• October 31, 2007
  • By Colin Beasty, (former) Associate Editor, CRM Magazine

Online Banking for the Little Guy

Despite the popularity and growth of online banking among small businesses, many financial institutions continue to neglect this market, according to new research by TowerGroup. While 95 percent of U.S. banks offer a dedicated small-business banking product, approximately half of these financial institutions simply provide these customers with a rebranded version of consumer online offerings rather than creating advanced features that meet the unique needs of small businesses. Small-business adoption of online banking grew dramatically from 1998 to 2007 according to TowerGroup's study; by the close of 2007, over 50 percent of U.S. small businesses will bank via the online channel. (The research firm estimates a further 10 percent penetration by 2010.) Despite strong growth, not even half of all banks include electronic payments as part of their small-business banking offerings, says Patricia Hines, senior analyst in TowerGroup's Wholesale Banking practice, in the report. And as is the case for most consumers, security and fraud prevention rank high among the list of concerns expressed by small-business users. According to another TowerGroup survey, 85 percent of banks have implemented multifactor login authentication for small-business customers. Subsequently, adding or improving security or fraud prevention offerings is a golden opportunity for those financial institutions looking to retain small-business customers, Hines says in the report. "Although there are significant geographic differences in how online authentication is provided, our survey documented that financial institutions worldwide are committed to adding layers of security to protect their customers." Small businesses are straddling the line between consumer banking and corporate cash management, Hines says. Small-business owners appreciate the simplicity of retail online banking and value the corporate-level features such as multiple user access and electronic payments -- when those features are made available to them. "The savviest players are using small-business online banking to provide multiple-user access, electronic payments, cash management, services, and innovative features. But wide discrepancies remain. While several banks do offer a full feature set, many institutions are simply renaming consumer tools [as] 'small-business banking,' " Hines says in the report. The release of the TowerGroup study happens to coincide with a recent announcement by financial services giant Wells Fargo & Co., which announced last week another component of its Wells Fargo Mobile service: text banking. According to the company, the addition makes Wells Fargo the first major financial services company to offer its consumer and small-business customers both browser- and text-based account access via mobile devices. "We don't believe any one mobile-banking method will ultimately provide all the functions customers demand, which is why we're offering two ways for consumers to bank with us through a mobile device," said Eskander Matta, senior vice president of Wells Fargo Internet Services Group, in a written statement.

Related articles: The Emotionally Detached Customer E-banking means fewer visits to the branch and fewer opportunities for banks to interact with customers. Wireless Purchase Opens the Door to Enhanced Service Offerings ERF Wireless snaps up Southwest Enhanced Network Services; banks will benefit from owning their own wireless equipment and dropping expensive T1 lines. Intuit Quickens Pace Into Online Banking The financial management software vendor will acquire on-demand banking services provider Digital Insight, which will allow Intuit to blend financial management workflows with online banking. Trust Will Drive Market Share for Banks Financial institutions must respect customer data, use the Web, and respond to email to help ensure growth.
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