While many consumers have taken a liking to online banking, a new study suggests that small business owners may be more inclined to use traditional banking, including visits to brick-and-mortar branches. For many small business owners, additional security comes from having a personal relationship, and some may be more confident in traditional banking because they have other decisions to make on a daily basis regarding the direction of their company. New research conducted by BAI Research on behalf of ARGO reveals that small businesses have a tendency to stick with tradition and opt to work with local credit unions and banks who may offer a more customized approach to problem solving.
Tech insurance often factors into which innovations business owners choose to use, and what is a popular option for the average consumer may not be the same banking decision that small or large business owners make, as their needs are certainly different. In recent years, many banks have been acquired by other financial institutions, and these high levels of consolidation have increased during the recession. With economic improvements, more alternative banking options have appeared for both consumers and business owners, but branches have taken notice that many of their clientele are small business owners. Eliminating branches could negatively affect business, as owners of small companies may be more likely to switch their financial institution if a branch becomes non-existent.
One thing that is apparent thanks to the research is that small businesses benefit from interacting with branches, as more than half of all transactions completed by businesses are done at a physical branch versus over the internet or by phone. The preference for communicating with an actual person, be it in person or over the phone when dealing with financial matters has led to branches becoming the best opportunity for developing business relationships, according to the study.
In addition, BAI found that fees weigh heavily into business owners’ decisions to bank with a specific institution, and banks or credit unions that provide incentives such as affordable rates or reward programs have a better chance of getting business from small business owners. For many owners, finances can be extremely tight in the early stages of development and operation, which is prevalent in the responses offered that show under half of owners say fees are a main consideration of those in the process of choosing a financial firm. To add on to that, many said they would switch banks if fees rise.
Less than 25 percent of small businesses reported using mobile banking and just eight percent utilized mobile bill pay. Overall, just 20 percent of business owners polled indicated preference to online banking over in-person interactions.
“Given the importance of the branch to these customer relationships, banks that can provide superior service at the branch-level can attract and retain these customers,” said Todd Robertson, senior vice president of ARGO. “Although seemingly counter-intuitive based on comparisons with retail consumers, this segment’s strong attraction to the branch, personal service and paper checks, among other preferences, opens the door to grow existing customer relationships and become their primary financial institution. This can be done by facilitating the processing of large check deposits in the branch and by meeting all of the small business owner’s needs, both for deposit and loans. With the right tools and training, frontline bankers can better engage small business owners and improve service by offering them the right product at the right time.”