In a new report, Winning the Hearts and Wallets of Small-Business Customers, Aite Group analyzes the banking preferences, online transaction adoption and missed opportunities within the small-business banking segment. The report, based in part on Aite Group's omnibus survey of 278 U.S. small businesses in April 2006, concludes that despite increased online banking adoption by the segment (which is forecasted to reach 60% by 2009), banks are often losing opportunities to deepen customer relationships and generate additional revenues. Almost half of all U.S. small businesses use third-party technology software sites for cash flow management, invoicing, payroll and tax payments; far fewer use their bank's small business banking sites for these transactions.
For several years, the costs associated with serving small businesses were believed to far outweigh the returns. Today, as this customer segment operates in a more global economy, and as they require more sophisticated banking products and increasingly have access to technologies that are better suited to meet its needs, the small business customer segment has become an important target. The average number of bank products used per customer is expected to double and reach six by 2010. In addition, small-business spending on financial products is forecasted to increase 35% to reach US$477 billion by 2010. Many banks must adjust their strategies to win the hearts and wallets of this segment.
"A disconnect exists between small business needs and bank offerings," notes Christine Barry, Research Director with Aite Group and author of the report. "Businesses that generate between US$100,000 and US$1 million in annual revenues are the small-business sub-segment most likely to complete transactions online, yet most banks offer these customers only retail banking solutions and thereby limit their opportunities for cross-selling and generating fee-based revenues."