Community banks have long had a reputation of delivering better service than their big-bank counterparts, but small-business owners say that the customer-service gap is narrowing.
Greenwich Associates, a Connecticut consulting firm, asked more than 22,000 owners of businesses with revenue of between $1 million and $10 million this past spring what they thought of their banks' service levels. The results were published Monday in the firm's Business Banking Survey, which it conducts every two years.
Seventy-nine percent of the business owners who were customers of five large banking companies - JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Wachovia Corp., and SunTrust Banks Inc. - gave their banks an "excellent" or "above average" overall satisfaction rating, a 7-percentage-point increase from the 2003 survey.
And even though smaller banks' customers say they are also getting better service than they were two years ago, the advantage those banks hold over the biggest banks in the levels of satisfaction - what Greenwich calls the "competitive spread" - is shrinking.
Bob Neuhaus, one of the survey's authors and a Greenwich consultant, said community bankers should be "concerned" about the findings, because large banks already have advantages when it comes to pricing and convenience.
"Larger banks are responding to the competitive threat and have improved service quality," Mr. Neuhaus said. "If large banks continue to shrink the spread, the high-touch [service] that has been the domain of community banks will no longer be enough to compete effectively with the large bank model."
Two years ago 84% of small-bank customers said they received top-notch service while 72% of big-bank customers said the same - a difference of 12 percentage points. That spread narrowed to 8 percentage points this year as 87% of community banks' customers gave their banks "excellent" or "above-average" marks.
Executives at large banks said the survey's results validated their efforts in improving customer service to rival that of community banks. Community bankers, though, maintained that their sector will continue to have an edge over big banks, because their customers can more easily talk to top managers who are in the local markets, and can get decisions and problems solved faster.
(For this survey, Greenwich defined community banks as bank holding companies with $5 billion to $15 billion of assets. It used that asset range because those companies tend to offer many of the same products and services as larger ones, Mr. Neuhaus said.)
The survey also concluded that small-business customers are more satisfied with bankers' decision-making authority. Seventy-eight percent of large-bank customers gave their individual bank "excellent" or "above average" grades for their ability to make decisions quickly, up from 72% two years ago. Again, small-bank customers also gave their bankers higher marks than they did two years ago, but the increase - 81% to 83% - was smaller.
David Pope, the executive vice president of business banking at the $512 billion-asset Wachovia, said it routinely surveys its small-business customers to find ways to improve service. As a result, it now assigns both a relationship manager and a "relationship specialist" to each business customer. Both operate out of local business centers in each of Wachovia's major markets, and whenever the manager is out meeting new prospects, the specialist stays in the office to help existing customers.
"We're extremely focused on continually improving customer service, so that we can actually avoid any problems a customer may have, by anticipating whether there could be issues and taking care of them before they become a problem," Mr. Pope said. "Our goal is not to match the service levels of community banks, but to be out in front."
J. Downey Bridgwater, the president and chief executive officer of the $3.6 billion-asset Sterling Bancshares Inc. in Houston, says that even with all of the improvements at large banks, community banks will always surpass them in terms of customer service.
"Our customers can access top management and talk to the real decision makers, and we can respond more quickly to their needs, because everything is done locally," Mr. Bridgwater said.
The majority of larger community banks like his offer much of the same small-business products and services as bigger banks - and at competitive prices, he said.
Richard E. Holbrook, the president of the $6.4 billion-asset Eastern Bank Corp. in Boston, agrees that community banks still have an edge, but he said they cannot rest on their laurels.
"If you just think you can sit back and offer the same products as you may have done 10 years ago, then you're sadly mistaken," Mr. Holbrook said. "This is a very competitive business, and community banks have got to invest in the kind of things that big banks heavily invest in, like the latest online banking options. Those organizations which provide them with better offerings, will rate higher than the others in terms of service."
When the survey participants were asked how satisfied they were with their banks' online offerings, big banks actually scored higher than the small ones.
