Focusing on small businesses services
by. Ric Carey and David Kerstein
Small businesses represent banks’ best opportunity for higher spreads, improved fee income and superior relationship profitability, yet we find that few banks are actually succeeding in doing what it takes to effectively penetrate this segment and unlock the profit potential. Thanks to new channel advances and advanced analytics, though, banks have more to offer than ever and small businesses have urgent banking needs that go unmet.
But to do so, bankers must re-think old assumptions about customer needs, channel preferences and marketing tactics.
1. Plumb the opportunity in different segments, different needs.
In the U.S., about a third of the approximately 30 million small businesses are part-time pursuits, while another third have fewer than three employees. These two customer segments, which represent nearly two thirds of all business, are consumer-like in their banking needs and distribution utilization.
Over 60% of businesses in this segment want the simplicity of a combined business and personal banking relationship, but few banks provide those services in a way that truly meets the needs of the small business owner. These smaller customers are too small to be effectively served by an expensive dedicated business banker, whose highest value is focusing on more complex credit needs. As a result, small businesses that are not borrowers become stuck between the branch, which serves consumers, and business bankers, who are focused up-market.continue reading »