Traditionally small and mid-sized businesses have been attracted to small banks that offer personalized service and knowledge of the local market. Yet the rise of internet banking has left smaller banks struggling to keep up.

Small businesses with annual sales of $100,000 to $10 million are increasingly reliant on internet banking and want more sophisticated features than smaller banks are offering. As the number of small business banking users increases their satisfaction level with small bank online services is decreasing. Meanwhile, satisfaction with larger bank online services is increasing.

Large banks have the resources and scale to invest in technology that integrates their delivery online. Larger banks have a head start on corporate payment products and can simply adapt and re-market those products for small business customers.

Smaller banks should focus on the features and products that are most important to small businesses — particularly payment services and remote deposit capture. A BAI survey in May 2006 demonstrates the importance of check imaging and electronic transactions:

Fifty-seven percent of businesses surveyed that have $5
million to $9.9 million of annual sales said they are likely to switch
banks to get better payment services.

As Big Banks Get Better, Small Ones Shift Tactics
American Banker (subscription required)
Tuesday, August 1, 2006
By Chris Costanzo