Global evolution of the small-business and middle-market segments: Responding to their growing international needs

By: Jordan Sternlieb

As the economy recovers, small and middle-market businesses are growing.  Not surprisingly, the combination of economic recovery and globalization is encouraging many to consider international expansion.

In the past, only large corporations had comprehensive international operations.  Today’s middle-market and small businesses are increasingly global in nature.  Removal of barriers to entry and free trade continue to facilitate this expansion.  At the same time, the need to look beyond the US to find additional streams of revenue and less expensive resources persists.  As these small and middle-market businesses expand internationally, so, too, does their need for international banking products and services.

Growing international service demands
On the treasury management side, small and mid-sized businesses have greater needs for foreign exchange, trade, and international payment services.

For larger banks, these international service capabilities may already exist internally, as these banks have been offering such products to their large commercial and corporate customers for years.  Smaller banks, therefore, must be able to grow along with their customers’ needs in order to protect their business from larger financial institutions with broader international offerings.

Increased uniformity of banking regulations, standards, and payment systems worldwide is allowing US banks to expand their reach overseas in the form of international products and services. This means that smaller banks do have an opportunity to expand their treasury management offerings to include more sophisticated international products that their clients will continue to need as they grow and expand operations across the world. 

How can you respond to customers’ growing international needs?
At large banks, domestic and international business services are often distinct departments.  In the past, when a few large corporate customers were the only consumers of international trade, payment, and cash management services, it made sense to keep these teams separate due to different regulations, systems, and local knowledge.

Today, with more customers requiring global banking services—many of whom are smaller and already have relationships with the domestic side of the bank—there is a significant opportunity to integrate domestic and international departments such as sales, operations, and client services.

Advantages of integration include:

  • Increased consistency in legal policies and systems across the domestic and international teams
  • Shared best practices and ability to leverage combined institutional knowledge
  • Cross-pollination of domestic and international product and service knowledge
  • Improved internal coordination and shared team member responsibility
  • Shared systems, tools, and technology
  • Enhanced customer service and synchronization
  • Improved processes and better performance

Smaller banks looking to expand into international services should closely align their international resources with their existing domestic product and services teams.  Oftentimes, it is assumed that global services are too different due to disparities in foreign regulations and customer needs.  While differences do exist, the value of blending domestic and international teams significantly outweighs any drawbacks.

Do you see your customers’ treasury needs advancing towards global or other more complex services?
When evaluating a bank’s commercial customer portfolio, a good place to start is by assessing the gaps between what the bank offers customers today and what those customers need in the near future. 

Many small and medium-sized businesses have already outgrown the basic domestic product offerings of most regional and community banks.

Banks should prioritize which products and services to offer next. In a unified domestic and international banking organization, these decisions can happen collaboratively.  Staying up to date with—or, even better, ahead of—your customers’ changing needs is critical for retaining this profitable segment of customers and can become a competitive advantage in winning new business.

For more information about domestic and international treasury and commercial service and product expansion, please contact Jordan Sternlieb.

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