Irritated Small Businesses Continue to Look Elsewhere for Better Service
Frustration among small business owners toward their banks appears to be growing, and a number of them said they are making plans to jump ship over the next two years.
The findings come from a new Aite Group LLC report of 283 owners and executives of businesses that generate less than $10 million in annual revenue. Among small businesses that are "disappointed" with their financial institutions, 31% stated they "definitely" or "probably will" switch to a new financial institution over the next two years. Thirty-eight percent of the disappointed bank with the big four banks, while 41% bank primarily with regionals. The big four are Bank of America, Citigroup, JPMorgan Chase and Wells Fargo/Wachovia.
The most significant declines in satisfaction were seen in customer ratings of service, online banking application ease-of-use and financial institutions' ability to understand their specific small business needs, Aite found. Most respondents said their banks weren't doing a good job providing tools for managing cash and tracking payables and receivables. The voids could present yet another opportunity for credit unions to take up the slack. Ineffective cross selling and missed opportunities have resulted in most banks maintaining an average of only three products per small business customer year over year, according to Christine Barry, research director at Aite and co-author of the report, "Declining Satisfaction Levels Among Small Business Customers."
"While the current economic environment is creating new challenges, financial institutions cannot lose sight of the importance of providing high levels of customer service," Barry said.
The financial crisis and current recession have led many financial institutions, especially the larger ones, to tighten their credit policies, making it difficult for some small businesses to access funding, Barry noted. Fewer small business loan approvals by banks have resulted in the SBA backing 36% fewer 7(a) loans during its 2009 fiscal year than it did during the prior year.
One surprise from the survey was the growing dissatisfaction with banks' online applications. Even though some banks have shifted away from homegrown solutions to vendors to provide such services, the payoff has not come to some small business owners. One reason could be the lack of segmentation strategies. Some larger banks offer sophisticated online banking to their small business customers without bundling them to best fit their needs.
Despite financial institutions' increased focus on the small business customer segment over the last few years, small businesses' overall level of satisfaction with their primary institutions decreased between 2007 and 2009, according to Aite. This is especially true among those that had described themselves as "extremely satisfied" in 2007.