THE SHIFTING TIDE OF SMALL BUSINESS CUSTOMERS

Like our community bank customers, we love small businesses and we also like to hang out at the beach. Small businesses are great banking customers because they spend an estimated $353B per year on financial products, use an average of 4 cash management services, employ about 50% of all non-government workers and generate 70% of new jobs in the country. While community bankers currently do a good job supporting small business cash management needs, recent studies show the tide may be shifting faster than many have anticipated. For instance, while 87% of small businesses still write checks for their accounts payable, 72% would rather do so online and 80% of the most profitable want their bank to provide a technology-based electronic payment platform. Further, an estimated 40% of small businesses are currently banking online, a number expected to grow to 65% over the next 3Ys. Bankers need to aggressively explore online delivery and product options in order to remain relevant to this very profitable customer base into the future. In fact, 57% of small business customers say they would change banks if a competitor offered the right mix of products and services. In addition, most also said they felt their primary bank was under serving them, when it came to payment products and services offerings. The good news is that by creating a comprehensive online suite of products and services, community bankers have a great opportunity to capture new business clients. To start, community bankers may want to consider adding online payroll capabilities for small business customers. Competitors like Bank of America are making a big push on this front and the statistics indicate why they are doing so. A full 57% of small business owners have a medium to high interest in managing payroll online and the number of electronic employee payments made by small businesses is up 41% over the past year. Another feature bankers should consider adding to their online banking suite is online invoicing. The number of small business invoices sent electronically has jumped 20% over the past year and 67% of small business owners want their bank to provide them with online invoicing capabilities. Bankers who really want to supercharge their online suite of products should not only offer the products and services outlined above, but should also consider adding: account opening, viewing balances, downloading statements, bill pay; funds transfer (both inside and outside the bank); purchasing CDs; combining statements on multiple accounts, expense dashboard, security email alerts (when new accounts or payees are set up), loan application and checking the status of a loan in process to their suite of small business services. Given that 20% of small business customers actively shopped for a new primary bank in the past 3Ys and that 50% use more than one bank, competition demands bankers upgrade their online banking services as quickly as feasible. As the tide of small business activity shifts rapidly to online delivery platforms, community bankers will have to move quickly, or risk standing on a dry and very hot part of the financial beach.