“When you are founded by an entrepreneur, you are encouraged to think like a startup,” said Nicole Lorch, First Internet Bank’s president and chief operating officer. “That provides us with a unique perspective in delivering innovative solutions to meet the needs of small businesses.”
First Internet, the first Federal Deposit Insurance Corp. (FDIC)-insured digital-only institution, aims to provide small-business owners with insight into their finances by breaking down spending trends by category. The account also offers a budgeting tool and transfers.
“Now, more than ever, entrepreneurs need to efficiently track all their finances — both business and personal — to save time and money,” Lorch said. “Do More Business Checking enables small-business owners to focus on running their operation with a clear sense of their big financial picture.”
First Internet’s new account creates a one-stop shop for small-business owners, many of whom go to third-party providers for various business-related tasks, according to a study by Cornerstone Advisors.
Small-business owners spent more than $500 billion on accounting, invoicing, bill payment and payment acceptance services from third-party providers in 2020, the consulting firm found.
About four in 10 small businesses with revenues greater than $5 million said they would “definitely” consider a bank for their accounting, invoicing, bill pay and payment acceptance services, according to the report. That represents a $370 billion market opportunity for banks, Cornerstone said.
A number of fintechs have launched with the mission to fill the small-business banking gap. The industry, however, has seen some fluctuation in how fintechs have structured their business models around serving the segment.
Corporate spending-management firm Brex announced in June it made the “difficult decision” to stop serving traditional small-business clients so it can focus on venture-backed startups.
Azlo, a neobank that offered small businesses a subscription-based banking service and a subsidiary of BBVA USA, became a casualty of the Spanish lender’s decision to sell its U.S. retail arm to Pittsburgh-based PNC for $11.6 billion in 2020.
Azlo’s shutdown sent a surge of former users to small-business banking platform Novo, which spurred the neobank to launch new features including invoicing and budgeting, Novo CEO Michael Rangel told Banking Dive in March 2021.
Bluevine, another fintech targeting the small-business market, offers checking accounts and lines of credit to small-business owners. Bluevine launched in 2013 with an invoice factoring product, a feature it sold to FundThrough in January, according to Protocol.
As fintechs continue to find ways to capture the small-business market, traditional banks need to be aware of entrepreneurs’ financial needs, Ron Shevlin, director of research at Cornerstone Advisors wrote in Forbes.
“Banks must become embedded into small businesses’ everyday operations in order to achieve the speed and agility needed to compete with new competitors,” Shevlin wrote.
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The business banking startup added an automated expense-management tool for its middle-market clients. But the company won't be tempted to aim small to snatch a share of Brex's core audience.
Banks' ESG considerations stretch far beyond climate change. This snapshot touches on banks' inclusion efforts along lines of race, gender and income, social stances and a look at the LMI-area investment one big bank is making ahead of a merger.
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