Community banks could have an advantage among millennial small business owners if they can compete with the tech initiatives of larger institutions.

Fifty-five percent of millennial-led SMBs prefer banking with community financial institutions — provided they offer products and services comparable to larger banks, according to a report released today by digital banking provider Apiture.

The study, conducted by market data firm Datos Insights, surveyed more than 1,000 U.S. small businesses, including 460 millennial-owned SMBs, according to the report.

Key findings include:

• Digital banking is essential: 95% of millennial-led businesses bank online, with over 70% relying on mobile banking.
• Payment flexibility matters: 50% of respondents would switch banks for better payment options, and 38% would switch for real-time payments.
• Invoicing and money management tools are in demand: 73% are willing to pay for banking products that improve financial management.

AI adoption is growing, as well. Of millennial-run businesses, 39% are highly comfortable with AI in banking, compared to 25% of older business owners.

While millennial small business owners prefer the convenience of a bank in their community, community banks that fail to modernize could lose this client segment, Christine Barry, leader of strategic initiatives and research at Datos Insights, said in the report.

“Understanding how younger generations prefer to bank is critical for financial institutions to remain relevant and competitive,” Barry said.

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