Small Businesses Demand Great Mobile, Account Managers, Branches Too

A key lesson of the Covid period has been that many small businesses continue to need access to real people for both service and advice. Research by J.D. Power indicates that while digital channels provide convenience and helpful tools, having a person still can't be replaced.

Prompted by the sharply changed banking habits of consumers, many financial institutions have been downsizing branch networks more aggressively. That may make sense from the perspective of retail banking, but it could negatively impact an institution’s satisfaction among its business customers.

Small businesses also made extensive use of digital channels during and after the height of restricted branch service. But J.D. Power’s U.S. Small Business Banking Satisfaction Study found that even though the broad small business market likes digital service, especially full-featured mobile, it’s not enough. Many want digital served up in combination with continued availability of branch service and a strong dash of the human element. In other words, many small firms want their financial institution to cover every base.

Digital’s Great, But …

J.D. Power’s study found that small business banking customers who have a designated account manager at their bank drive satisfaction scores that are more than 9% higher than customers of institutions that don’t give small firms a dedicated banker.

The firm’s small business research is based on the reaction of respondents who bank with national and regional commercial banks, but there’s a lesson going forward for banks and credit unions of all sizes: People still matter to small firms.

“It’s becoming clear that small businesses want and are having higher levels of engagement and are looking for more from their banks,” says Paul McAdam, Senior Director of Banking and Payments Intelligence at J.D. Power. “They are looking for more services and more help.” The study report notes that where banks don’t provide account managers, “consistently good branch service and knowledgeable staff are essential to maintain satisfaction levels.” Failing to fire on any of those cylinders won’t fly anymore.

McAdam says that, after a rocky start, bank participation in the Paycheck Protection Program proved of help to many institutions. Banks that carried it off well saw a lift in the satisfaction scores.

Since the nation’s shift to the “new normal,” mobile use advanced by six percentage points and branches by seven percentage points, coming back from a 2020 dip.

Shifts in small business channel usage

The continuing interest in face-to-face banking in branches by small business operators appears to be prompted in part by trouble in this sector. While 52% of small firms told J.D. Power that they are financially stable, the rest are having a rough time. Power reported that 23% of firms lack capital and credit and are having difficulty meeting obligations. Of the rest, 13% are having debt issues and 13% are concerned about their ability to raise capital and obtain credit.

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Account Managers Give Institutions a Face Small Firms Want to See

In spite of the advent of more online-only providers of small business banking services, providing this piece or that piece of a firm’s financial needs, J.D. Power found that 39% of respondents feel it is very beneficial to be able to conduct an annual review of the state of their business once a year with their bank. This argues against the fragmentation of their financial affairs among multiple providers and also favors designation of a single officer who has a view of the business from all perspectives.

The study also found a strong interest on the part of many businesses to hear from their bank. J.D. Power found that only 8% of small firms felt like their financial institution communicates with them too frequently.

Small businesses having access to an account manager reported higher satisfaction in all of ten categories of customer relationship, as demonstrated in the chart below.

How having an account manager improves small business satisfaction

55% of small businesses say they have a designated account manager, which indicates that many institutions could improve their connections to business customers by adding this position.

The study found that an institution doesn’t necessarily have to outfit a cadre of specialists to take on the account manager role. Small firms reported that their account manager had the following job:

  • Business banker based in a branch, 37%
  • Bank manager, 27%
  • Customer service representative or personal banker based in a branch, 13%
  • Business banker based out of another type of office, 6%
  • Investment, wealth or trust representative, 6%
  • Other roles, from cash management/payments specialists to call center employee, 11%

A key benefit for institutions offering account managers is that it personalizes the connection between bank and customer. From 2018 to 2021, the percentage of customers stating that they perceive their account manager to be a trusted advisor rose by 13 percentage points to 94%. That is a very significant rate of increase in the context of the annual survey, says McAdam.

Finding a Lifeline:

Three areas where having an account manager especially improved small business customer satisfaction were problem resolution, communications and advice, and product and fee inquiries, according to J.D. Power’s research.

McAdam says that banking leaders in small business satisfaction always include those who have both branches and account managers. “Physical presence matters a lot to many small businesses,” he says, “and most say they want a point of contact.”

Institutions that have been trying to cut costs have often looked to branch system trims, which can put small firms further away from a branch, especially if they are connected to a particular officer. One alternative to eliminating a branch completely comes from the portfolio of North Fork Bank, now part of Capital One.

When North Fork expanded beyond its original suburban footprint into New York City, it knew it was doing so chiefly to serve businesses, rather than consumers. Management reasoned that there was no need to pay up for higher-priced ground level space in Manhattan buildings when it wasn’t catering to consumers who favored ground-floor access. By opting for higher floors, North Fork saved a great deal of money.

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Branches Remain Important, But Digital is Growing Stronger

J.D. Power’s research found only 5% of respondents solely use branches, and 5% relied on phones. Of the rest of the study population, surveyed in June 2021, here is how usage split out:

  • Branch Dependent, Digital Using, 49%
  • Digital Centric, Branch Using, 12%
  • Digital Only, 28%

Account managers are more likely to be important to customers that are branch dependent than to those who are digital centric, the report notes. 61% of the former have account managers, while 49% of the latter do. Yet Millennial-owned businesses were slightly more satisfied, on average, than branch-dependent customers, though they skew towards digital-centric. This may come from greater comfort with digital channels and a preference for self-service, where possible.

Mobile On The Move:

J.D. Power’s study found that online banking continues to be more commonly used by small businesses than mobile, but that mobile usage has climbed by 16 percentage points from 2018 to 2021.

Overall satisfaction with both online and mobile has been relatively flat since 2019. McAdam believes this is due to the schism between satisfaction ratings for national bank business mobile and regional bank offerings. The larger institutions have enjoyed improving ratings, but falling ratings for regionals have pulled down the overall findings.

The study looked at features on business mobile apps and business online banking, with usage levels as a reference point.

Which small business online banking features increase satisfaction most

Which small business mobile banking features increase satisfaction most

J.D. Power recommends paying close attention to the patterns in the findings regarding digital. Online banking features that resonate the most tend to be those that assist in managing the business. While there is some commonality, a key observation for business mobile is that there’s strong appeal in everyday features that provide convenience.

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