BOSTON — Their willingness to experiment with new channels and technologies may have given credit unions an advantage over other financial institutions considering offering mobile banking services to woo small business customers.
According to a new report from Aite Group, "The Mobile Banking Opportunity for Small Businesses–Are Banks Listening?", credit unions have offered such services for several years and were among the early adopters.
A survey conducted between September and November 2007 of 101 of the 1,200 largest credit unions, which were defined as those with more than $100 million in assets, found that 20% were already offering bill payments, 15% offered account balances and 5% were making intrabank transfers–all via the mobile phone.
"Credit unions are more agile than larger institutions, and tend to focus on enabling access to banking services via multiple channels," according to Nick Holland, senior analyst with Aite and co-author of the report. "As with community banks, credit unions have played to their strengths, developing close client relationships and high levels of trust compared to larger banks."
Aite's most recent report data was culled from a survey of 50 of the largest U.S. financial institutions conducted between July and September 2008. There are currently more than 300 banks and credit unions offering mobile banking services in the United States, all with varying degrees of complexity and innovation, Aite discovered.
A separate survey of 147 small businesses were segmented according to the type of financial institution they banked with: the five largest banks (Bank of America, Citigroup, JPMorgan, Wells Fargo and Wachovia), regional banks, community banks; credit unions and brokerage firms.
More than 60% of respondents said they currently bank online and have indicated a greater demand for multichannel banking including mobile banking services. Of the small businesses surveyed, more than one-third were "likely" or "extremely likely" to use such a service within the next six months if offered by their bank's business online banking site.
Aite polled several mobile banking service vendors and found that the most common activity is checking one's balance. That discovery appears to be in line with credit unions and brokerage firms, which reported that the activity is the most prevalent. At the large, regional and community banks, just 3% to 4% of small business clients were currently using this functionality.
"Banks do know that time is a hot commodity for small business owners," Aite noted. "These individuals are attracted to financial products and services that save them money or increase convenience. This factor helps to explain high online banking adoption
rates by small businesses."
When it came to conducting intrabank fund transfers via the mobile phone, credit unions and brokerage firms led the pack in already offering the service, according to Aite. While only 7% of both groups fell into this category, they still managed to beat out regional banks, which had not started offering the service at the time of the survey. Credit unions and brokerage firms were also ahead of the nation's five largest banks and community banks, both respectively indicating that only 2% currently offered intrabank fund transfers via mobile phone.
Aite also reported that credit unions and brokerage firms once again were out front in bringing bill payment capability to mobile phones. Regional banks and community or local banks had yet to offer the service at the time of the survey. Of all the bank segments, regional banks have been the least successful in the adoption of mobile banking services because they often do not have the geographic footprints and strong brands that attract small businesses to larger banks, Aite said.
"[They] don't have the community feel offered by smaller banks. We interpret their lower mobile success as being a result of their overall lower-than-average success rate with small businesses in general."
Aite said the "once-ignored" small business customer segment has become an important target market for all sizes of financial institutions. By 2010, the research firm is forecasting that these customers will spend an estimated $500 billion on financial products, which could provide a stream of new fee-based revenues and "much-needed" deposits.
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