Hidden entrepreneurs are all around, operating their small and microbusinesses from what looks like typical retail accounts.
For financial institutions, identifying consumer accounts being used as business accounts and collaborating with accountholders to facilitate their success results in a triple-win: a win for the accountholder, a win for your financial institution, and a win for your local community.
Effective Use of Data
Your data probably already contains the indicators that someone has a side hustle or is using their personal account to run a small business.
Since microbusinesses don’t typically fund themselves using credit cards, you can identify hidden small and microbusinesses by analyzing deposit and payment patterns in checking and savings accounts. This data can be scored quickly based on a set of layered indicators, helping you prioritize which accountholders to approach about the benefits of converting to a business account.
Deposit Patterns
High-frequency deposits
A typical personal account usually has just a few deposits, with many debits for everyday shopping. However, if an account shows a consistent pattern of deposits beyond regular payroll, it’s a strong sign the accountholder might be running a business. You can use algorithms to flag accounts that frequently exceed the average consumer’s mobile deposit activity.
Gig economy deposits
Look for recurring deposits from well-known gig-economy platforms. Names like Etsy, Amazon, Shopify, Uber, or DoorDash are clear indicators that an individual is earning income through these channels.
Merchant app deposits
Another obvious signal comes from merchant-type app deposits. This includes frequent or recurring payments received from payment fintech companies, suggesting business-related transactions.
Frequent check deposits
The frequency of check deposits can also be a giveaway. The average personal account sees roughly two checks deposited per year – often around holidays or birthdays. Anything recurring above that threshold likely points to business payment activity.
Payment Patterns
Supplier payments
You can create search logic to explore your data for business-related payments. Look for payments to wholesale suppliers or recurring business subscriptions. Examples include bookkeeping software, web hosting services, or creative service providers.
Marketing expenses
Payments for marketing are another strong indicator. This could include regular debits to platforms like Facebook, Google Ads, or other digital marketing services.
High-frequency travel
Recurring travel expenses can also signal business expenditures. Most individuals aren’t incurring monthly (or more frequent) airfare or hotel costs. Someone regularly traveling for work is likely managing business finances.
Payroll debits
Payroll debits are generally not common among very small businesses, so their presence is a strong indicator that an accountholder is operating a business.
Serving SMBs Well Is a Win-Win-Win
Ultimately, your goal is to break down barriers to financial health by helping SMBs grow, and using data to find and convert SMBs operating with consumer accounts is a great way to serve your accountholders, your financial institution, and your local community.
Read Learn How to Beat the Competition in the Race for SMB Accountholders, a white paper from Jack Henry™, to explore the enormous growth and revenue opportunities for community and regional financial institutions serving the SMB marketplace – as well as the technology ecosystem required to be successful.
