Challenges in digital banking for the SMB space: a US perspective

How does SMB market look like in the US? Learn not only about this in our latest episode with Anthony Strike from SteadiPay!
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In the US, small and medium-sized enterprises (SMBs) have remained underserved in terms of banking services with most digital offerings primarily focused on securing huge corporations or reams of retail customers. That’s because SMBs have traditionally been viewed as having much of the same complexity as large-scale business customers but are overall, less profitable as customers, being tough to acquire and with churn rates approaching those of retail. Yet much of this banking landscape could well be about to change as we found out from our Banking on Air podcast guest Anthony Strike, CEO of US-based SteadiPay. SteadiPay began life as a personal finance app designed to set aside funds to offset money spent on an individual’s credit card. In designing the initial app, Anthony and his wife wanted to take advantage of all the rewards that came with using their credit card but needed, likewise, to know that they were always fully on top of their spending. Shortly after bringing the product out they began to get enquiries from SMBs for whom effective cash flow management is critical:

“Cashflow is the lifeblood of a small business and understanding how many dollars are moving in and out of your business is the most important thing you need to do as a small business owner. But it’s also not remotely why you got into business and it’s also a big manual chore.” – Anthony Strike

Anthony wanted to take much of that weight off the shoulders of small business owners. He initially hit a few roadblocks when initially scaling up the business realizing it was nowhere near as easy to secure the technology providers to build the product as he had first envisioned. The app needed to enable SMBs to assess their cash position real-time, forecast cash flow and also optimize cash holdings by securing superior money market rates without the need to swap banks. Searching for technology service providers he and his team learnt firsthand about the challenges and limitations of the BaaS space:

“As a FinTech, I’m dependent on my banking as a service platform and my banking relationships and I can only innovate to the extent that they innovate. I can only bring products to market that they have capabilities for. And that’s why I think you see a ton of the neobanks being relatively undifferentiated on product because it’s very hard to create something when all of them have some banking as a service platforms operating underneath.” – Anthony Strike

And according to Anthony, this remains a key reason why small and medium-sized enterprises in the US is so underbanked:

“It’s  less about them not having a bank and more about them not having access to tools to really grow and improve their business from the places they do bank.“ – Anthony Strike

How was SteadiPay able to build its offering and begin to offer SMBs these services? SteadiPay partnered directly with a bank and was able to create its own internal BaaS platform to manage ledgers and transactions. For critical elements of the technology build, SteadiPay did not have the ability to build this in-house, so the company partnered with Vacuumlabs.

“We found a partner that has expertise in building these really critical heavy-lift things that we need to build right now. We did not have direct experience building this, but we knew we had to and Vacuumlabs was an excellent fit—like a hand in a glove when it came to delivery.” – Anthony Strike

Anthony talked about the culture of old-school community banks in the US and how these institutions were able to offer a highly-personalized service that understood the all intricacies of the customer’s business, therefore they could recommend products that really fitted the bill for that particular customer’s needs. For Anthony merely delivering the data and providing a snapshot is just the starting point:

“There are a lot of forecasting tools that there’s a lot of things that help the customer see their data. But that should be the starting point for the small business where you understand their current cash situation and data or financial needs. And you don’t just dump a forecast on them and say, okay, here’s your data, go figure out what you need to do. They need help—like the community banker would do in the past.”- Anthony Strike

To find out more about scaling up their business and the reality of SMB space, listen to our new Banking on Air podcast episode featuring Anthony Strike of Steadipay – Available on Apple Podcasts, Breaker, Google Podcasts, Overcast, Pocket Casts, Spotify or here:

WHERE TO LISTEN    

Here’s a rundown of this episode:

  • 02:32 Journey of SteadiPay & focus on SMB market
  • 10:27 Outsourcing of platform development & cooperation with Vacuumlabs
  • 18:40 Limits of banking as a service providers
  • 26:09 Anthony’s point of view on underserved communities
  • 30:37 Anthony’s advice for Fintech founders

 

Anthony Strike is the founder & CEO of SteadiPay, a bank-agnostic platform that helps small businesses manage their cash more effectively. Anthony spent more than a decade in product and marketing but was a fintech novice when starting SteadiPay. 


‘Banking on Air’ is the official Vacuumlabs podcast covering the challenges, opportunities, perspectives and opinions that matter to you and to our community. In this podcast, we are looking under the hood of the changing face of tech: the acceleration in all things digital, the impact of regulation (and disruption), the need for genuine collaboration – and the specter of competitors old and new as it plays out in fintech and financial services around the world.

This podcast is brought to you by Vacuumlabs – and we’re sharing our experience and expertise in creating solutions for the digital journey for professionals, community banks, and fintechs. We believe that the future is in communities when it comes to digital transformation in financial services, and we invite you to join us and our guests over the coming weeks and months.

About Vacuumlabs

Vacuumlabs provides teams of flexible software engineers and designers with years of experience building fintech, online marketplaces, and digital products. Every step of the way, Vacuumlabs experts collaborate with clients, so that they can move fast, learn and iterate as they build world-class products together.