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used to say, "We just can't figure out how we can make Lifeline for SMBs
money on a million dollar loan." What they meant was
they needed a larger loan deal to cover their fixed and You see a lot of press about "open banking," where
incremental expenses of booking the loan and doing there are no branches. A recent survey by a firm called
ongoing monitoring. cg42 showed that only 9 percent of customers said they
would be most likely to switch to an online bank with no
More than banking branches. A well-managed community bank is a lifeline
for entrepreneurs starting their own businesses, and they
Local banks are interested in entire business relationships, want to be able to go to the bank and talk to someone they
not just banking relationships. They have local decision- know, not talk to an AI-driven call center.
making; they make faster decisions than larger banks;
and because of their legal lending limit, they can make a Recently, the banking world was shocked by a quote from
loan for a few hundred thousand dollars. There is ongoing David Furlonger at Gartner, stating, "Within 12 years, 80
communication with customers, and there is an element of percent of financial firms will either go out of business,
trust. I would argue that community banks are also better or be rendered irrelevant by new competition, changing
prepared than megabanks for the inevitable credit quality customer behavior, and advancements in technology. …
cycle. Digital transformation is largely a myth, as institutional
mindsets, processes and structures stand firm. Established
When you see a headline like, "Banks need to find more financial services providers will have to move faster on
effective digital strategies," think about the following digital business by building digital platforms, or finding
quote, which I have on my bulletin board (unfortunately, niche products and services to sell on other platforms."
I lost the author's name): "A knowledgeable, enthusiastic,
driven banker, who is also supported by original Now, much of this talk is nonsense, as pointed out by bank
marketing, will attract customers with creative deal analyst Chris Skinner, but he added, "This marketplace of
structuring, cash management services, business advice, apps, APIs, and analytics is what banks have to adapt, to
wealth management, and other forms of advisory services, interface and integrate with." Banks look to Jack Henry to
even some that have yet to be developed!" figure this out for them and build new platforms, because
nobody else can do it for them.
As an ISO selling card processing and payment services,
one of the smartest things you can do is develop a There are about 6 million small businesses in the country
relationship with a local community bank that specializes with more than just one employee. These businesses
in small business lending. account for almost half of the entire workforce in the
country! Here is a quote from the Jack Henry blog at:
These banks differentiate themselves from large banks https://discover.jackhenry.com/strategicallyspeaking/.
by better customer service and responsiveness, and a real
presence in the community. Their boards are filled by "When a business is expanding and needs access to cash,
local businesspeople. Small banks do not have specialized the owners have several options … These are tough
sales staff to sell cash management and treasury services, choices for the average small business owner, who likely
but their loan customers need to take card payments, knows a lot about their industry, but may know little
particularly now that Square has convinced even micro- about finance. These owners often look to their banks as
merchants that they can and should accept cards. an advisory source regarding the financing that would
best fit their scenarios. Success in this area can lead to
Local banks need to partner with someone who will walk long-term business relationships where you view your
the streets, call on their loan customers in person, and financial institution as a trusted partner."
provide merchant services, particularly the necessary and
vital degree of handholding that comes with setting up a As an ISO, this is exactly where you want to be with your
merchant on a new provider. This should be a reciprocal customers, too. These are trusted personal relationships
relationship, where the bank refers their merchants to you built over a long time. They are not going to be impacted
and you in turn refer potential loan customers to the bank. by any new fintech products coming down the pike or by
open banking. Working with a local community bank to
Small banks need to cultivate and help incubate small and help their customers succeed is the best way to create an
midsize businesses (SMBs) so those businesses can survive attrition-proof customer base over the long term.
the first few years, because most new SMBs do not make
it to five years. They need trusted advisors to provide Brandes Elitch, director of partner acquisition for CrossCheck Inc., has
guidance and support, on an ongoing basis, which you, as been a cash management practitioner for several Fortune 500 compa-
ISOs, can provide. nies, sold cash management services for major banks and served as a
consultant to bankcard acquirers. A certified cash manager and accred-
ited ACH professional, Brandes has a Master's in Business Administration
from New York University and a Juris Doctor from Santa Clara University.
He can be reached at brandese@cross-check.com.
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