Small Businesses Willing to Switch Banks for Better Payment Options

That's according to a new study from BAI in collaboration with Oracle, a software company and Unisys, a technology services and solutions provider, titled BAI Small Business Payment Strategies. More than 1,000 small and mid-sized businesses and 30 executive banker interviews were conducted.

Within the small business market, companies with annual revenues between $5 and $10 million are especially attractive to bankers because they tend to carry higher average balances and, in many instances, stronger credit profiles, the study found. Fifty-seven percent of businesses said they were quite likely to switch providers if their payments needs were not met. Another finding of the study is that bankers need to modify their perception of small business needs. The research revealed that many bankers believe small businesses are "not interested in technology," nor do small business owners have the "resources to take advantage of it." This may be true for micro-businesses with revenue of $1 million or less, according to the study, but it may not be representative of the broader small business marketplace. For the $5-$10 million revenue segment, 80% of businesses expressed a "strong interest" in a technology-based electronic platform, 82% said they use or plan to use ACH direct deposit and 79% of the group currently use or plan to use wire transfers. Other highlights from the study showed less than half of the respondents use credit cards issued by their primary deposit provider. By introducing card loyalty programs, banks could likely improve upon this statistic as over 55% of businesses said rewards and points were important to them when selecting a method of payment, the study said. Forty-five percent of all small businesses were concerned with maintaining working capital. "If banks adapt existing middle-market capital, cash management and treasury management services, they can capitalize on this issue," the study said. Fraud is also a major concern. Over 70% of the respondents were looking for an identity management platform to safeguard their business' identity and provide electronic access to financial and other key accounts. "While the study highlights some disconnects between the bankers and their small business customers, it also outlines opportunities for banking organizations to increase their penetration and build loyalty within this market segment," said Deborah Bianucci, BAI president and CEO. The study's findings will be discussed at the BAI TransPay Conference & Expo on May 24 in Las Vegas. -