New Report Analyzes Small-Business Strategies of Community Banks

Aite Group report says that community banks may find it difficult to capitalize on small-business customers, but the benefits justify the costs.

A new report from Boston-based analyst firm Aite Group found that community banks struggle to maximize opportunities to connect with small businesses, but the benefits of doing so outweigh the costs.

The report surveyed 100 U.S. community banks -- which the firm defines as those with less than $5 billion in assets -- and analyzes their current use of the online banking channel, vendor preferences and planned enhancements to online business banking functionalities. It also highlights these banks’ growing interest in using the mobile channel, remote deposit capture (RDC), and social networking to better connect with small businesses.

The small-business customer segment represents an opportunity for community banks to grow much-needed deposits and fee-based revenue, but capitalizing on this opportunity is no easy task, according to Aite Group.

U.S. small businesses spend more than $400 billion each year on financial products, but, according to the report, banks struggle to understand the needs of this customer segment. The firm recommends that community banks hoping to increase their penetration into the small-business banking segment should allocate sufficient resources to train staff about small-business customer needs, broaden their small-business product portfolios, and leverage the necessary technology to make banking more convenient for small-businesses.

"Small businesses remain underserved by their financial institutions, and their satisfaction levels are lower than they should be," says Christine Barry, research director with Aite Group and author of the report. "Community banks able to successfully serve this segment will find that the benefits far outweigh the costs. By offering the right banking channels and leveraging technology partners, community banks will see increased satisfaction among existing small-business customers and increased opportunities within the segment."

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio