What's the biggest banking problem for small biz customers?Service. At the moment, banks are saying, "You're lucky to be our customer. Come to us if you need something." Business owners are saying, "We have other options." [Twitter co-founder] Jack Dorsey's startup Square is a great example of mobile payments innovation where the banks are being too slow to adapt. Software companies and other virtual financial institutions are taking over the relationship banks traditionally had with borrowers.
How will small business banking change over the next decade?Small businesses are particularly challenged by payments and cash flow. It will be increasingly important for banks to simplify the mechanism of receiving payments. Instead of waiting for a check to clear, they might be able to instantly receive a payment from a customer using a phone. Ninety percent of small business accounting is probably wrapped up in bank transactions. There's going to be some merger between Internet banking and Quicken (INTU)-like accounting functions.
Will that integration improve lending to small businesses?As information flow increases and banks know more about a business, the risk is reduced. At the moment the problem is, "I don't understand your business well enough to anticipate whether you can afford credit." As banks start to adopt innovations, it may be easier for them to assess credit worthiness. That may make them more inclined to lend—or if a business is clearly a risk, to communicate why and help fix it.