One of the biggest ways FinTech firms have been able to gain a competitive edge on traditional banks for small business SMB customers is through relationship-building Banks are shuttering their physical branch locations at the fastest pace in years according to The Wall Street Journal WSJ Small business financial services FinServ experts have warned that a lack of access to human bank representatives is harming SMB owners ability to not only obtain the bank products they need but the advisory services they crave from their financial service providers The implications of this can be significant For business owners the absence of branches and the face-to-face relationships that go with them can complicate everything from getting financing to depositing earnings to making payroll and local economies can suffer as a result said Fortune in August covering news that Chase announced plans to open 400 more bank branches to support SMBs affected by industry-wide branch closures While exact data is sparse credit unions CUs are often lumped into commentary about branch closures and their impact on small businesses However Trevor Dryer co-founder and recently former CEO of small business lending technology firm Mirador said that unlike large banks credit unions often offer a more localized and personalized approach to servicing their small businesses What differentiates credit unions in the small business finance space is that they are very member-focused he recently told PYMNTS They are able to offer their small business member bases competitive rates for funding in addition to resources and personalized support Its the personal guidance thats the secret sauce to enabling small businesses to grow and thrive While bank loans may be small businesses first target when they need financing research from the Biz2Credit Small Business Lending Index released last month found credit unions approved more than 40 percent of small business loan applications last October That is significantly greater than the 268 percent approval rate at large banks small banks approved even more 501 percent during the month A variety of factors go into why large banks are less likely to approve small business loan applications than credit unions including tighter risk and capital control requirements as well as greater application volume However the data may also reflect the ability for a small bank or credit union to develop a relationship with SMB clients that is of higher quality than major multinational financial institutions FIs perhaps even without face-to-face interaction in a physical branch Mirador recently took a major step in positioning itself to service the credit union community This week the company announced that it reached an agreement to be acquired by one of its investors CUNA Mutual Group an insurance and financial technology provider to credit unions CUNA invested in Mirador last year via its venture capital arm CMFG Ventures The acquisition not only signals the strengthening role that credit unions play in small business finance according to Dryer there are 1 900 credit unions in the US that currently offer small business loan products today with many more considering it but reflects the credit union communitys interest in following one of the biggest trends to emerge in the last year FI-FinTech collaboration Its a topic generally dominated by news of traditional banks partnering with or acquiring FinTech firms often in an effort to outsource product development to more quickly introduce enhanced digital solutions to their clientele This often comes in the form of collaborating with FinTech firms that address key friction points in small business finance including SMB lending as banks face pressure to improve their service and product offerings In some ways the trend allows banks to compensate for physical branch closures shifting investments and resources to digital platforms to promote a positive small business customer experience and develop relationships virtually Miradors acquisition shows that credit unions seem eager to capitalize on their position in SMB lending which Dryer expects to grow Credit unions are looking for technology that will create time savings on routine back-office processes he said enabling them to focus on member interactions that bring a value-add Like big banks credit unions collaborations with FinTech firms are an investment in product and the small business customer experience added Dryer The role of a credit union continues to be that of a trusted advisor for its small business member base he continued Top-tier banks while having invested in FinTech innovation and digital transformation still lack personalized interactions Credit unions still have a lot of ground to cover to compete with big banks however The Federal Reserves 2017 Small Business Credit Survey found only 26 percent of small business loan applicants deemed medium high risk were approved for financing from a credit union lower than large and small banks 35 percent and 47 percent respectively Furthermore credit unions were chosen by just 9 percent of small businesses that sought credit meaning the category came in last place behind online lenders the source of 24 percent of SMBs At the same time however the Fed found credit unions have the highest net satisfaction levels among non-applicant customers at an impressive 81 percent compared to just 43 percent for online lending platforms Credit unions participation in the FI-FinTech collaboration trend may be an opportunity for this category of lender to combine its high customer satisfaction rates with the popularity and technological agility found among FinTech firms According to Dryer marrying these two goals of small business lending is no easy feat and while tech is key the customer experience trumps all The digital lending experience for small businesses is a complicated sometimes confusing process he noted The differentiator is a true focus on the small business customer s themselves not the front-end application the loan origination system or the compliance or underwriting process Its about understanding and humanizing the unique challenges the small businesses face when seeking capital LATEST INSIGHTS Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation thats reshaping the payments and commerce ecosystem Check out the latest PYMNTS report on driving gas pump payments to the C-Store acquisitions B2B B2B Payments Bank Branches Collaboration credit unions CUNA Digital Banking FI FinTech Mirador News SMB SMB banking SMB finance SMB lending