Are Banks Missing an Opportunity in the Small Business Market

By : Andrew Short

October 11, 2017 04:00 AM


Small businesses represent a vast market, and consequently a big opportunity for banks.


In the US, there were 28.8 million small firms operating last year, accounting for pretty much all US businesses (99.7 percent). Similarly, the UK was home to a record 5.5 million private sector companies at the start of 2016, and 99.3 percent of these were small businesses.


With so many other things to worry about – generating revenue and managing costs, for example – most small firms want their banking services to be as straightforward and convenient as possible.


Consumers are becoming increasingly accustomed to maximum convenience and omni-channel accessibility in banking, but are financial institutions doing a good enough job of extending the same benefits to small businesses?


An overlooked opportunity?


One area where banks could be doing more to engage with small business customers, according to research, is digital account opening.


This is a service that is becoming increasingly common in consumer banking, with many providers now giving people the option to open an account without leaving their home, with nothing more than a mobile phone.


In the business banking market, progress has been slower. In its new report ‘Digital Account Opening in Small Business Banking’, Javelin Strategy & Research reveals that, in the US, only six of the top 30 banks serving business customers allow digital application for checking accounts. Furthermore, those banks already hold 30 percent of the country’s small business deposits.


The report argued that businesses should have more options than time-consuming phone calls and branch visits when they want to open an account or make changes to their banking services.


Jacob Jegher, senior vice-president of banking and head of strategy at Javelin, said digital account opening represents “a tremendous opportunity for banks to demonstrate their omni-channel competence”.


He added: “Bankers should strive for a process that allows for seamless transition between channels, and uses the strengths of each channel to cross-sell and onboard customers into engagement-building digital services.”


What matters most to small business customers?


Small business owners face many demands on their time and have various external pressures to deal with, so what they really want from their bank is a combination of service quality and convenience. In short, they want their banking services to be reliable, effective and easy to use.


In a report released earlier this year, research firm Raddon revealed the factors that are most important to small businesses in their primary financial institution. Service quality topped the list, followed by convenient branch locations, online banking technology, convenient branch hours and free business checking.


Bill Handel, vice president of research at Raddon, advised: “Financial institutions can win small business customers by demonstrating that they understand business owners’ challenges, have the expertise these customers need, and can deliver the technology and service to help small businesses grow.”


The digitization of services and omni-channel delivery will only become more important over the coming years.


Small businesses will show increasing demand for the same standards of convenience and accessibility that have come to define consumer banking. Those institutions that are able to meet these demands will be in a strong position to reap the rewards from this lucrative and expanding market.

Andrew Short

Mobile and Payments Solutions Manager – NCR Financial

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Andrew has 20+ yrs experience in the software industry covering banking, healthcare and the telecommunications verticals. With past positions in finance, accounting, sales, and prod. mngt, he brings significant mobile and payment expertise to his current role.