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American SMBs Found To Be Redirecting $225Billion From Inadequate Banks To Third-Party Providers

New whitepaper indicates that America’s significant small and medium-sized business (SMB) community is migrating to the payment and accounting services of third-party providers; to the detriment of traditional financial institutions. 

$225billion – that’s the figure that American SMBs spend on payment and accounting services annually. The businesses producing this figure make up around 90 per cent of the USA’s total business demographic and employ roughly half of all Americans.

Although SMBs were previously highly-reliant on their financial institutions to provide accounting and payment services, a new whitepaper from BankiFi and RedCompass Labs has exposed an ongoing shift away from traditional institutions to third-party providers.

The whitepaper, ‘SME Banking Channels: converting a money pit into a business opportunity‘, documents the catalysts of this exodus and delves into how banks can most effectively and lucratively deliver cutting-edge technology.

Unable or unwilling to meet demand?

Having identified the SMB shift to third-party providers, the whitepaper rightly questions why financial institutions are failing to compete and retain their market share.

Although it does confirm financial institutions as a natural first choice for SMBs seeking payment and accounting services, the whitepaper further uncovers an inability/unwillingness among banks to provide solutions that are on par with those of their third-party competitors.

It further notes that a rise in open banking by about 30 per cent shows that small businesses are increasingly turning towards third-party service providers.

The brunt of the issue

Above all, the whitepaper seeks to resolve, or at least identify, why the financial industry powerhouses continue to struggle in this most basic department.

It attributes this outcome to the overall cost ownership for in-house digital channels, exacerbated further by increasing technology and staffing costs.

However, BankiFi and RedCompass Labs have evidently been conscious of avoiding doom and gloom, despite their current position as bearers of bad news.

The duo have leveraged the opportunity of the whitepaper to suggest to banks that these costs can be mitigated through partnering with external service providers. In this way, they will be able to offer attractive, top-of-the-line technology for the very best price.

This suggestion in itself is poignant, as BankiFi itself is able to act as an external partner for banks in this department, affording its banking partners ‘the best technology with minimal cost’.

Time to act

Reflecting on the findings of the whitepaper, Keith Riddle, CEO of BankiFi Americas, confirms that “we’re seeing a real crisis for both banks and small businesses.”

Despite the clear popularity and demand for payment and account services among SMBs, Riddle currently sees banks as “disincentivised to offer those solutions given the current state of the market.”

However, echoing the advice of the whitepaper, he puts forwards that “through external partners…banks can have the best of both worlds, offering the best technology with minimal cost to the bank itself.”

Furthering this, Kjeld Herreman, head of strategy advisory at RedCompass Labs, explains that “In our discussions with financial institutions, it became apparent that it was quite challenging for them to quantify the costs and the benefits associated with their SME banking channels.”

“We’ve developed a model for banks to better understand these drivers in order to refine their channel strategies for this important client segment,” concludes Herreman.


  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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