The reasons small businesses choose a bank or credit union with which to do business vary according to the type of institution, according to a new survey.
Raddon Financial Group said its survey of more than 1,000 business banking customers has found that businesses choose competing providers for very different reasons. Small business owners said they choose banks based on convenience and quality of service, with pricing coming in third. Discount brokers, credit unions, mortgage and finance companies are selected primarily for pricing, according to the survey, which was conducted on behalf of eight institutions representing more than $600 billion in total assets. Mutual fund companies were chosen for specialty products and full-service stock brokers for advice provided.
"When a customer considers a bank to be their primary business as well as primary personal financial institution, that bank benefits significantly from owning that mixed relationship," said Raddon in its analysis. "Results showed decreased customer use of financial service competitors-other banks, credit unions, mortgage and finance companies. The research also showed in mixed relationships it was twice as likely that the personal, and not the business relationship, was established first. The prevalence of this type of evolution is important for banks to consider when seeking that most profitable, mixed banking relationship."
The Raddon study acknowledged that while some of the barriers to owning both relationships would be difficult to counteract, other barriers cited by customers were clearly missed opportunities. When business customers were asked why the bank was not also their primary personal financial institution, they responded by saying another competitor was more convenient (23%), pricing was better elsewhere (22%), and that they preferred to keep separate providers (20%) (see chart).
Of seventeen possible business banking online features, three of the four ranked highest by by business customers dealt with monitoring and controlling the company's cash flow: viewing account balances, transferring money between accounts, and check images.
"Banks should keep these in mind when prioritizing and allocating resources for scarce IT support," said Bob O'Merea, VP-director of research for Raddon. "Let the customers set the priorities, and when the top priorities are taken care of, the lesser-ranked, nice-to-have features should be enhanced."