Chris Ward (07:06):
And Sandy, in your analysis, I've seen you break this out by bank as well if you have enough survey responses.
Sandy Hanson (07:11):
Yes, we do.
Chris Ward (07:13):
At TD, we absolutely agree with that previous slide. And we do have a small business digital application that goes up to $250,000. It's a simple, clean interface. We have video tutorials and frequently asked questions in order to make the experience a positive one, because who enjoys filling out a loan application? Last time you probably filled out a home equity or a mortgage application, it was painful. Going to the dentist could be easier. So we're trying to make this simple and easy. And these are requests for $10,000 up to $250,000. It could be for a line of credit, a term loan, or an SBA Express. As you can see down there, we're very proud that we've been the number one SBA lender on the Eastern Seaboard based on units for the past eight years. Hopefully, we'll find out if nine is in the cards once the US government decides to reopen.
(08:00):
Of course, we can't get anything from the SBA right now because they are shut down, as we all know. But providing credit is one of those pain points for small businesses that we all need to try to solve. Whether that's a credit card request or commercial mortgage request or the products that I just outlined, being able to put the answer in front of them and make the process simple, with low documentation, quick answers, and quick responsiveness—even as much as putting an underwriter on the phone to help if you have extra questions that you need to uncover.
Sandy Hanson (08:30):
Yeah. They're going to go for the most seamless, easiest thing. Another respondent that we talked about had a marketing firm. She never needed credit. She just didn't need it until she needed it. And what had been popping up almost on a daily basis for her when she logged into QuickBooks was an offer for capital. So that's what she went through and she took out the loan. She didn't read all the terms. She just needed it, so she took it. And she said in the end, it probably wasn't the best decision for me to do that; I should have talked to other providers.
Chris Ward (08:56):
The next topic of the S's is simplicity: removing friction, making it a simple, easy, enjoyable experience. And that is leveraging not only the human element but also leveraging technology in order to make the experience better.
Sandy Hanson (09:11):
Yeah. We talked about this a little bit already, but simplicity and ease in that application are key. When we do a driver's analysis, we look at all the different channels we ask about: the branch, the account officer, online banking, and the brand—how they think and feel about the bank. We look to see which of those items really explain the variation in overall bank satisfaction. Year after year, the number one driver is: are you easy to do business with? If you're not easy, your satisfaction is going to drop. Be easier, and your satisfaction will improve. When you look at that with onboarding, if they said they were very satisfied with the onboarding experience versus if they were not satisfied, you see totally different scores. The Net Promoter Score (NPS), which measures if they would refer you, and the overall bank satisfaction score are much higher on the left-hand side here in the green than what we see on the right-hand side in the red.
(10:06):
Those people not satisfied are not going to refer you and are not delighted with you, but if you can get them in the door and make it easy, they'll give you that loyalty.
Chris Ward (10:17):
One of the things that we've done at TD is build what we call the small business dashboard. This is a unique product. We were one of the first ones in the industry to do it. It took a three to six month odyssey of customer interviews to find out what they need. At TD, we feel like putting more information at the fingertips of a small business is critically important to help them and make their business life simpler. And we all know this, managing and judging cash flow is a challenge for most small business owners. A lot of them don't have the financial acumen that they need to be successful. So with this, we built a tool that interacts with a lot of the major online accounting software. They can pull in all their checking accounts because we know this: they don't bank at any one institution.
(11:02):
And that way they have access to all their information in a simple, easy-to-use dashboard. It's on our online banking portal and also on our mobile banking app. It provides efficiency and empowerment by centralizing all the data at their fingertips. They can run "what-if" scenarios. If I add three more employees, what will that do to my cash flow? If I go buy this $100,000 piece of equipment, what would that do? If I want to expand my facilities, what would that do? If I have a drop in revenue, what would that do? And it gives them a cash flow predictor of where their business is heading. Why do we do this? We do this in order to help our customers be more successful by giving them the tools that they need, whether that's business planning software or something like this so they can judge and manage their cash flow and see what's going on with their business.
Sandy Hanson (11:48):
I think that's such a great dashboard. We talked about small businesses wearing a lot of hats. They went into their business because they wanted to run their flower shop or their bakery. They didn't go into business because they love finances and they love doing the banking part of it. It's just another thing they have to do. And as you said, they're not always the best at it. So any way we can help them.
Chris Ward (12:08):
The cool thing about this is we don't charge. We give this to them, which is a really nice benefit and an additional feature that we think is a strong value proposition. Also, another cool piece of this is they can go and compare themselves against benchmarks within their industry, within their size of business, and within their zip code. That way they can see: how am I doing if I'm a dental owner and I have about four locations? How am I doing versus others in my peer set? So: safety. I personally have been worried about this for quite a while. I don't know how many of you have gotten those spam calls or get emails saying "click here." All of us at banks have to go through compliance training and it's all about "don't click on your email" and "don't open attachments."
(12:53):
Small business owners don't have the luxury of that type of training, but fraud is becoming more and more of a major issue. I wrote down a couple of stats. The SBA Office of the Inspector General estimated there was $64 billion of PPP fraud, almost 10% of all the PPP dollars. Right now, Experian is reporting a 70% increase in small business fraud online. And then the FTC is reporting about $12.5 billion in fraud for consumers and small businesses in 2024. Fraud is a growing industry. The fraudsters are smart, they're well-funded, and they have access to really good technology.
Sandy Hanson (13:31):
Yeah. And when we look at our data, we knew this was a hot topic. So we asked small businesses earlier this year: how concerned are you with about five different types of fraud? For each one, 40% or more of those small businesses were concerned. So phishing attempts, account takeover, check fraud, card fraud, et cetera—40% or more were very concerned. And then we also asked: have you actually experienced fraud? The highest type of fraud experienced was phishing attempts, which was experienced by 30%. Nearly a third of those 6.7 million companies in the last year have had a phishing attempt on their business. The level of concern outweighs the experience. I think that's a good thing. I think they're starting to think about this and know that it's real and that it can affect them.
(14:24):
You see here, though, they really are reliant on their financial providers to safeguard their money. In most cases, they're not going to say, "Oh, it's my fault." They're going to say, "Nope, it's your fault. Give me my money back." So they really are looking to us to safeguard their money, and we can only do that if we educate them. So here we asked what different types of fraud prevention measures would be most important for your provider to offer. MFA was the top. Nearly 70% said, "Well, MFA—we need MFA in order to get into our accounts." Real-time transaction alerts came up next with over half the market saying that was very important. Insurance followed with about half the market, then encryption of data. Look at where positive pay is: only less than 20% said that would be very important to them as a fraud prevention measure.
(15:18):
And then that's just saying what's important to them. We also asked: are you actually using fraud prevention measures? Only about a third are using some sort of fraud prevention. They know it's a problem, they're concerned about it, but they don't know what to do about it or they don't want to pay for it sometimes.
Chris Ward (15:37):
I think we're all trying to provide better services and tools for our clients to safeguard their accounts, but what can we do in a proactive manner? One of the things that we've stumbled across in a very positive way is our SAFE training: Security Awareness For Everyone. We do this for consumers and for business owners. And here's what we've found: they are thirsting for the information. We've been doing a lot of small business networking events throughout our entire footprint. And this is the number one request when we have small business owners in the room. They want to learn more about this. You would think it would be about SBA financing or business planning or wealth management. No, it's about: "How do I protect my business because I'm getting inundated with this," as Sandy's stats have shown you.
(16:20):
So some of our SAFE training topics go into things such as the evolution of fraud, common scams, how to protect your business and keep information private, and steps to verifying and requests. They get a lot of invoices. If they don't verify those invoices and the money goes out the door, it's gone. And that's a common thing. Sometimes the invoices look like the legitimate, real thing. We teach how to spot and recognize fraudulent activity, how to make sure their checking account is being watched every day by the owner or the bookkeeper, and then safeguards to implement, such as the tools that we just showed you. The response, once again, has been overwhelming in this proactive manner and has taught us that we can't just rely on the small business owner figuring this out. We've got to help them.
(17:09):
We've got to educate them and we've got to train them. Once again, we do this for both consumers and business owners, but the response from the business owners has been really overwhelming for us.
Sandy Hanson (17:18):
I think this is going to be huge. And when you're bringing in new customers, if you're offering this right away... we just did a podcast with two different small business owners that had had fraud recently. One of them was check fraud. He was an online commerce company and somebody took over his account number somehow. And the bank wanted him to get a new account number. He said, "I can't just switch my account number. I have all these payments coming in and out. This is going to take forever." They eventually solved it for him and they did, at that time, offer some fraud prevention tools. He said it took about a month to resolve this, but he ended up leaving the bank anyway. And he said, "I left and I went somewhere who offered me the fraud prevention tools right away, who didn't wait until I had a fraud event to offer this to me."
Chris Ward (18:00):
We had a client who wired out over $1.8 million on what they thought was a legitimate transaction for a purchase they were making, and it was fraudulent. $1.8 million can shut down a business overnight.
Sandy Hanson (18:12):
Yeah, definitely. And it's costly to the banks, too. I think I heard for every dollar of fraud, it costs the bank $4. Have you heard that stat? Something like that.
Chris Ward (18:20):
It's a little scary.
Sandy Hanson (18:21):
It's huge. It's a huge issue.
Chris Ward (18:23):
All right. So we left service for the end. Service can mean a lot of different things to a lot of different people, but we know this: small business owners are demanding and expecting service from all of us as financial institutions, more so now than ever. All of our patience levels have eroded, whether you're going to the airport or going to the grocery store. We have no problem with self-service checkout, but we want it fast, on time, and right.
Sandy Hanson (18:49):
Yeah. Here what we're looking at is the importance of these channels if small businesses had to choose a new primary bank. I think that blend of personal and digital is so evident here. In the middle set of bars, that's "easy to use online banking." It is equally important to all sizes of company, large or small. But the relationship is still there, right? What that relationship looks like differs depending on the size of the company. On the left-hand side, that's "conveniently located branch." That's more important to the smaller company and then declines in importance. But on the far right, "access to an account officer" has the reverse trend. It's more important as we move up. They want people, whether it's people they can go to the branch to talk to or an account officer, but they need the digital and they need the people.
Chris Ward (19:34):
So Sandy, it was just a couple years ago, I remember you showing this slide and the "conveniently located branch" was a lot higher.
Sandy Hanson (19:40):
It was. It is declining in importance for sure. Digital is taking over some of that. Incidents of use of the branch is at the same percentage as use of digital channels. About 80% of all small businesses use digital channels—online banking and/or mobile banking—and 80% use the branch. So they're still going there, but they're going there less frequently because they can do some of these things on their mobile device. They don't have to go to the branch to deposit checks. We're obviously seeing mobile RDC (remote deposit capture) continue to grow. So they go there less often, but they still want the security of knowing where they can go or who they can call when they need a real person. And I think this shows that trend really well, too. Here what we're looking at is their preferred level of service. For the smallest companies, those micro businesses, they say they want two proactive contacts a year.
(20:33):
That's an in-person visit, a proactive phone call, or a virtual meeting—two per year, once every six months. On the right-hand side, for the business banking company, the largest, they want a proactive contact nearly every other month from their bank. Very different in level of service, but still important even at the low end that they have that personal relationship with somebody. I think we need to layer into this that it can't just be a "Hey, how are you doing?" call. We have to bring value when we do these calls—bring something of value to them, which could be that fraud prevention piece. "Hey, do you know about this? It's important you know about this." On the bottom though, when we look at reactive service—when they have a problem or an issue and they've called you or emailed you—they want a response in two to three hours.
(21:19):
That doesn't change for the smaller company or the larger company; they want that response. And I think this might be my favorite verbatim that I've seen in a long time: "People do business with people. So I want a personal relationship with a banker. They're there if I stop by or I call, but normally I have to initiate and they're looking for the bank to initiate."
Chris Ward (21:42):
So the sundown rule is no longer good enough.
Sandy Hanson (21:44):
No longer good enough.
Chris Ward (21:46):
And we're not going to be replaced by AI bots anytime soon.
Sandy Hanson (21:49):
I don't think so.
Chris Ward (21:52):
So it just goes to show based on those previous slides, there's no one channel that is going to make or break you. Well, they all could break you, I suppose. But whether you have small business specialists in a contact center providing outreach, or support online, or locations that are available... some of our locations are obviously open on Saturday. We're even open on Sunday in certain locations. And of course, I think the advent and increasing usage and comfortability with online and mobile banking is more important than ever and is growing really fast. One of the things that struck me on that previous slide is the need for an assigned account officer. It's something that we take very seriously. So even despite all the technology and tools we're putting in front of our clients, they still want to talk to somebody about their financial needs and solving their problems.
(22:46):
So: does your financial institution have everyone in the small business account owners know who their assigned officer is so they know exactly who to call when they really, really need help? We wanted to give you a couple of takeaways. We talked about speed, we talked about simplification, we talked about safety and service, but I want to break it down even simpler. I like simple things. Number one: it's about simpler and faster. We all need to get faster. Our entire society is built on speed. As Americans, we're incredibly impatient right now. Technology has done a lot of that, but we're constantly on the move. Number two: build deep client relationships. How do you do that? You not only provide services and products, but you have to be proactive in offering information, advice, and support. And last, and certainly not least, is to execute brilliantly.
(23:41):
You've got to get it right the first time. You have to bring quality to every transaction. That's the expectation now. Once again, I've been in banking 35 years. I don't believe I've ever seen a time in my banking career where the expectations of our small business clients are as high as they are today. That's how we are as a society, and that's the challenge that we all have in front of us. Sandy, any final words?
Sandy Hanson (24:04):
Yeah, I think just when you listen to that voice of the business customer, they're centering on all of these things. They want it fast, they want it easy, but when they have a problem, they really want the security of knowing that they can go somewhere and talk to a real person. I know we're seeing fewer and fewer branches. We're seeing branches close. That is probably one of the most common themes I see when people say that they're leaving their primary bank. They talk a lot about general service items and fees, but also: "Well, they keep closing my branches. I need to talk to somebody." I really believe that banking is a person business and we're not going to get away from that.
Chris Ward (24:45):
Last but not least, just a couple of things about TD Bank. You can see who we are, America's most convenient bank. We're mainly on the Eastern Seaboard of the US. And our parent company is in Canada, one of the largest banks in North America. We certainly are always trying to make ourselves more available and provide better service for all of our clients. And then once again, just a quick thing about Barlow Research.
Sandy Hanson (25:09):
Barlow Research—we are the gold standard in business banking. We've been in business for over 40 years, providing that voice of the business customer to our clients. As I've been talking about some of our syndicated research on the left-hand side of this slide, we also are a full-house market research firm, so we do custom research and multi-client studies as well. So definitely, if you have a research need, please reach out. I'd love to talk to you.
Chris Ward (25:33):
And like I said, I've been utilizing Barlow in my career for the past 19 years. I think at one time Linda used to say, "I went to your website more than anybody else." Their website is fantastic. If you ever need information, talk to Sandy. They've got it when it comes to small business and business banking. So that wraps up our presentation. I hope you all have a fantastic day. Thanks for letting us kick off the day today. Thank you.