We all know that small businesses are very important to financial institutions, since they provide more profitable relationships than consumer accounts. But here’s the problem: More than three-fourths of all small businesses (21 million) have no employees, operate out of the owner’s home and have less than $500,000 a year in revenue.1 So it’s hard to know who these business owners are and how to service them.
Many small businesses look and act like consumers to their financial institutions. The owners use their consumer accounts because it’s convenient — and they don’t know what small-business banking products can do for them. But if you can discover these business owners, you can provide the products and services they need to be successful.
Payments and account control/security are big pain points for small businesses.
25 percent of small-business online banking users view entitlements as a very important or top-priority solution.2 Plus, we’ve found that 71 percent of customers strongly agree that entitlements save them time by delegating online banking tasks to others, and 71 percent say that entitlements make them feel more secure about giving others access to accounts.3
70 percent of small businesses consider ACH and wires to be an important functionality for online banking.2 65 percent of all small-business payments are electronic, and this percentage is expected to grow as small businesses get more access to the right products.
Another issue for financial institutions is the Goldilocks and the Three Bears syndrome…small business offerings are either “too big” or “too small” but not “just right”. Financial institutions simply don’t know where to put small businesses, so those businesses stay on the retail platform with its limited functionality or they are migrated to a cash management platform that’s too big and too expensive for what they need.
Recent Barlow research indicates that 50 percent of small office/home office businesses (SOHOs) are on a retail banking platform and the rest are on a business banking platform. With digital banking that’s designed for small businesses, you can introduce your small-business customers to new services and start generating fees as they take advantage of the new capabilities you offer.
Like Goldilocks, small business owners are realizing that most solutions just don’t “fit” them. 74 percent of small-business owners say they aren’t wowed by their financial institutions.4 That’s why many are threatening to take their business elsewhere.
Finding the right-sized solution for small businesses can be hard, but so is monetizing these relationships. The good news is that there is an opportunity to generate fees by offering solutions they are willing to pay for (small-business payments) and creating small-business-specific account bundles and packages that add value to their banking relationships.
What’s your small-business strategy? What would help you serve small businesses better? What are your top successes and/or issues in servicing small businesses?
About Dianna Morton: Senior Marketing Manager for Small Business Online Banking Solutions
Dianna is an experienced marketer who has led innovative and complex marketing programs focusing on the small business segment for over 15 years. She joined the Digital Insight team (previously Intuit Financial Services) in 2011 and has brought with her extensive knowledge and experience about the small business industry and how to help financial institutions acquire, engage and grow their small business customer base. Prior to Digital Insight, Dianna also worked at Merrill Lynch Credit Corporation, Harke-Hanks Direct Marketing and Beneficial Finance where she drove and executed successful marketing programs. Dianna holds a Masters of Business Administration from University of North Florida and a Bachelor of Science in Business Administration degree from Towson University.
1 Barlow SOHO Opportunity Study 2013 and U.S. Census Bureau, 2010
2 Barlow Research Associates Business Internet Banking Study, 2012
3 Digital Insight entitlement beta results
4 Aite Group, Aug. 2011