If you work at a bank right now (fall 2022), you are deep in the throes of strategic planning, budgeting or whatever your CFO calls it! As a former banker, my sympathy goes out to you (and, I hope your “cycle count” stays manageable!).

Strategic Underpinnings

When we ran this process at my former bank, there were two foundational concepts that we always reviewed with the Executive Team and Board:

1. Relative Growth Potential. This conversation concerned the different lines of business. To generalize, most banks have three lines of business - Retail, Commercial and Business Banking (in the middle):
2. Retail: typically core to the mission of the bank, but persistently low growth and low ROE. Recent rate moves have helped, but real estate costs and digital investment continue to weigh on Retail
3. Commercial: tends to be the most profitable segment, but is difficult to scale as growth is dependent on hiring experienced and specialized teams
4. Business Banking: we call this the Goldilocks segment, as it can be both profitable and scalable with the right execution. In our daily discussions with bankers, we see more and more banks placing bets to allocate resources to Business Banking based on strong growth and profitability potential
5. What Does a Bank Do…and What Do we Want to Be Good At. An ostensibly simple, yet critical conversation to have during planning.
6. When boiled down, banks perform four functions: safekeeping of deposits, evaluation/extension of credit, facilitation of money movement, and they provide advisory services
7. Every bank is different, but many have invested notably in lending and payments over recent years; and for those who are behind in those areas, it may not be worth trying to play catchup!
8. Many banks are now looking at Advice as a greenfield capability and a true way to stand out

So, as bank leaders are thinking through resource allocation for next year and beyond, there is unmistakable opportunity at the intersection of Business Banking having high growth potential and Advisory services as a way to stand out and win.

Market Validation

And, we don’t have to look far to see validation of this thesis. The mega-banks are investing heavily in this area to grow market share: BAC has Cashflow Monitor, PNC has Cash Insights, and US Bank recently announced Cashflow and tools for business customers. These offerings are clearly becoming table stakes for banks to attract and retain Business customers.

Further, the need for banks to provide these tools was perfectly underscored by the recent JD Power’s Business Banking Satisfaction Survey. They found 76% of Business owners want advice from their bank, but only 15% are getting it!

As bank leaders and executive grind through the planning season and look for “no regrets” investments to drive growth and profitability, they should give heavy consideration to providing/expanding advisory services and tools to Business customers.  

Proven Solutions

At Monit, we continue to help banks realize significant results in this area. As an example, one of our bank customers ran an analysis of business customers using our cashflow forecasting and guidance tools and noted those business grew deposit balances by ~60% and lending balances by ~30% in just one year. One bank is also using Monit’s analytics to monitor their portfolio’s credit health as we navigate a choppy economy. For details on how the Monit team can accelerate growth (and, compete with the big banks) in your Business Banking segment, please reach out to sales@monitapp.io!