The criteria for choosing a banking provider for small and medium-sized businesses are changing. While cost-related considerations, such as rates and fees, have traditionally been the deciding factor in choosing a bank for SMBs, new research has found that security and fraud protection have become the segment’s top priority. 

In a recent BankUnited poll  of 200 Florida-based SMBs, surveying their top business and financial needs, 23 percent of respondents cited security and fraud concerns as the single most influential factor that would drive them to switch banks. That edged out the 22 percent who said high fees would motivate a change and easily surpassed the 7 percent who cited unfavorable rates.

The results reflect a significant change in how SMBs evaluate their banking relationships. As financial fraud grows more prevalent and sophisticated, companies expect their banks to offer protection that’s up to the challenge. When banks fall short of those expectations, it’s easier than ever to switch providers. More than half of surveyed businesses, 52 percent, currently partner with two or more banks, and 12 percent work with three or more. That means most SMBs aren’t locked into a single banking relationship; instead, they have options when security-related expectations aren’t being met. 

The BankUnited study found that 31 percent of businesses polled have either seriously considered or given some consideration to switching their primary banking partner in the last 12 months. The survey results make it evident that banks should prioritize fraud detection and overall security or they risk losing clients to competitor banks.  

While payment fraud is growing as a threat to companies of all sizes, smaller businesses can be particularly vulnerable. That’s because, unlike enterprise corporations with dedicated security teams and sophisticated in-house fraud prevention systems, SMBs often lack the internal resources to monitor threats or respond quickly to incidents. 

And when fraud does occur, the consequences can be particularly devastating for smaller businesses, which tend to have a lower ability to absorb fraud-related losses than larger organizations do. A fraud event can threaten the viability of an entire business, when you consider the financial impact along with operational disruptions and reputational damage.

Meanwhile, the adoption of digital banking tools among SMBs is creating new vulnerabilities facilitating fraud at a rapid speed. According to the BankUnited survey, 65 percent of SMBs now use mobile banking apps, 57 percent use online banking platforms, and 39 percent use remote deposit capture. Additionally, the study found that 35 percent have integrated their banking platforms with accounting software, such as QuickBooks or Xero.

While these digital banking tools offer tremendous benefits in terms of convenience and efficiency, they also create additional potential entry points for fraudsters. Every digital channel, platform, and integration can be an entry point for fraud if it’s not properly protected and secured.

For SMBs without dedicated cybersecurity staff and in-house defenses, keeping pace with these evolving threats is nearly impossible on their own. The good news is that while AI is helping bad actors perpetrate more sophisticated fraud, it’s also arming banks with advanced defenses that detect and stop fraud attempts in their tracks. What’s more, machine learning enables anti-fraud systems to learn from these attempts, constantly evolving to stay one step ahead of fraudsters in what’s becoming a critical technological arms race. 

Multi-factor authentication adds a critical layer of protection beyond passwords, making unauthorized access significantly more difficult even in cases when login credentials are compromised.

Real-time transaction monitoring and alerts enable businesses to detect suspicious activity immediately, rather than only discovering fraud days or weeks later, when significant damage has often already been done.

AI-powered fraud detection helps banks identify patterns and anomalies that might escape human detection, flagging potentially fraudulent transactions before they're completed and escalating borderline cases for further scrutiny.

Secure integrations with accounting software and other business platforms ensure that the digital tools SMBs increasingly depend upon don't become vulnerabilities.

But technology alone isn't enough. Effective fraud protection also requires a strong service component. SMBs need banking partners that not only provide fraud prevention education and training, helping staff recognize threats and best security practices, but also deliver fraud mitigation expertise when the worst happens. That means immediate incident response to contain the threat, damage control and recovery to minimize losses, root cause analysis to prevent recurrence, and ongoing support to strengthen defenses for the future.

They need to trust their bank will respond rapidly and effectively during a security incident. That’s because when fraud occurs, every minute is crucial. Acting quickly to freeze accounts, stop or reverse transactions, or implement additional protections can mean the difference between a contained incident and a catastrophic loss.

These companies are looking to their banks to help them successfully navigate these challenges and keep their finances safe. Banks that can meet this demand are those that take a comprehensive approach to fraud defenses, offering not only cutting-edge security technology but also people and processes that complement these high-tech tools.