It’s practically an industry cliché at this point. Many community banks have that one lender who’s infamous for pushing exception pricing on a loan in return for the promise of major deposit accounts that never seem to materialize.
The trope is so common that PrecisionLender (now Q2) conducted research in 2021 testing the pattern. They found that even when additional business was explicitly promised by the client, it only showed up 36% of the time — and that percentage was only reached after extending the timeline out to two years. Some banks are going so far as to document these types of promises in loan covenants to try to make them enforceable.
It doesn’t seem fair. Community banks punch above their weight class when it comes to small business lending. According to data from the Federal Reserve Bank of Kansas City, they hold 40% of the small business loan market but only 13% of the industry’s total assets. The reason appears to come down to customer experience. The reason appears to come down to customer experience. And no one saw that more clearly than the entrepreneur who set out to fix it.
The Technology Gap Breaking the Relationship
When Jorge Garcia needed access to credit to grow his business, the big banks didn’t give him a second look. Even though he was a successful, serial entrepreneur — having launched global platforms with millions of users for companies like Disney, Coca-Cola, and numerous venture-backed startups — the Honduran immigrant wasn’t able to get a simple line of credit from a large institution. A friend eventually connected him to a community bank, where his business was welcome.
Garcia got access to the credit he needed and was appreciative. He loved the bank that had given him a chance. But eventually, he had to move most of the company’s deposits away from them. “The tech wasn’t there,” he explained. “It was so cumbersome. It was a line of credit and every time we needed to use it, we had to call someone. For wire transfers and things like that, they had three different systems.” A couple of months into the relationship, the company made a calculation and decided it was better to pay more for products at a different bank because they made it so much easier to move money.
The experience stuck with Garcia, who was genuinely torn about leaving the community bank. He started asking other entrepreneurs in his circle and was told repeatedly that their operating accounts were at megabanks and large regionals. That didn’t sit well with Garcia, who described his thought process, saying, “I am a strong believer that one of the reasons the American economy is so dynamic is that it has independent banks funding local entrepreneurs. My fear is that continued market centralization drives up the cost of capital, and small, local businesses lose access to funding.”
When Garcia’s research went a layer deeper, he found the reasons many banks are losing out on deposits starts at the root of the relationship: the account opening process.
Volume and Vaporware
Relatively few community banks offer account opening for businesses, but that’s rarely a blind spot. More often, the choice not to offer it is a decision the bank has made based on a few key factors.
The first of those factors is fraud. Business accounts open banks up to more fraud vectors because they enable easy access to products that move money irreversibly. They’re also a favored vehicle for fraudsters, who find it easier to launder and move large sums of money in these accounts without triggering red flags. Making business accounts available online risks flooding a bank with applications that are mostly bogus.
If a bank is overwhelmed with applications, most don’t have the technology they need to weed out the fraudulent ones. This illuminates the second factor that confounds business account opening: most banks would have to combine multiple products from different vendors to open these accounts end-to-end.
Business accounts have multiple owners to vet, beneficial ownership rules to comply with, and several different types of documents to verify. A vendor might have a digital application, but not the fraud checks that need to accompany it. They might be able to intake the required documents online, but then the bank must manually check them against the Secretary of State for verification. The process entails a lot of behind-the-scenes work.
“There hasn’t been a solution in the market that actually solves the whole problem of opening a business account,” Garcia explained. A single vendor may have various modules that handle one small component of the process, but those must be stitched together, resulting in expensive consulting and configuration engagements that could take more than a year. “It’s prohibitive for the vast majority of the market,” Garcia said, and the expense is hard to justify. “Bank leaders may think, ‘well, I only onboard 10 businesses per month, so why would I pay a million plus for a solution per year?’ The ROI is not there.” Garcia shared that some of his bank partners were actually told by their vendors that they don’t have enough volume to justify the spend — one of the only things you can say to keep a customer on your side when you don’t have the full solution they need.
Patience is the Path: Building for the Long Haul
Garcia knew that if he wanted to help community banks like the one that helped him, he had to do better. His background as an engineer for some of the most customer-centric brands out there served him well when it came to designing the holistic solution banks needed. He had to connect all the disparate systems banks required to open business accounts 100% digitally, and he knew that would take time. So Garcia raised money from well-known investors like Techstars and Commerce Ventures, joined by a bank and later a bank consortium, Alloy Labs. Then he and his co-founder got to work under the banner of a new firm aptly named Linker Finance.
To start, Garcia had to go to the heart of every community bank’s tech stack: the core. He began with Fiserv because it was the largest, most complex player in the space. Garcia described what it was like to bring a customer-centric mindset to a product-focused incumbent, saying, “We’ve been in calls with thirty people from a core provider, and often our understanding of their own products is sharper than theirs, because they have a huge staff where everyone represents a different feature. You have to flip that. You have to start from the customer experience and work backward.”
From there, Garcia said, you can identify the proper connections and workflows. “That requires patience,” he acknowledged. “It requires, of course, time and money. And, many times, it requires having the right bank partner. But what’s perhaps most important is it requires being guided from the end-user experience and not from a technology perspective.”
The result of all that patience? A truly end-to-end experience for business account opening. Linker connects best-in-breed solutions for every part of the process — from rooting out fraud to getting accounts funded, and everything in between. Add to that a layer of data analytics that helps with cross-sell and the fact that you can do all this with one click, and it seems like a value prop that’s too good to be true. When I asked Garcia about whether banks were skeptical, he said that’s why the live demo is key — “You have to see it to believe it.”
Today, Linker is integrated with Fiserv Premier and CSI, and in direct communication with several others, currently onboarding FIS, and DCI. The company stated it recently onboarded a $1.3 billion asset institution in just two months.
Moving from Fear to Fighting
The reasons banks had for not offering online business account opening in the past were rational and real. But they were founded on assumptions that players like Garcia and Linker have started to challenge. Now that the technology is possible and the path to the cores is cleared, banks can actually test the ROI. Whether online business account opening is right for a particular institution will always be a strategic decision.
For his part, Garcia is ready to help the banks that want to fight for deposits. “Everybody’s selling banks fear,” he said, “the fear of fraud or the fear of missing out. I’m an optimist. Helping banks compete and grow is achievable — it just takes the right approach. That’s why I entered the space. That’s what I fight for.”
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This article is brought to you in partnership with Linker Finance. To learn more, visit https://www.linkerfinance.com/.
