Why Banks Turn to Embedded Fintech to Power Value-Added Services

Three banks. Three leaders. One clear signal: value-added services grow SMB-banking relationships.

Eighty percent of small business customers expect their bank to be a one-stop shop. Three of the largest banks in the U.S. are listening.

For years, checking accounts, lending products, and payment processing defined small business banking. But a new wave of banking executives has made a different bet: the institutions that win SMB relationships in the next decade won’t be the ones with the best rates. They’ll be the ones that help business owners actually run their businesses.

Value-added services sit at the center of that shift. For those business-critical services, small business owners increasingly turn to institutions they already trust.

SMB Owners Are Overwhelmed, And They’re Looking for Help

To start, it helps to understand the problem your SMB clients need to solve.

Shruti Patel, who leads small business products at U.S. Bank, has a clear diagnosis. Business owners today typically operate with a fragmented stack of disconnected software tools that specialize in just one service. In her words, they are “overwhelmed by the number of standalone software solutions which exist in the marketplace. They would like to consolidate these so that they’re not constantly juggling with multiple tools or playing mental gymnastics, all while streamlining costs.”

For financial institutions, this may be good news: Patel points to US Bank’s own research showing that “nearly 80% of small business customers… have time and again told us that they’re expecting their banks to give them a one-stop shop.” That expectation is an opening for financial institutions that are ready with the right services for their SMB customers.

Mike Walters, President of Business Banking at KeyBank, frames the same customer reality in terms of time, not tools. Small business owners aren’t just executives: they’re operators, HR managers, bookkeepers, and administrators rolled into one.

“A small business owner is a CEO as well,” Walters says, “but they’re a ‘chief everything officer.‘ They don’t just own the business, they run the business… and they suffer from what we call ‘time poverty.'”

Any service that gives that owner meaningful time back doesn’t just earn a fee; it earns loyalty.

But Which Value-Added Services?

Banks have launched a range of embedded services: accounting integrations, spend management, cash flow forecasting. So why should these sit atop banks’ priority lists?

Taira Hall, EVP and Head of Enterprise Payments at Citizens Bank, argues that payroll isn’t a peripheral feature: it’s one of three foundational pillars of small business financial management. “In my mind, the trifecta is payments, accounting, and payroll. If you think about the three components of really managing that business… each of those is coming together in a way that we can start to think about what [surrounds] that.”

The recurring nature of services like bill pay and payroll makes them uniquely sticky. Every pay period, the business owner returns to the platform. It’s also high-stakes, which builds additional trust in the banking relationship over time. And it’s deeply connected to cash flow, which means embedding it unlocks a new layer of insight that transforms what banks can offer.

When you can see a payroll run scheduled alongside a business’s account balance in real time, you shift from reactive to proactive. You can offer a line of credit before a cash flow gap becomes a crisis.

The Strategic Case: Differentiate Before You’re Commoditized

This isn’t just about serving clients better. It’s about the long-term competitive position of banks, particularly in the face of increased competition from neobanks.

Walters at KeyBank speaks candidly about the risk of staying purely transactional. “We cannot commoditize our product, which is advice,” he says. “If it becomes standardized and repeatable, we will lose as an industry… so we have to find ways to continue to show that the advice we give is differentiated.”

The framework he offers follows the revenue flow of a small business, from the first customer interaction to the final deposit, and identifies every friction point where a bank can add value. “Banks are going to continue to find ways to add value, [likely] on complementary services.”

Critical value-added services like bill pay are an obvious place to start. It’s a recurring, operationally pivotal service that, when offered by a bank, creates data, deepens the relationship, and positions the bank as a strategic advisor rather than just a custodian of deposits.

The Platform Vision: From Vendor to Command Center

The banks leaning hardest into this model aren’t just thinking about individual services. They’re thinking about becoming the operating system for their SMB clients.

Mark Valentino, President of Business Banking at Citizens Bank, sees this as the direction the entire industry is heading. “The broader industry is headed to more of a command center style platform for small businesses to actually be able to run their business off of your online banking platform,” he says. “The general trend that we’re seeing… is that they want to be able to do everything right now. And they want to be able to do more sophisticated things as they grow.”

For Citizens, value-added services are a cornerstone of that command center vision. When payroll, payments, and accounting are all visible in one place, the bank becomes the hub the business owner can’t operate without.

And critically, Hall points out that this model can be made accessible even to the smallest businesses. Citizens embedded spend management capabilities into their platform, “at around $50 per month, versus a commercial platform, which can cost thousands of dollars per month but actually gives them a lot of the same capabilities.” The bank’s scale makes enterprise-grade tools available to businesses that couldn’t otherwise afford them.

But behind the command center vision lies an operational reality most banks haven’t confronted, a user experience expectation they have yet to master, or a compliance challenge they may or may not understand. In the case of embedded payroll, the SMB owner-friendly interface sits atop a payroll that manages filings across 11,000+ tax jurisdictions, tri-party fund movement, and compliance nuances that lack clear black-and-white interpretation. This is precisely where an embedded fintech partner changes the math.

Technology With a Purpose: Giving Time Back

For Walters, the framing that resonates most with SMB clients isn’t about features, it’s about lifestyle. Every digital tool his bank offers shares a simple goal: give time back by offering intuitive, owner-friendly tools all in one place.

“When you start to aggregate all [the] time savings, I don’t know if it gets [the business owner] all the way to a vacation, but it certainly gets her closer.”

Payroll automation is one of the clearest expressions of that promise. A business owner who used to spend hours every pay period on calculations, compliance, and direct deposits gets those hours back. And when that happens through their bank, not a third-party app, it deepens the relationship in a way that’s hard to unseat.

The Time to Innovate is Now

Patel’s read on the next generation of small business customers makes the urgency clear. “[The] next-generation entrepreneur is much more digitally savvy in terms of how they expect their financial institutions to serve them. They’re really looking for financial institutions to give them one-stop shop banking plus payments plus software.”

For banks, the data is clear: small business owners trust their banks, as highlighted in our 2024 survey of SMB owners and bankers conducted by American Banker. So the trust is already there, as is the demand.

U.S. Bank, KeyBank, and Citizens Bank are all making the same bet: that the banks that offer value-added services today will be the institutions their SMB clients can’t leave tomorrow.