Why high yield savings is a must-have for business owners

Businesses across the country are trading hands to their younger inheritors. This massive shift in ownership of small- and medium-sized businesses represents an equally massive shift in how financial institutions should think about business accounts. Millennial and Gen Z SMB owners bank and communicate differently than their predecessors. And banks that ignore this risk the market share..This is not your granddad’s banking relationshipMillennials and Gen Z SMB owners do business and bank differently than their predecessors. It feels almost too obvious to state, but younger generations have a strong preference for digital and mobile interfaces, and that extends to business owners who are younger. An Apiture-Harris Poll study reports 80 percent of Gen Z and Millennials prefer digital banking, and more than half identify it as a priority when choosing a new financial institution.In addition to their predominant preference for online banking options, younger SMB owners have high expectations for intuitive banking platforms, personalization, and ease of self-service. And believe it when they say they will abandon if a loan application, report, or payment process is too complicated, inconsistent, or takes too long. If you are to attract new business accounts, be sure to factor autonomy, clear and responsive design, and digital banking into the experience.With previous generations, financial institutions provided relationship pricing and rates to small businesses and were highly dependent on local reputation and walk-in traffic. How will a digital-first small business now know that they have access to special rates as they are unlikely to come in. Younger business owners, as deep users of digital channels, rely on the self-service that a bank or credit union’s website, social media, and marketing provide. When those channels are not being utilized for SMB-specific outreach and relationship building, there’s no relationship to be had.The enormous upside of business HYSAsSmall businesses want the same thing that larger businesses want: to maximize liquidity and optimize capital. Banks that go beyond lending for SMBs, that offer start-to-finish online support and the products owners need, will be the institutions that grow from SMB acquisition. One product that’s been neglected for SMBs is a high-yield savings designed for businesses.Simpler products such as high-yield savings accounts have a lower customer acquisition cost. And due to the primarily digital product setup of HYSAs for business, they’re not only desirable by SMB owners for capital optimization, they’re preferred by Millennials and Gen Z account holders. Self-directed and consolidated transactional accounts are another reason business high-yield savings offerings appeal to younger business owners. Couple a business HYSA with personalized guidance and service, and your financial institution will win loyalty. Think of a business HYSA as a gateway product. Customers who open one are thinking long-term and are more likely to explore additional offerings such as loans, credit lines, and wealth management. In addition, SMB owners tend to have more savings to keep with the right institution.The cost of inactionWhen it comes to SMB accounts as a deposit retention strategy, there is a cost of doing nothing. Beyond loss of potential revenue and customer base, banks that neglect to pursue SMB business risk increased competition from fintechs or large banks that offer SMB services and products. And in some cases, community perception can be damaged if local businesses perceive the bank as less reliable or inclusive — particularly important in areas where local branch access is important to SMBs. By minimizing account-funding requirements to as little as one step and allowing for paperless document delivery, banks can avoid the application abandonment that contributes to the potential loss of SMB accounts to large banks and fintechs. According to BAI, 52 percent of SMB owners said they plan to use more digital and self-service channels by 2027, and that number is likely a low estimate for digital-first, younger-generation owners.Where to invest to attract more, younger SMB accountsFirst, launch a digital first, SMB-focused savings account with a competitive rate. This can be white-labeled or affinity branded to reach niche small- and medium-sized business owner segments without requiring an overhaul of the bank’s legacy brand. Bundle a business HYSA with the frictionless tools that a younger audience wants, such as custom reporting, cash-flow insights, or real-time payments. Self-service, transparency, and ease of use build trust with younger owners.Finally, to promote a business high-yield savings account and other SMB services, lead with financial education and guidance to demonstrate partnership and relevance for the long run.High-yield savings accounts for SMBs aren’t a low-margin afterthought tactic. They’re a deposit growth strategy for banks that come with lower customer acquisition costs, appeal to the Millennial and Gen Z cohorts, and open the door to a full banking relationship with these younger business owners. Kathleen Craig is the founder and CEO of Plinqit, which offers two ways to help banks and credit unions attract deposits. Prior to launching Plinqit, Craig served as vice president for digital banking at a well-regarded community financial institution. Craig has successfully raised over $12 million in venture funding for Plinqit and has partnered with several of the largest financial technology companies in the world.