Small Business: Perception vs. Reality

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every candidate—the very backbone of the nation’s economic infrastructure, the greatest source of employment and innovation, the foundation of America’ greatness.

The new J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study paints quite a different picture. It uncovers an environment where optimism co-exists with uncertainty, and where tapping capital resources remains an unnecessarily onerous task. Far from being lauded, this is a market  that is looking for support, deserves it, but too often doesn’t get it.

There’s no question that as the economy continues to recover, however slowly, small businesses will play a critical role. Those already in the market are on track to keep growing, and this will turn help fuel the creation of others. Indeed, the study highlights a degree of optimism in this sector.  There’s a clearly perceptible spike in the percentage of small business banking customers who report being better off now than they were a year ago. It’s still far from a majority at 33 percent, but that’s still a 10 percent jump over last year’s corresponding number, and even better news compared to the 15 percent who now say they’re worse off.

“There is a long road ahead to economic recovery, but it’s positive to see that small business banking customers report they are better off this year over 2011,” said Jim Miller, senior director of banking at J.D. Power and Associates.  “Since 2009, we have seen the percentage of those who reported to be ‘better off’ jump from 16 percent in 2009 to 33 percent in 2012.”

For banks in particular, there’s even more good news.  The JD Power study reports that, on average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers. The people running the businesses are doing well too: these customers carry higher levels of personal banking business than the average consumer.

And finally, there’s the profit factor. Perhaps contrary to conventional wisdom, profit margins associated with small business customers are typically higher than those associated with larger corporate banking customers.

However, the gulf between perception and reality extends into other areas as well, with less happy results.  As the JD power study makes clear, this market doesn’t get the respect it clearly merits. For the record, there is a higher level of overall satisfaction in the most recent report, but that’s still cold comfort. In fact, it still ranks near the bottom among the financial services businesses that the study covers (only mortgage servicing ranks lower). Even the credit card business, which long languished at the bottom, has now moved past small business banking in satisfaction to levels enjoyed in the retail banking sector.

The elephant in the room, of course, is credit, or rather the lack of it. Oddly, the hard numbers don’t necessarily show a decline here: 82 percent of small business loan applicants say got approved for their most recent loan, the same as the year before.  However, a recent research effort conducted by the Small Business Administration that went a level deeper revealed that lending  this sector has been falling steadily since 2008, the year of the banking meltdown. This is likely  one factor behind the declining Availability of credit rating, which is down from 6.71 (on a 10-point scale) last year to 6.65 in this year. That’s actually  one of the lowest-rated attributes in the 2012 study.

Again, all the clichés ascribed to the small business sector—hardy, entrepreneurial, innovative—are real. This is a risky proposition, and we all know just how many new ventures don’t survive. At the same time, as every good candidate will point out in every stump speech, small business is exactly what will fuel overall economic recovery.

In the next piece, we’ll look more closely at the pain points in this market. But for now, the unmistakable takeaway is that small businesses are healthier than they’ve been for a while, they’re vital for economic growth, and there are significant profit margins involved. The market is good for companies, good for individuals, and good for the economy. Given those considerations, the banking satisfaction levels identified by the new report are lamentably low, and it should be the industry’s goal to do better.

* Now in its seventh year, the U.S. Small Business Banking Satisfaction Study measures small business customer satisfaction with the overall banking experience by examining eight factors: product offerings; account manager; facility; account information; problem resolution; credit services; fees; and account activities. The 2012 study includes responses from nearly 7,246 small business owners or financial decision-makers who use business banking services. The study was fielded from August 10, 2012, through September 10, 2012.

For more information about the J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, please contact: Holly Zagresky at (248) 680-6319 or via email at

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Market Outlook: Good Times Ahead, But. . .

Another day, another ray of hope in an otherwise dour environment: A new report based on a poll of 137 banking executives from over 100 financial institutions reveals an optimistic outlook for the SMB market. How strong? Try this: 95 percent of bankers describe the untapped potential of this market as equal to or greater than any other current opportunity, while more than half, 57 percent, say it’s huge.

That’s the word from the North American Insights conference held by Fundtech, a provider of financial technology solutions to banks and other corporations. And the good news doesn’t end there: 60 percent say demand for new services from this market sector is higher than usual, while nearly 20 percent call it “unprecedented.” Of course, mobile is a big issue: 38 percent report that building the mobile banking channel is a top priority. Perhaps strangely, almost as many, 34 percent, also note that cutting costs in this area is a top priority. And to top it off, a strong 67 percent of the respondents believe that social networking will play a major role in their growth, but add—and this is critical—they don’t quite know how.

That isn’t the only dark note in an otherwise bright scenario. While no one denies the viability of competition, almost 60 percent of the respondents, banking professionals all, say they see signs of inroads into their business coming from non-banking companies. That would be a tip of the hat to organizations associated with the technology sector—think Facebook, eBay and PayPal. This is by no means an isolated concern. In fact, numerous other analyses have stressed that many successful entries into this market will be made not only by innovative startups but also by companies that have achieved success in the technology arena and apply those techniques to the banking sector.

That’s just one reason why another subject covered in the report is so intriguing: regulation. Bankers confirm that they’re already not clear exactly how to comply with new mandates such as the Dodd-Frank Act—to be fair, almost half say they “mostly” understand—and yet they expect more such mandates to come down the pike.

What’s completely unrelated yet very relevant in this regard are the statements made this week by former Citigroup head Sanford Weill. He startled everyone by essentially calling for the resurrection of the Glass-Steagall Act, the Depression-era legislation that separated commercial banking from investment banking, and was abandoned more than a decade ago. This is one reason why banks got to be ‘too big to fail,’ and as has been widely reported, Mr. Weill himself was a prime mover behind the change. Now he seems to have changed his mind.

Taken together, these are some strange winds blowing for the financial services industry. There are good times for banks working with the SMB sector, but one potential concern is that non-banking institutions might steal some of that thunder. Meanwhile, one of the people most responsible for shredding the legislation that separated commercial and investment banking would like to see it return, a major reason for their existing strength, recommends reducing that power.

This should be very interesting to watch. Stay tuned.

What are your plans for Financial Literacy Month?

As you may already know, April is National Financial Literacy Month and financial institutions everywhere are looking for innovative ways to educate their customers and members. The staff took notice of some particularly creative campaigns in the month of April looking to help consumers and financial institutions take advantage of this month’s theme:

We want to know what you’re planning to do this month to help your customers and members? Let us know by answering our poll below.

Behavioral Change: Is There An App for That?

To some of us, it might seem that people who don’t know about mobile banking must be living in a cave somewhere. But here’s the reality: Only 10 percent of mobile banking users were prompted to use their bank’s mobile channel by their actual bank.

This is not some revelation from years ago, when mobile features and capabilities were still mostly a novelty, and understandably accompanied by some trepidation. It’s actually a key finding from a survey of 1,527 mobile banking users, encompassing more than 240 banks and credit unions. It was commissioned by ath Power Consulting, a provider of customer experience solutions for the financial services industry.

That’s not the only bad news in the report. It turns out that only one in five users were offered any option to customize their user interface, and fully 40 percent failed to find links for technical support.

It’s relatively easy for those of us essentially embedded in these disciplines and practices to look down on these findings—after all, companies have spent millions developing these technologies, and millions more promoting them. Besides, many of those consumers are surely using their mobile devices for many other functions that would have seemed futuristic just a couple of years ago. So what’s the problem?

Just this past week, acerbic comedian Bill Maher got big laughs on his HBO show by expressing bewilderment at the construction of new retail banks. He noted that he hasn’t walked into a bank for many years, since there’s so much available at the click of a button.

But we should get real too. When it comes to banking, just saying “There’s an app for that” isn’t enough.

It’s impossible to bottle the science behind behavioral change. If we could, everybody would launch something like Facebook out of a dorm room, or create viral videos on a regular basis. What we do know is that some behavioral shifts (such as social networking) occur at an incredible pace, while others (such as specific aspects of e-commerce) are adopted in fits and starts. For the most part, we don’t know why, except that the availability of a new technological capability alone doesn’t guarantee a change in habit.

Money complicates the issue even more. The relationship we have with our banks is fundamentally different than with our favorite retailer or clothing brand; it requires a level of trust, comfort and familiarity that extends far beyond other B2C interactions. It takes a leap of faith to go from using the cell phone to Tweet something personal (which we know others can see) to conducting a sensitive financial transaction.

For the record, the ath Power study does show some promise. While security will always be a prime concern, the mobile channel can play a major role in fraud prevention as mobile adoption improves and consumers become more familiar with alerts. On another front, mobile customers are more loyal: about one in eight say they’ll change banks within two years, compared with one in five in the general customer base. Finally, despite the relative lack of awareness of this category, the quality of a mobile offering is a major factor in choice of bank among the mass affluent and small business owner segments.

That’s all for the good, but this is a behavioral change that needs broader consumer adoption. And for that to happen, maybe the word needs to get out a lot more than it has so far.

Small Business, Big Lending

After such a prolonged period of doom and gloom in the global economy, any uptick in lending from financial organizations is cause for celebration. Now maybe, just maybe, we’re headed that way.

First, the good news: Flush with deposits, banks around the world have money in their coffers. Next, the better news: They’re more inclined to make loans in 2012 than they have been for a while (as in, the recession). Finally, the best news: Small businesses, often seen as the true engine of growth, are likely to benefit the most.

That’s the word in a new report from Omega Performance Corp., based on a survey of 409 respondents around the world, and it offers an interesting snapshot of how bankers see the near future. And by all accounts, what they see is good. In fact, 69 percent of global bankers reported a positive outlook for the global economy over the course of the year. For the record, no one’s looking through rose-colored glasses just yet: Only 12 percent predict “drastic” improvement on a global scale, while 57.2 percent see it improving “slowly.”

It’s in the area of lending practices that we see the greatest changes. Well over half the banks surveyed forecast greater lending on the consumer front, and the numbers are even higher for EMEA. It’s an even better story on the commercial side, but this time, the outlook is rosier in the North America, particularly the U.S., with a whopping 72.5 percent.

Going one level deeper, there’s an even brighter spot. Nearly three-quarters of the respondents said that their financial institutions will increase small business lending. Of those, 61.1 percent will do it slowly, while 12.7 percent see a drastic jump. The corresponding numbers for the U.S. are even higher, collectively clocking in at 77 percent. In fact, this sector dominates the target markets for banks—76 percent globally, and 78 percent in the U.S. On a related note, more than two-thirds of respondents in the U.S. plan to actively pursue leading to mid-sized and larger business as well.

It’s not all good news: For example, construction and multi-family homes (considered bellwethers of the industry) still rate below credit cards and auto loans around the globe. As for individual housing, the number for Canada is significantly higher than the U.S.: 57.8 percent over 42 percent.

Again, like all surveys, this is just a snapshot in time. But considering the cascade of gloomy reports and dire forecasts that we’ve almost become accustomed to, any positive signs are welcome. Here’s hoping there are many more, and soon.

Gen Y: Leading the Technology Revolution

Gen Y consumers are quick adopters of new technologies, so it came as no surprise that Intuit Financial Services’ Fourth Annual Financial Management Survey found nearly half (48 percent) of Gen Y consumers currently use their mobile device to conduct banking activities, compared to only 15 percent of Gen X, Baby Boomers and Seniors.

While disparate in actual usage, all consumers share the same viewpoint toward the main barrier to adoption – 41 percent do not own a Smartphone. The survey also found:

  • Nearly one-third (30 percent) of Gen Y would switch financial institutions if theirs stopped offering mobile banking. Only 15 percent of Gen X, Baby Boomers and Seniors would switch.
  • Gen Y uses mobile banking the same way they use online banking – viewing account balances and transferring funds is ranked as most important (70 percent utilization), followed by bill pay.
  • Gen Y is three times as likely to use remote deposit capture for checks compared to Gen X, Baby Boomers and Seniors (12 percent versus 4 percent )They are also three times as likely to use a tablet to access and conduct banking (18 percent versus 6 percent).

Furthermore, Gen Y is more likely to voice their opinion and dissatisfaction with their financial institution – in fact, 42 percent have already or plan to switch where they bank due to increased fees.  As referenced in our recent post, How to Attract Gen Y Customers and Members, it is now more important than ever for financial institutions to provide solutions to satisfy all demographics.

How is your FI adopting to the ever changing needs of Gen Y? Do you have specific marketing campaigns targeting the Gen Y audience? Let us know by tweeting @Bankingdotcom or leaving a comment in the section below.


Women Call the Shots When It Comes to Banking

As women are taking a larger role in the economy, they require more tailored tools and solutions from their financial institutions. The Future of Financial Services Report indicated Gen Y women are expected to dominate higher education graduation rates and professional workforce entry, taking control of financial responsibility both as household CEOs, consumers and business decision makers fueling the She-conomy. Additionally the report states that by the year 2020, 60 percent of baby boomers will be women, the majority of whom will work beyond the traditional retirement age by starting small businesses and re-entering the workforce.

Women will hold a larger piece of the pie as is substantiated by reports from the CUNA Marketing and Business Development Council, which states that baby boomer women will control two thirds of consumer wealth over the next decade, and the book Women Want More which indicated by 2014 women could earn about $18 trillion a year and control as much as $28 trillion of spending.

With this customer segment growing in importance, financial institutions need to provide tools and solutions to not only balance a checkbook – but balance it all. Intuit Financial Services’ Fourth Annual Financial Management Survey found women have very strong opinions about the ways they like to bank.

Women prioritize online banking for convenient management of their finances:

  • One third of respondents said they would switch financial institutions for one that offers better online banking tools.
  • Women are also smart shoppers; 82 percent would use a service from their bank or credit union that provides discounts on products and services they already use.
  • Women are also high adopters of mobile banking to meet their busy lifestyle with more than one-fifth of women reporting use of their mobile device to access their bank account or use banking tools.
  • Mobile banking also serves as a good retention tool for this customer segment as 16 percent of women surveyed said they would switch financial institutions if theirs stopped offering mobile banking.

Lastly, in a time when consumers are finding their voice to demand the appropriate fees and offerings from their banks, 35 percent of women indicate theyhave already, or plan to switch where they bank due to increased fees.

Are you seeing women driving adoption of mobile or online banking at your financial institution? How do you see women shaping your financial management offerings? Let us know in the comments section below, or Tweet @bankingdotcom.

Banking Industry Leaders Discuss Findings of Intuit Financial Management Survey

*This blog was originally posted on Bank Marketing Strategy by Jim Marous. Jim is a marketing services leader focused on building strategic solutions for the financial services industry. You can follow him on Twitter @JimMarous or connect on LinkedIn.


In conjunction with the release of Intuit Financial Services’ 4th Annual Financial Management Survey, hosted a Twitter Town Hall yesterday, bringing together financial industry leaders to discuss loyalty and channel migration as well as some of the challenges and opportunities facing the banking industry. The following is a recap of the very robust one hour dialogue. (The complete transcript can be found using #IFSsurvey on Twitter)

The Town Hall discussion began around the issue of customer loyalty and the finding that many consumers thought their financial provider was not ‘in touch’ with their needs. Given the events of the past week, where many large banks reversed decisions around the implementation of fees due to highly vocal negative sentiment amplified by social media and credit union trade group support, most participants believed that banks are not leveraging current insight and technology to make better decisions and provide value added service.

Tobin Lee (@Tobin_Lee), Intuit Financial Services spokesperson stated, “It is time for a banker mindset shift; cultivating deeper relationships, more meaningful engagement and stronger advocacy for growth”. Campbell Edlund from EMI (@EMI_mktg4sales) added, “These findings provide a very strong argument for a communications plan around the customer lifecycle”.
The already robust dialogue really took off as the discussion moved to the acceptance and utilization of banking channels (especially mobile and tablet banking). Bradley Leimer (@leimer) from Mechanics Bank in the San Francisco Bay area believed mobile strategy will be the key to future engagement due to the portability and ‘always on’ nature of the device. He also believed that the correlation between mobile banking and smartphone use (41% of respondents owned a smartphone) could indicate a lower engagement with financial technology in general for non-smartphone users.

Edlund added that while there is currently a higher penetration of smartphones than tablets, tablets can not be ignored by banks since Oracle found that tablet ownership is expected to increase significantly in the next year. She also warned that we need to be cautious not to get ahead of the acceptance curve. . . “we always underestimate inertia”. Brett King (@brettking), author of Bank 2.0 and founder of Movenbank went a step further stating that within 3 years all bank websites will need to be built for tablets first. He also believed that branches will continue to diminish in presence and utility (according to the study, 27% of respondents still visit their branch once a month in addition to ATM visits).


Mark Zmarzly (@BankMarketing) did not believe bricks and mortar would completely go away, but definitely felt the relevance of branches will change. “It’s easy to say branches will go away, but is that realistic? They have to evolve, but customers will never let them become 100% irrelevant.” King responded that with the drop in branch transactions, the economics of the branch are not working. I (@jimmarous) illustrated the model of Boeing Employees Credit Union in Seattle, where only 2 of the 40 branch network have tellers, while the installation of multiple ATMs at offices and around the city have an average of 10,000+ transactions each. 94% of the transactions at BECU are done electronically, according to Howie Wu (@howie_wu) from the credit union.


“Relevance is the key to banking for tomorrow,” stated King. “By 2015, mobile will be the #1 day-to-day channel, OLB #2 with the branch network being #5. The challenge for mobile and online will be developing great customer journeys”. King doesn’t believe these journeys exist today and believes the goal should be to have banking so pervasive that it is not tied to a branch, device or website, but is everywhere customers are.

Edlund pointed to the retail industry as a forerunner for what we will see in financial services. “Social and tablets will change the landscape in banking as they have in retailing”, Edlund stated. (During the Twitter Town Hall, there was even a discussion of the integration of TV as a channel for banking). Representatives from EMI in Boston (EMI_mktg4banks) emphasized that we will continue to see a blurring of all channels with social media providing some of the glue for enhanced communication. Gamification and location-based rewards were also seen as a key elements of engagement by Leimer and Edlund.

A conundrum was discussed with regard to the needs of small businesses where checks still prevail and the need for branches. King believed that we will see significant attention paid to mobile payments for businesses in the next couple years, while I added that tablet apps for business are also being developed to respond to the needs of the business community. NFC was also seen as a game changer with regard to the need for branches for small businesses. Bob Williams (@bob_williams) from Harland Clarke believed that, while check usage is definitely dropping, there are much greater efficiencies today than in the past with RDC and other electronic tools.


It was clear from the Intuit research that was just released, the Bank 2020 research released in April, and the discussion during the Twitter Town Hall today that there is significant disruption in the banking industry with regards to channel support and device utilization. The consumer movement to new banking channels is mirroring the movement to more sophisticated devices such as smartphones and tablets. Many consumers are NOT choosing one device or channel over another, but are using multiple devices depending on their personal needs.

Consumer desire for an integrated banking experience without friction will need to be supported by banking organizations in the future. Distribution networks (whether tangible or intangible) will need to support an expanding array of capabilities that may include integration within retail or social sites as opposed to standing alone.

As I stated to the participants of the Twitter Town Hall at the end of today’s discussion, “If banks are not prepared for the channel migration that is already underway, they may experience the impact of ‘Bank Transfer Decade’”.

Note: A summary of the findings of Intuit Financial Services’ 4th Annual Financial Management Survey and recently released related research is available in my previous Bank Marketing Strategy blog post.

If you weren’t able to join us, what are your thoughts around the impact of channel shift away from the branches and towards other media? Will we see the elimination of branches completely? Will another device or technology unseat smartphones and tablets?

Leave us a comment below, or Tweet at the author @JimMarous.

Intuit Financial Services 4th Annual Survey: Key Findings

Thanks to all our Twitter followers who participated in today’s Twitter Town Hall surrounding the Intuit Financial Services’ 4th Annual Financial Management Survey. We will be sharing a re-cap of the Twitter Town Hall later this week, so stay tuned.

If you are interested in reading a copy of the key findings from the survey, it is available for download here: Intuit Financial Services Survey 2011_Background Information. Please DM @bankingdotcom or @FinanceWorks with any questions regarding the content.