Winning the Switch: How Community Institutions Can Use Tech to Capture Growing SMBs

Section 1: Why New SMBs Choose Neobanks

For early-stage SMBs, neobanks offer an irresistible value proposition: fast account creation, no paperwork, minimal fees, and clean digital interfaces.

Platforms like Mercury, Brex, Novo, and Relay have gained rapid adoption among startups by doing three things well:

• Enabling digital-first onboarding in minutes
• Offering integrations with tools like QuickBooks, Shopify, and Stripe
• Providing founder-friendly design and transparent pricing

A 2023 Statista study found that over 50% of newly formed SMBs in the U.S. now open their first business account with a neobank or fintech platform. The trend is particularly strong among digitally native founders and solopreneurs.

These SMBs didn’t bypass traditional institutions out of hesitation – they chose what was easiest. In the early stages of business, convenience often outweighs long-term considerations. Digital-first platforms offered a faster, simpler path, and that’s what these tech-savvy founders were looking for.

Section 2: Why Growing SMBs Outgrow Neobanks

What gets an SMB started often isn’t enough to help it scale.

As SMBs reach $250K–$2M+ in annual revenue, they encounter more complexity – new employees, new vendors, new capital needs. At this stage, the cracks in neobank functionality become more apparent.

Common SMB pain points with digital-only banking platforms:

• Inability to secure traditional loans or working capital
• Lack of treasury and cash management services
• Limited support for multi-entity or industry-specific operations
• No access to strategic guidance or in-person support
• Rigid fraud or compliance protocols that can freeze operations

So what happens when a startup begins to grow? It outgrows the neobank. A 2022 Cornerstone Advisors survey reported that 59% of SMBs with $1M+ in annual revenue use a traditional financial institution as their primary provider, citing “need for more comprehensive support” as a top reason for switching.

Importantly, these SMBs don’t want to give up tech – they just want more than their current provider can offer.

To win their business, a community institution must pair relationship-based service with modern digital tools. These are tech-forward SMBs; they won’t tolerate a clunky experience just because the service is local.

Section 3: Switching Is the Bottleneck

Even when an SMB wants to leave a neobank, the friction of switching often stops them from doing so.

Unlike a personal bank account, a business banking relationship is deeply embedded in the operations of the company. Payroll, vendor payments, invoicing, recurring ACH transfers, and tax obligations all run through the account.

Barriers SMBs face when switching:

• Risk of missed payments or disruptions to vendors/payroll
• Time-consuming process to update payment details across platforms
• Uncertainty about what will break during the transition

This creates inertia. Even if an SMB is ready to level up to a community bank or credit union, the status quo feels safer – unless the switching process is actively de-risked.

Section 4: Tech-Enabled Switching as a Strategic Advantage

To overcome the switching barrier, community institutions need more than competitive rates or better service – they need a frictionless, scalable way to transition SMBs from their current neobank.

Fortunately, fintech innovation is beginning to address this challenge head-on, giving community banks and credit unions new tools to stay competitive without adding staff or overextending resources. These solutions make it possible to offer a high-touch onboarding experience without the traditional operational strain.

Onsetto is one such example – purpose-built to help financial institutions simplify and scale the SMB switching process. Rather than relying on internal teams to manually guide each business through the transition, Onsetto automates the steps involved in migrating accounts, updating payment flows, and minimizing disruption.

It enables institutions to:

• Detect and map the current dependencies of an SMB’s existing account
• Assist SMBs in securely migrating recurring debits, credits, payroll, and account funds
• Minimize downtime and human error during the transition

By automating what has traditionally been a manual, time-consuming process, Onsetto solves an operational challenge for financial institutions while eliminating a major source of friction for SMBs. It transforms a resource-heavy task into a scalable, top-of-funnel acquisition tool – giving community institutions the confidence to actively pursue SMBs that would otherwise be too difficult or costly to onboard.

Just as ClickSWITCH helped modernize consumer account transitions, Onsetto brings that same efficiency to business banking.

Section 5: How Community Institutions Can Win These SMBs

To compete in this evolving landscape, community banks and credit unions must combine the best of both worlds: the relationship-driven support SMBs want, and the tech-forward experience they expect.

Five strategic takeaways:

1. Target SMBs in transition – not just startups

Focus on SMBs at the inflection point of growth. They’re already experiencing the limits of their neobank and are most receptive to a change – if the path is easy.

2. Use switching automation as your differentiator

Instead of “We’ll help you switch,” say “We’ll switch you over.” SMBs need to know you’ve solved their biggest pain point.

3. Match the digital experience SMBs are used to

Your user interface, digital onboarding flow, and transition tools must match the ease and speed SMBs are used to from neobanks – especially during the account switching process.

4. Combine automation with real human support

Even with automation in place, SMBs value knowing a real person is available if something goes wrong during the switch. Offering a clear point of contact during onboarding builds confidence and reinforces the difference between your institution and a faceless platform.

5. Treat switching automation as a growth channel

Partner with solutions like Onsetto to proactively identify and engage SMBs stuck in digital-first accounts. Build marketing campaigns around the message: “We make growing your business easier – starting with the switch.”

Conclusion: Tech-Forward + Relationship-Driven Wins the Future

SMBs aren’t looking to go back to analog banking – they’re looking to grow. Neobanks got them started. But now they need more.

Community banks and credit unions are in the perfect position to deliver that “more” – if they remove the friction of switching and modernize their experience.

By combining trusted local relationships with seamless switching technology, financial institutions can become the preferred destination for SMBs entering their next stage of growth.