Major Banks Miss the Mark with Small Ecommerce Businesses

The nation's top banks and regional players made small businesses happier in 2024 with one exception: ecommerce specialists. New J.D. Power data also shows how Regions Bank seems to have the knack of pleasing small companies by maintaining strong people connections.

By Steve Cocheo, Senior Executive Editor at The Financial Brand

Published on December 2nd, 2024 in Business Banking

Major banks have improved their satisfaction ratings among small businesses — with a key and critical exception: small firms engaged in ecommerce, suggesting remedial efforts may be necessary for some institutions but also creating opportunities for competitors to grab up market share.

J.D. Power reports in its 2024 U.S. Small Banking Satisfaction Study that 16 large banks, as a group, saw average satisfaction levels rise 20 points on the company’s 1,000-point scale. (The overall ranking was up 13 points in 2023.) The firm considers this increase a surge and credits much of it to improved communication with small companies. That includes higher-quality interactions with relationship managers, greater satisfaction with advice rendered by business bankers, improved problem handling and resolution, and better communication and explanation of business banking fees.

Regarding the last item, 64% of the small firms polled said they completely understand the fees they pay, up five percentage points from the previous survey. In addition, companies saying that they were paying higher fees fell two percentage points year over year.

"Reducing and avoiding fees is top of mind for small businesses," according to a presentation based on the study. "They want to receive alerts and communication from the bank that helps them with this objective."

The top five banks, by overall satisfaction ratings based on the 1,000-point scale, were: Capital One (736), Chase (729), Regions Bank (712), Huntington Bank (710) and Bank of America (705). The average of all the banks in the study was 705. This was the second year in a row that Capital One took the top spot, after coming in second in 2022.

How major banks stacked up for small business satisfaction for 2024

A growing portion of small business respondents indicate they believe they have a primary relationship manager that they can tap when they have account questions or difficulties. Many firms also feel that it has become easier to find information about their banks’ products and services online.

"Resolving problems was a big deal in this year’s numbers," says Paul McAdam, senior director of banking and payments intelligence at J.D. Power. Overall satisfaction with the major banks’ problem resolution rose by 41 points in the study.

McAdam also explains that concerns about inflation and other broad economic factors mean that small firms increasingly see their banks as valuable business partners. Respondents’ satisfaction with banks’ financial health support increased 34 points from year to year.

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Satisfaction Among Ecommerce Goes Contrary to Overall Small Business Trend

The J.D. Power study is based on a sample of nearly 7,000 small firms, 35% of which self-identify as being substantially or completely based in ecommerce. By contrast to the overall finding of increased satisfaction, the study found that satisfaction levels were flat from year to year among the ecommerce respondents.

Why didn’t the ecommerce contingent report the same improvement as other types of businesses?

"Among ecommerce small businesses, we saw declining incidences of receiving advice and receiving proactive communication," says McAdam. "We also saw declining levels of satisfaction with the relevance of advice that was received."

Overall, says McAdam, "it looks like there were some disconnects in the larger banks in connecting well with ecommerce businesses."

More specifically, McAdam says that ecommerce firms typically complained that the major banks keep them on hold too long and they are aggravated by experiences with interactive voice response systems.

Given the negative findings, says McAdam, "taking better care of ecommerce businesses looks like an opportunity."

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A Standout Among Top Performers: Regions Bank

As noted earlier, Regions Bank came in third in the ranking, up from eighth place the year before and tenth place the year before.

McAdam credits this performance to Regions’ long-term emphasis on person-to-person skills among its employees. This is especially important in small business banking, he says, because small firms tend to be much more interested in obtaining advice from their banks than retail customers.

Advice sought from banks by financially healthy and unhealthy small business

"There are banks that talk about culture, but this is something that Regions has historically been very good at," says McAdam.

McAdam adds that Capital One and Chase score a bit higher than Regions in terms of technology and range of services, accounting for those institutions having a superior ranking to Regions in the overall listing. The study report notes that the people factor is the only dimension of the J.D. Power scoring matrix where Capital One did not score as best-in-class.

Read more: The State of Small Businesses: A Guide for Banks

Small Businesses’ Desire for New Credit is Flagging

The study found that demand for new loans is down a bit. In 2021 the study found that 20% of the sample expected to apply for a new loan or credit line, but that in 2024, only 17% of the sample anticipated that.

The portion of the study sample that has not applied for a loan or credit line has been climbing since it fell to 65% in the 2021 study. In the 2024 study 70% of respondents had not asked for more bank credit. Of the remainder that did apply for credit, nearly nine out of ten were approved. Most respondents indicated that their bank was a good to excellent source of credit.

McAdam says that many small firms have been exercising "a little bit of caution in terms of taking up additional leverage." He adds that the latest study saw a small pickup in firms believing that their credit rating has slipped somewhat. This could account for some of the reluctance to apply for more credit, and fits with the decline in credit growth that many financial institutions have seen.

"It will be interesting to see what 2025 looks like," says McAdam. "Optimism for the economy and the new administration and less regulation for banks and more should help things. But we’ll see what the future holds."

Read more: Flexible Spaces Demand Flexible Lending in the New Office Era

About the Author

Profile PhotoSteve Cocheo is the Senior Executive Editor at The Financial Brand, with over 40 years in financial journalism, including the ABA Banking Journal and Banking Exchange.

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