This Week’s Reads…

Mobile Trend-Setting

It’s obviously inevitable that the dawn of a new year will produce a rash of predictions for the months ahead. It’s also obvious that many of these prognostications focus on mobile banking—after all, that’s where the action is right now (if we can skip the messy government settlement stuff). Still, that doesn’t mean we have any real idea what’s going to happen.

There’s certainly no question that this is the new battleground: Banks able to build on mobile innovation will reap the rewards of more engaged customers, higher market share and, ultimately, greater profits. And more than just competing against traditional rivals, they will be able to hold off online-only banking startups. That said, as with any advance, there might be a price to pay.

For example, increased mobile adoption in 2014 will take its toll on branch networks. There’s a new generation of consumers that has no real memory of traditional banking, which means the idea of actually stepping into a brick-and-mortar outlet seems quaint. For their part, financial institutions will market their services directly (and perhaps exclusively) to mobile-only customers.

Hand on mobile phone

Here’s one recent example of the effects of this trend: More than 140,000 customers of First Niagara, a community-oriented bank with some 420 branches in New York, Pennsylvania, Connecticut and Massachusetts—downloaded its mobile app in just the first year. Early in 2014, the bank announced an organizational restructuring that cuts 170 positions. Expect to see many more such stories in the next few months.

While things are busy on the consumer front, we could see even greater transformation on the business side. ‘The ath Power Small Business Banking Study,’ a new research initiative from ath Power Consulting, highlights a potentially worrisome divide between what the market appears to want, and what it’s actually getting. Fully two-thirds of the small business owners surveyed for the study say that they’re likely to switch banks in favor of better mobile options. However, some 37% of the bankers surveyed for the same research omitted to even mention their mobile offerings.

Isn’t it a little late in the day for mobile banking to not be on the forefront? In fact, one prediction for 2014 is that this is the year in which mobile banking will actually eclipse online banking, at least in users (within certain parameters, the number of transactions is already higher). That’s a remarkable advance for a capability that essentially didn’t exist just a few years ago. But with affordable smartphones now ubiquitous and 4G networks more widely available, the infrastructure certainly exists to speed the change.

The critical element here is that mobile isn’t really one thing anymore. For example, what we know as the camera dates back to 500 B.C., but putting one inside the phone now enables everything from Remote Deposit Capture to Picture Pay. This has had the effect of turning our business on its head, and it’s likely that we’re still in the nascent stages of this change—there are many more apps and capabilities still to come. Or consider digital wallets, particularly with aggressive marketing from institutions that see greater opportunities with this capability. Surely there will be discounts and other customer goodies, which in turn will affect the bottom line.

The more sobering reality is that these larger trends will only affect us as financial services institutions and professionals only to the extent that we are able to shape them. It’s not as if we’re just entering this brave new mobile world; we’ve been here for some time, and doing our part to develop new apps, adapt traditional offerings and empower customers. As always, we can identify emerging market needs and provide solutions to meet them.

However, the most successful companies are those than function ahead of the curve. They create technology and service solutions to problems that don’t exist, and in the process provide transformative capabilities to their customers. We can look ahead to 2014 and see what trends are coming down the pike. But we can also help drive those trends ourselves.

*Image courtesy of  twobee

How to Crack the Code to Serve Small Businesses Well

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.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


Small Business: Respect and Dedication

In a recent blog on, we explored how small businesses don’t always get the respect they deserve from the banking world. There’s no question that this sector of the economy is always vital, and increasingly optimistic. In fact, the number of businesses that report being ‘better off’ jumped from 16 percent in 2009 to 33 percent in 2012. This is also a market rich with possibility: on average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers.

And yet, this market continues to rank near the bottom in banking satisfaction.  So what’s going on—and what can the industry do to make thing better? The new J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, a comprehensive research report that identifies and highlights the situation described above, digs deeper into the problems and identifies many of the pain points.

As mentioned in the previous blog, credit is still the primary issue, but it’s not the only one.  The J.D Power study lays out more fundamental problems too. In particular, while small businesses are sometimes lumped in with retail banking, there are major differences between the two.

First, small businesses expect greater competence and responsiveness from their bank, since their needs are more complex needs and they bring greater value. Second, relationships are everything: they want an account manager who understands their needs and provides customized solutions. In both these areas, the study shows, banks come up short.

In routine transactions conducted both face-to-face and on the phone, small business customers say their experience either mirrors that of retail customers or doesn’t even rise to that level. By the numbers, 21% of retail banking customers have problems in a given year; 36% of small business customers say the same. Similarly, only 43% of small business customers say their assigned account manager (if they actually have one) ‘completely’ understands their needs. The latter problem is particularly acute: the J.D. Power study outlines the ways in which a good relationship with an understanding account manager makes a significant difference in terms of discussing loan options, receiving regular updates, etc.

The problems extend past business issues to even more basic headaches. The data shows that small business customers are less likely to experience in-person best practices than retail customers when they visit a branch, are less likely to be greeted by name, and are more likely to experience longer wait times.

The study does take into account equivalent concerns on the banks’ side: It’s perhaps unrealistic to expect that every account manager will have a full understanding of every small business account they handle, and it is only natural to assign bank personnel to accounts where they offer the greatest value. However, there’s also no question that there is plenty of room for improvement here.

The study does lay out some remedies. First, while there can (and should) be some discussion around whether to have a dedicated commercial-only window in particular branches, there needs to be more training staff-wide on paying greater attention to small business customers. Second, in the era of Big Data, we have more information at our fingertips now than ever before on each account and the market in general. This should be used more effectively to develop a greater focus on this critical market segment. Finally, while many institutions fully intend to create small business specialists within call center groups—with experienced representatives and specialized training—the final product often falls short. If, as the J.D. Power study makes clear, “a dedicated small business team is established—and the data suggests it should be—it needs to be sourced and managed appropriately.”

Ultimately, of course, any list of best practices runs the risk of being too generic, the same problem that frequently afflicts this market. The small business market is undeniably both vast and fragmented. It’s also vital—and for the banking industry’s purposes, potentially very lucrative.  It deserves respect, and that will come through customized solutions backed with knowledge and dedication.

* 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

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