As lenders increasingly turn their attention to the small and medium-sized business segment, Plaid is launching a solution designed to provide better access to data.
The company’s Transactions for Business platform builds on Plaid’s existing infrastructure, originally developed to parse consumer transaction data. By shifting this model for small business clients, the platform will allow financial institutions to get a holistic view of an enterprise’s financial profile—including revenue, payroll, loans, and expenses.
With these insights, banks may be better positioned to support their small business customers through more personalized financial tools, both for managing operations or obtaining capital.
A Difficult Situation
Securing financing has been a pain point for small businesses over the past few years. Federal Reserve data found that a little over a third of small businesses that applied for financing last year received either partial financing or nothing at all.
Because many larger financial institutions view smaller organizations as too small to be profitable, many small businesses have increasingly turned to fintechs or nontraditional lenders to make ends meet.
Many cash-starved small business owners have even turned to credit cards, with more than half reporting they have relied on personal credit cards to cover business expenses. This can often worsen an already difficult situation, as small business owners typically face less favorable credit card rates than the average consumer.
Taken as a Whole
Taken on its own, a small business may seem like too much effort for too little profit. However, when taken as a whole, there are roughly 34 million U.S. small businesses. This creates a $150 billion opportunity for financial institutions.
This opportunity can be even greater for community banks and credit unions that have struggled to grow their consumer banking base in a competitive environment. Not only are small businesses a new customer base for these institutions, but building relationships with local business owners gives them a way to make inroads in their community.
As more institutions eye the small business segment, Plaid is banking on its established network. The company noted that it supports business checking, savings, and credit accounts from nearly all U.S. banks that serve small businesses.
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