LAS VEGAS -
With member and share growth virtually stagnant, Digital Insights' president said online banking/bill pay is the only area experiencing rapid growth.
"This is a real opportunity for financial institutions," said Jeff Stiefler, whose Calabasas, Calif.-based company was acquired by Intuit Feb. 6. "Many online tools are too complex, and sometimes they are not integrated. There are 26 million small businesses in the U.S., but 22 million of those do not generate enough revenues for financial institutions to pay attention. These people are really in pain; they are frustrated."
Solving 'Hidden' Problems
Stiefler, along with Steve Bennett, CEO of Intuit, sat down with Credit Union Journal during the recent Digital Insights User Conference here. They said the company offers products that fix the problem for people "hidden in the body" of CU membership.
"We can solve that; we can give them the tools no one else can," Stiefler declared. "Financial institutions and consumers wouldn't define this as something they want because they can't imagine it. There are 15 million small businesses doing payroll, invoices, and accounts receivable or payable manually. Online banking doesn't deliver nearly the solution set these people need."
Bennett said CUs must offer business services, not just business loans. "Lending is a hard world to compete in by itself. It comes down to one rate versus a competitor's rate. Credit unions must do something else to differentiate."
Robert Surridge, senior vice president and general manager for Digital Insights, has headed the company's lending division for more than six years. He said making a small business loan is different from a consumer loan because business lending requires different information, identification and underwriting standards.
"Credit unions in general are new to small business lending. They do not have the experience."
In many instances, Surridge said, the 22 million small businesses at the lower end of the spectrum simply take out consumer loans-owners sign for an auto loan, but use it for a delivery truck. They also use home equity loans or lines, or their personal credit cards, to capitalize their companies. He said Digital Insights' Small Business FinanceWorks package monitors consumers by transaction types. "As it gets adopted and used, it will help financial institutions define their products and market them better."
Once a CU has identified a small business owner by his or her transactional behavior, it can help direct these people towards products and services they need. "The credit union's marketing dollars become so much more valuable, and it increased penetration and service to members."
According to Beth Schneider, director of customer market insights for Intuit, 19.7 million small businesses (79.5% of the 25.8 million total) have no employees, and an additional 2.8 million have one to four employees.
"Sometimes it is hard to know where they are and how to find them. They have few employees, and half are home based. But cumulatively, they spend a lot of money on technology and telecom," she said.
Recognizing 'Alternative' Small Businesses
Some don't think of themselves as a "small business"-lawyers or plumbers, for example. Schneider, who led a breakout session along with Debra Syfert, vice president, account management for Digital Insight, said CUs must talk to these people in their language and address their needs.
Added Syfert: "The important first step is identifying who they are."
Schneider said understanding the small business mindset is important.
"These people do it all by themselves. Understand they have no departments for HR, legal or marketing. Understand wearing many hats is challenging, but also rewarding-most love it. However, they sometimes feel overloaded because their data is not organized, they don't know if their bills are getting paid or invoices tracked. If a financial institution can help them, that is hugely valuable. People want things that will help them get organized, and at the same time, they must be easy to use."
