Small Business Banking in the US

Sep 18, 2020
4 min read

Despite the first quarter of 2020, the US small business index score has decreased by about ten points from the fourth quarter of 2019. At the same time, the same index shows a growing uptrend from 2011 to 2020. There are more than 30 million small businesses (SBA statistics) in the United States, they take only six days to open, and around 33% get started with less than $ 50,000. Besides personal savings, the top sources of survival for small businesses are profits/assets, credit cards, and bank loans. Overall, small business banking plays a central role in the future growth of small businesses/startups.

What is business banking?

With business banking, also called commercial or corporate banking, banks provide financial and advisory services to small and medium businesses and larger corporations. These services are tailored to each business's specific needs and include deposit accounts, loans, and credit card services. Banks may also offer asset management and securities underwriting to their corporate and business clients, cash management solutions, payroll services, and fraud protection. Demand for business banking is increasing in the United States, as the business field is on unstoppable growth.

What are the top 5 Banks for Small Businesses in the US?

Coming in at first place is Chase, a traditional bank that offers everything that a small business might need, has lots of locations, business checking with minimal fees, and it's one of the best online banking and mobile banking available.

Navy Federal Credit Union occupies second place. It's not technically a bank but offers services suitable for small businesses: business checking and savings, loans, credit cards, payment processing, and even retirement and insurance. To open a business bank account at Navy Federal, you'll first need to join as a private individual because it's not a profit bank. It charges lower fees and offers higher interest rates on savings than profit banks.

In third place, there is an online bank: Axos Bank. It's the oldest online bank in the United States and stands out thanks to its interest-bearing checking account. It gives good interests and excellent online and mobile banking options. The account includes up to 50 free items per month, so it is not suitable for businesses with many transactions.

Wells Fargo takes up fourth place and is the most popular bank in the United States. Because Wells Fargo is so big, it offers virtually any service you might need, several business checking accounts, payroll services, business tax services, etc. Wells Fargo is one of the best options if your small business uses a lot of cash.

In the last position, there is M&T Bank. It's suitable if your business is on the East Coast, but its strength is the business review to achieve the best small business success.

What will be the impact of Artificial Intelligence in the future banking development?

Banks' traditional role in the economy has changed from the conventional intermediation approach to a financial shop, in which banks offer a wide range of financial services. Banks and financial markets have become more linked, integrated, and recently, Fintech has created other disruptive forces in the financial industry that have yet to be explored in the upcoming years.

There are three main channels where banks can exploit artificial intelligence to save on costs, and they are front office (conversational banking), middle office (anti-fraud), and back office (underwriting). The most significant savings opportunity comes from the front and middle office.
AI is leveraged on the front office for customer identification and authentication, deepens customer relationships, and provides personalized insights and recommendations with virtual assistants' help. Moreover, AI works within middle-office functions to detect and prevent payment fraud and improve anti-money laundering (AML) processes and regulatory checks.
Big tech companies will move deeper into banking. Apple launched its Apple Card with Goldman Sachs for private consumers. Maybe it will be available for small businesses in the future. Stripe Capital has launched a debit card for businesses, and Amazon Lending offers loans to help small-medium companies grow.
Large tech companies are gaining a powerful scale, hoovering up data, building relationships, and brands with banks that are behind their financial efforts.
Banks are finding additional ways to partner with Fintech, for instance, HSBC has launched a digital lending platform built with technology from the Fintech Amount. These partnerships will multiply as other banks look to enter into the digital lending space. Recent research confirms that digital lenders more than doubled their market share in the past four years, with consumers turning to digital-first providers.
Open banking will play a vital role in the future. It allows third-party providers to securely access and analyze a business' historical banking data almost instantly. Open Banking could help in tracking cash flow and avoid late payments. Runpath, part of Experian, is developing a cash flow management tool that uses Open Banking to provide a historical analysis of income, outgoings, and cash flow capacity. By analyzing and tracking real-time banking, the tool can understand when cash flow is crunching, allowing the business owners to access funding in advance to mitigate any negative impact.

Happy Small Business Banking growth!