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Banks have a golden opportunity to provide more personalized advice to small businesses that currently feel underserved.  

Banks have an opportunity to step up their services for small business customers, according to a new report from JD Power.   

“Small business owners are staring down an increasingly ominous set of challenges” and are “looking to their banks for guidance on things like available credit, tips to reduce fees, and technology that can benefit their businesses,” according to JD Power director Paul McAdam.  

“SMBs want technology partners that help their business grow or reduce expenses,” he told Insights Distilled. Banks should offer both digital tools and priority numbers that give clients the ability to speak with a real human on the phone.  

While banks have recently launched a slew of new products aimed at small businesses – for example, US Bank just added a new tool to help SMBs predict their future cash flow, while Barclays is hastening its cash advances – there’s still more to be done, McAdam said.  

Clients want “to receive tips to help improve their business’ financial situation,” he added, as well as “practical advice on ways to avoid and reduce banking fees.” 

Using artificial intelligence for underwriting and risk mitigation helps insurance providers be more efficient and proactive – which is especially important for cyber-related policies, as ransomware payouts top $1.2 billion. 

Leading insurance firm Travelers is partnering with artificial intelligence-driven provider Corvus Insurance, an Insight Partners’ portfolio company, to bring cyber-related products and services to Europe, the two companies just announced.   

Corvus uses machine learning to gather and analyze a proprietary dataset that helps it quantify cyber risks and deliver optimal pricing and coverage quotes within minutes. Its scanning tool also provides ongoing threat monitoring and alerts, which is particularly important as attacks – including ransomware threats – are on the rise.  

“Travelers will find that Corvus’s alerting leads to faster responses and remediation against zero-day vulnerabilities,” Corvus’ chief insurance officer, Lori Bailey, told Insights Distilled. “In fact, the Corvus team often hears from its policyholders that responses are significantly faster than their dedicated cybersecurity vendors.” 

Travelers will also have access to a Corvus platform that aggregates risk data and mitigation best practices. 

“Commercial insurance is in the early stages of embracing data science and AI to better distribute and underwrite policies,” according to Insight Partners’ managing director Deven Parekh, and Corvus’ technology allows it to improve underwriting, the broker and client experience, and loss prevention. 

While checks may seem archaic, they’re still widely used for payments like class action settlements, refunds, or investment disbursements (at least in America). It’s more efficient and environmentally friendly to use other modern payments methods, but the behind-the-scenes orchestration presents challenges for incumbents. 

BNY Mellon just launched a new payment platform called Vaia – in partnership with fintech Verituity – to help its clients move away from paper checks in favor of real-time payments options. Offering a range of payment choices has “historically been time and cost prohibitive” for businesses, but Vaia “is doing the heavy lifting,” a spokesperson told Insights Distilled. 

Verituity helps verify the identities of the payer and payee, as well as the chosen payments method (including Zelle, same-day ACH, and, eventually, PayPal or Venmo), so that BNY Mellon can help clients execute more flexible payments.

Verituity first started working with BNY Mellon through its accelerator program earlier this year and it lets BNY Mellon “take a zero-trust approach to payment verification, establishing that validation step quickly enough so that it merges seamlessly with the transaction,” the spokesperson said.  

BNY Mellon currently processes more than 300 million check payments per year and it’s not the only large bank working to cut down on that old-school modality: JPMorgan is piloting a new platform to help eliminate the need for rental checks. 

Data governance platforms help financial institutions wrangle and understand their vast swathes of data while maintaining regulatory compliance, ultimately allowing them to compete with digital upstarts by delivering enhanced customer experiences more quickly.  

Data scientists, analysts, and engineers at $207 billion-asset Fifth Third use collaborative data platform Alation to understand and take advantage of all the bank’s data, ensuring that the right people have access to the right information at the right time.  

Alation’s technology – which combines machine learning and human input to label, organize, govern, and share data – helps massive organizations like Fifth Third save time and money (Forrester estimates that the platform can save customers 211 workdays by auto-classifying data and $2.7 million in productivity improvements). 

To compete with “digitally born, direct-to-consumer” neobanks, legacy financial institutions need to optimize their data use “to gain efficiency and better understand their customers,” Alation CTO John Willis told Insights Distilled. The platform can help incumbents launch new features, faster, he said.  

Alation just raised a $123 million Series E round, which included minority investments from HPE, Salesforce, Dell, and Insight portfolio company Databricks. Its competitors include Collibra (used by DNB Bank and Credit Suisse) and Ataccama (used by Aviva and Société Générale). 

Travel is one of the most aspirational and big-ticket spending categories for consumers. By providing an exceptional in-house booking experience where customers can spend their credit card points, banks are building loyalty while also carving out additional travel spend for themselves.

Capital One is the latest bank to step up its bid to build out travel services and entice credit card customers.  

It just invested $96 million in travel app Hopper, which powers the bank’s booking portal, as a follow-on to its $100 million investment last year. 

Capital One Travel includes price drop protection and easy cancellations for hotels and flights, as well as exclusive experiences and premium benefits at a curated selection of resorts and hotels. By investing fresh funds into Hopper, Capital One aims to accelerate the technological progress that will help further differentiate its travel products. Ultimately, it sees its robust travel offerings as a way to appeal to – and draw more spend out of – its credit card customers, as well as rope in new ones.  

Other big banks have been beefing up their travel products through partnerships, acquisitions, and investments as well. Here’s a non-exhaustive run-down of recent moves: JPMorgan bought luxury travel agency Frosch, Citi is partnering with Booking.com and just invested in car rental startup Kyte through its VC arm, and US Bancorp bought travel platform TravelBank.  

Confidential computing – which protects data while it’s actively being processed, not just when it’s stored or transferred – is making inroads with big banks for use in marketing, fraud detection, and cybersecurity. 

Confidential computing is starting to be adopted at major banks, thanks to efforts from cloud providers like Microsoft, Google, and IBM. 

This form of encryption allows data to stay secret even when cloud servers are analyzing it, which gives banks the ability to share information about transactions without making personally identifiable information and other data visible to partners or competitors.  

Pooling encrypted transaction data could allow big banks to use machine learning to flag unusual patterns that could point to fraud or money laundering. In that way, confidential computing allows a bolder approach to collaboration among banks without running afoul of regulations.  

Alternatively, it allows banks to share data with merchants, so that they can better target consumers for advertising without invading their privacy. For example, RBC uses confidential computing with Microsoft Azure to combine its own transaction data with merchant data, run machine learning algorithms to figure out how to best target consumers, and ultimately provide real-time, personalized ads without letting either side have access to new, unencrypted customer data.  

JPMorgan security director Matt Novak recently described confidential computing during a conference talk as set to revolutionize cloud computing in finance: “Confidential computing is to traditional cloud what traditional cloud is to legacy on-premise datacenters,” he said.   

As traditional financial firms continue to explore the use of blockchain and digital assets, compliance tools to help manage regulatory and reputational risk are in high demand.  

Blockchain intelligence firm TRM Labs is winning support from legacy financial firms for its ability to help launch blockchain and digital asset initiatives by analyzing and investigating crypto-related fraud and financial crime. The firm provides tools to vet and assess risk from third-party service providers, flag suspicious transactions, and prevent money laundering and other crypto crime.  

While big banks consider blockchain and digital assets worth exploring – experts believe they have the potential to fundamentally rearchitect the way that finance works – they need to be more cautious than their upstart competitors.  

Thoma Bravo just led TRM’s $70 billion Series B extension, with participation from Goldman Sachs, PayPal Ventures, Amex Ventures, and Citi Ventures (while Visa and JPMorgan both invested in a previous round).  

In the same vein, Mastercard acquired TRM rival CipherTrace in September 2021 while competitor Chainanalysis recently raised $170 million. Overall, financial institutions are leading the way in public company blockchain investments. 

As small businesses report feeling underserved by their banks amid this difficult economic climate, financial firms have an opportunity to buck the status quo by providing personalized analytics that help customers improve their operations and profitability. 

Standard Chartered is partnering with fintech platform upSWOT to offer forecasting, analytics, and advice to its small business customers. The partnership gives SMBs a single, comprehensive dashboard to track and analyze their cash flow, inventory, and return on investment, which can help drive their decision making around marketing tactics, financing requirements (like credit lines), and more.   

It’s a “win-win” situation for both the bank and its SMB clients: The partnership will allow SC to have a “deeper understanding of their business users in order to provide customized up-sell and cross-sell opportunities, speed up the loan underwriting process, cut renewal costs, and most importantly, build trusting relationships with their SMBs,” upSWOT’s head of digital acquisition, Nana Mardoyan, told Insights Distilled. SMBs, meanwhile, “will have access to advanced financial technologies that they need in order to compete in the increasingly complex global marketplace.”  

SC is launching a pilot initiative in Singapore, with plans to expand next year. It also isn’t the only bank that’s been beefing up its small business offerings recently: For example, US Bank has worked with an unnamed fintech to help SMBs predict their future cash flow, while Barclays is partnering with UK fintech Liberis to make cash advances faster and easier. 

Pay-by-bank capabilities – which let consumers pay bills directly from their bank accounts without having to type in routing or account numbers – reduces risks and costs for merchants and can earn goodwill from consumers. 

Mastercard and JPMorgan just announced a new pay-by-bank product to let consumers pay bills directly from their bank accounts with great security and ease. 

JPMorgan’s business customers benefit because pay-by-bank nixes credit card swipe fees and reduces their risk. 

“The technology behind pay-by-bank reduces the likelihood of unauthorized transactions and frees our clients from the need to retain — and the responsibility to securely maintain — consumer banking information,” JPMorgan’s head of payments, Max Neukirchen, said in the press release.  

Consumers, meanwhile, have an easy, instant, and secure way to pay, without relying on credit. “Digital acceleration has changed how people think about money and what they expect from everyday transactions,” a Mastercard spokesperson told Insights Distilled, citing those consumer expectations and technology innovation as drivers of open banking capabilities, including pay-by-bank. 

JPMorgan and Mastercard are piloting pay-by-bank with a small number of US-based billers and merchants this year and expect to expand in 2023.  

The LGBTQ+ community has a range of needs, including specific challenges around chosen names and family planning, that most traditional banks aren’t serving. 

Daylight, a digital bank aimed at LGBTQ+ people, has raised $15 million to promote and expand features including debit cards with customers’ chosen names, increased cash back for spending at queer and allied businesses, guided financial goals for gender-affirming procedures (like top surgery or facial feminization), and family-planning resources, including a marketplace of IVF and surrogacy clinics.  

Citi Ventures is a minority investor in the round, and its participation follows the bank’s efforts earlier this year to allow its transgender and nonbinary customers to assign a preferred first name to their debit cards. Many LGBTQ+ individuals say their legal identity doesn’t match their current chosen name, but most banks don’t offer an easy solution for switching out what’s on a user’s card. Helping customers avoid their deadnames is a relatively easy way many incumbents could appeal to their LGBTQ+ customers.    

Daylight is one of a spate of neobanks to emerge recently to provide niche features aimed at specific demographics or causes, including immigrants, Black Americans, Asian Americans, and battling climate change. These challengers endeavor to build more loyalty and connection with customers than a traditional bank by deeply catering to their needs. And while incumbents may not be able to launch hyper-specific features like neobanks do, they should take note of the messaging, marketing, and types of programs.  

Daylight’s fresh funding also comes at an intense moment for LGBTQ+ issues: The US Senate just took a crucial step in legally protecting same-sex marriages, while another horrific and deadly shooting took place at a queer nightclub over the weekend.