For the traditional banker, serving the United States’ 5.5 million small businesses is very good business. Generating $33 billion a year from checking accounts, simple credit, deposit products, and other services, this market provides many banks with returns on equity of over 30 percent. The contrast with consumer banking, where only the top customers produce profits, is marked. More than three-quarters of all small business customers are profitable over a three-year period. And again in contrast with consumer banking, small business is an area where banks hold a full 90 percent of the market.

As competition begins to hot up, every player needs to examine its own competitive position and those of its rivals

But this is only part of the picture. If we step back and take into account the activities of institutions other than banks, a more complex landscape emerges. Software firms, payroll processors, office product retailers, credit card companies, and a host of others are already serving or are poised to serve the financial needs of small businesses. Any organization seeking to capture or defend small business markets must base its strategy on this broader view. As competition begins to hot up, every player needs to...