U.S. Bank works to simplify SMB banking, payments

Citing entrepreneurs’ growing desire to get small-business tools from a one-stop shop, U.S. Bank is counting on its ability to provide both merchant acquiring and banking services to stand out in a highly competitive market.

The Minneapolis-based lender, which owns merchant acquiring unit Elavon, faces no shortage of rivals in serving small-business owners. JPMorgan Chase is the biggest merchant acquirer, and Bank of America and Wells Fargo have stakes in the market, too.

A number of financial technology providers, including Shopify, Stripe, PayPal, Block-owned Square and Fiserv, with its Clover unit, are also angling to serve that segment of merchants. 

The ability to tap both banking and payment services through U.S. Bank resonates with small-business owners, and the bank aims to stay “very competitive” from a pricing perspective, Shruti Patel, U.S. Bank’s chief product officer for business banking, said Wednesday in an interview. 

The bank has also invested heavily in its product suite and digital app capabilities, although Patel said the bank hasn’t disclosed the amount it’s spending on business banking improvements this year. Business banking generated $3.6 billion in revenue for U.S. Bank last year, and the lender sees an opportunity to grow that by up to 30% in the medium term.

Patel manages banking, payments and software for the bank’s roughly 1.4 million business banking clients, who generate up to $25 million in annual revenue. She worked at Shopify and JPMorgan before joining U.S. Bank last year. 

For Patel, the results of a recent survey of business owners in different areas of the country offer insight into what the fifth-largest U.S. retail bank should be focused on to meet client desires. 

“We hear small-business owners wanting more and more banking and payments integrations, to provide a much more seamless experience,” she said. 

The bank is working to bring together banking and payments products in a more unified way, and that’s an area of strategic investment, too. 

The desire for simple solutions has only become stronger, Patel noted. That’s indicative of how consumer banking and payment preferences have shaped what’s expected on the business side. 

“For small-business owners who want very simple payroll solutions – they’re running anywhere from two- to 10-employee shops – they don’t want something very complex,” she said. “They’re looking for a place where they have all of their banking products, they have all of their payment products, in terms of money movement capabilities, but also very simple software solutions to run their small business.”

With sole proprietors, “you very often see them more attracted to consumer banking products than business banking, because their needs are very simple,” Patel said. 

That’s inspired U.S. Bank to tweak its banking product suite in its micro small-business segment to feel more like consumer products, since those entrepreneurs crave simplicity and ease of use, she said.

The survey findings also underscored that the number of stand-alone software offerings in the market has increased, and the wide array of solutions available “overwhelms small-business owners,” Patel said. 

This marks the second year U.S. Bank has conducted the survey, which provides insights that flow into the lender’s product development cycle, Patel said.

U.S. Bank is also leaning heavily into providing small-business customers with access to capital, since obtaining funding to support their business is among entrepreneurs’ top stressors, Patel said.

The bank is constantly evaluating how to connect with potential customers in that endeavor, through such avenues as advisers and programs focused on serving Black and Hispanic business owners, or women-owned businesses, she said.

To stand out from competitors, U.S. Bank is also keenly focused on providing Small Business Administration loans, Patel noted. For the fiscal year that ended Sept. 30, 2023, the bank approved 2,264 SBA 7(a) loans, totaling $406.9 million. Thus far this fiscal year, the bank has approved 2,746, amounting to $557.5 million – putting the bank in the top five lenders by loan approval amount, according to the SBA.

“Access to capital and making sure that small businesses have that need met at the time of growing their business or starting their business is very big,” she said. “We have actually expanded that program over the last year, significantly.” 

For the bank, it’s a prime opportunity to give businesses a leg up early on, with the goal of retaining that customer as they grow. 

“It’s primacy,” Patel said. “You want to make sure you’re driving engagement and primacy to the banking product.”