In the wake of bank mergers, business customers are defecting to competing institutions in record numbers, according to recent market research.
Poor service was cited as the primary reason for moving accounts from one bank to another.
Over a 12-month period, 10% of small businesses changed banks, according to a survey by PSI Global of Tampa, Fla. It was the highest percentage since PSI began conducting its surveys in 1992.
"More small-business customers claim they've seen service problems with their banks than ever before," said PSI vice president Maria Erickson.
The findings reinforced those reported for the cash management business last month by the Maryland-based Treasury Management Association.
Ninety percent of its respondents-treasury and other financial professionals from companies of all sizes-said they feared that banking is becoming "commoditized" and that much of its personal touch is being eliminated.
More dramatically, 80% said they expect more monopolistic pricing by banks, and fewer sources of credit.
The PSI Global data suggest that the dissatisfaction trend is worsening. Of 900 respondents to its telephone survey in March and April-financial officers of companies with annual sales of $500,000 to $10 million-14% said they plan to move their accounts within the next year.
In the PSI survey, 71% of the small-business respondents said their financial services providers had merged with or been acquired by another. Almost a third of those whose banks had merged said the personalized service they were accustomed to had deteriorated.
Only 22% of companies that changed providers said their banks tried to keep them. "The most shocking thing to me is how little an effort is made to retain these customers, one of the banks' most profitable segments," Ms. Erickson said.
Small businesses are lucrative to banks because they use a wide range of services for business and personal reasons. To many, good service is more important than cost. But these customers also tend to demand a high level of personalization, making them far more sensitive than other customers to changes in their banking relationships.
"If the acquired bank has been giving personal attention to a small- business customer, and the acquiring bank has a more process-driven operation, the customer is bound to start shopping around," said Kenneth C. Coopman, executive vice president and director of commercial banking at California Federal Bank.
This year's was the first PSI survey to focus on merger-related issues.
Responses indicated that a bank could reduce customer defections by training staff to make sure customers know about improvements in service and product selection that result from mergers. But smaller companies also should be warned of possible disruptions, the survey found.
The results help to quantify the hazards of a poorly executed merger. The old Wells Fargo & Co., a leading small-business bank, lost its independence after its problems absorbing First Interstate Bancorp's operations. San Francisco-based Wells' earnings plummeted and its stock dropped sharply, setting it up for the eventual takeover by Norwest Corp. of Minneapolis. Norwest moved its headquarters to San Francisco and retained the Wells Fargo name.
In melding two banks, it is easy to worry more about the integration than the customer, said Michael R. James, executive vice president at Wells. "When you go through a merger, you tend to get very inwardly focused," said Mr. James, who oversees the business banking group at the California bank. "But we need to stay focused on customers and make sure their lives remain simple and hassle-free."
"Small-business customers don't necessarily demand premier service, but they want consistency," Mr. James said. "They are very busy. Banking is way down on the list of things they want to worry about."