Competitive advantage and above-average returns
from serving small businesses can be found by increasing the bank’s
value. This value can be found as banks expand their focus and look at
small businesses’ payment needs as the foundation of the banking
relationship.
Following the banking industry’s strategic shift
in providing services to small businesses in the 1990s into the early
2000s, significant progress and success have been achieved. Banks now face
new challenges and opportunities. They will need to provide continued
investment in the small business segment in order to maintain their
progress. In addition to stepping up investments, banks once again need to
shift their understanding of how to serve this unique customer segment.
In a new report, Rethinking Small Business
Payments: The Future Is Now, Celent provides insights into the market
that highlight changing payment needs, the behavior of small businesses,
and how important it will be to support expanded payment offerings. The
first section of the report looks at the implicit needs of small
businesses based on a changing marketplace. The second section looks at
how banks can profit from these changes and creates a framework for
evaluating the bank's current and future small business offerings. The
last section of the report provides several examples of how banks and
nonbanks alike are finding new ways to better serve and expand their
banking relationships.
- Market Trends Shape Behavior. Changes in
the payment environment are defining how small business customers are
looking at financial services needs and providers.
- Rethinking the Payments Offering. As small
business attitudes and behaviors change, banks need to look at their
offerings in a new way.
- Beacons of the New Order. Banks, nonbanks,
and vendors are innovating their payment-related product and services
offerings (particularly online), filling the gap between small
business needs and banks' legacy product and service delivery (see
Table 1).
Table 1: Beacons of the New
Order
| Provider |
Services |
| Bank
of America |
End-to-end
payroll services; electronic invoicing |
| Cardinal
Bank |
Small
business mobile banking |
| Commerce
Bancorp |
Tiered
authority |
| Intuit |
Enhanced
user experience |
| Prosper |
Person
to person lending |
| Wells Fargo |
Tax
payments; cross-border payments |
| Wesabe |
Online
personal financial management |
| Source:
Celent |
“Banks cannot rely on the quality of their
checking and credit services to attract and retain small business
customers, let alone see the full potential of the small businesses’
contribution to the bank’s bottom line,” says Edward
Woods, author of the report and senior analyst in Celent’s banking
group. “To find competitive advantage and achieve above-average returns,
banks will be required to increase their value in the eyes of the small
business.”
The 31-page report contains 2 tables and 16 figures.
A table of contents is available online.
