84% of Small Businesses Visit Branches Primarily to Make Teller Deposits
Small businesses seem to be underserved at many financial institutions in the United States, according to the results of Mercator Advisory Group’s 2016 Small Business Payments and Banking Survey. This is probably because they are so diverse and difficult to serve. An estimated 27–28 million small businesses accounted for at least 60–80% of all U.S. jobs in 2012 and for 66% of new jobs created.
Historically, many financial institutions (FIs) had restrictive policies limiting small business loans and didn’t offer many other support services for small businesses other than primarily consumer-oriented solutions. In 2015, 79% of small business loans were greater than $350,000, and most lenders required a minimum two-year financial track record, denying loans to many small firms, according to the Small Business Association.
Small businesses may not need all the services of larger corporate accounts, but they certainly have different needs than consumers. Most small businesses lack organized, structured financial plans and accounting and often need business support services and financial advice. Digital banking services with analytical tools and personal financial management are key to supporting them.
By providing tools to help small businesses organize their finances and acting as a trusted advisor instead of purely a facilitator of business transactions, financial institutions can leverage their understanding of small business owners to improve efficiency and generate new revenue through underwriting more loans. To serve small businesses, they can provide business management and financial management tools and advice and improve their online and digital banking functionality.
Mercator Advisory Group’s report, Business Banking Services: Expanding Online and Mobile
, finds that virtually all small businesses in the United States have business accounts at banks or credit unions and that digital banking by online and mobile is important to them. Small businesses still visit branches, primarily to go the teller rather than the ATM to make their deposits, rarely stopping to take advantage of support services within the branch. This report focuses on the types of loans, deposit accounts, services, and capabilities that small businesses use and are interested in obtaining. We explore the relationship that small businesses have with their primary financial institutions and satisfaction with their services.