The J.D. Power U.S. Small Business Satisfaction Study found that 22% of the fast-growing small businesses have switched banks in the past 12 months, compared with only 5% of slower growth firms. In addition, 25% of owners of fast-growing small businesses indicated they intended to switch financial institutions within the next year, while only 7% of other small businesses indicated the same.
The study found that the fastest growing small businesses are very sensitive to problems – when they experience a problem, the likelihood to switch more than doubles … up to 57%. The difficulty of receiving a loan also puts the small business relationship at risk for the fastest growth companies.
So why are faster growth start-ups less satisfied and more likely to switch? Let me share some personal examples that may clarify some of the challenges. Here are 8 ways my bank falls short of expectations.
1. Fractured Small Business Account Opening
Unlike an established business, most owners of start-ups have zero experience in building a new banking relationship. There is limited clarity of the forms needed to open a new account and no way to open a new account through digital channels.
The first challenge I faced was trying to find a bank where I could open an account. The first two banks I visited had only one person who knew how to open small business accounts … and both were out to lunch when I visited. It may have made sense to have a person available when a small business owner is most likely to want to open a new account.
When I finally found a bank that had a small business banker available, I knew that I needed my tax ID number, articles of incorporation and other basic documentation, but there were additional forms I was not aware I needed. Most of these were available for immediate online download, but my bank could not download them for me to sign since the banker wasn’t allowed to access sites outside the bank. I needed to go back home, download the form, sign it, and return the paper form to the branch.
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2. Lack of Experienced Advisors
The capabilities of the small business bankers I have met are not much different than 20 years ago. They totally understand the small business product line, are very service oriented, and understand transaction-based banking. The problem is that very few (if any) understand the unique needs of today’s small businesses. They usually don’t understand start-ups as a category or high tech firms specifically.
Owning a subscription-based eCommerce business, I needed a way to process a large number of moderate-sized payments from global sources. I also needed a way to send money rather quickly on request. Without established credit for the new business, I had to contract with an outside firm for processing payments and had to find my own way to avoid the $75 wire transfer fee for funds disbursed.
More frustrating was when I tried to refinance my personal mortgage. After going through a massive paper-based process, my mortgage lender told me that they could not approve the refinance without at least 3 years of verified income from the small business. They also said that they ‘didn’t understand’ a subscription-based business, and would require a co-signer. This is despite having more than 35 years of mortgage payments without interruption.
3. Delayed Access to Account Insight
At the core of an eCommerce subscription-based business is the ability to provide immediate confirmation of payment to the new subscriber and allowing the customer to access their account. This is easy when a customer pays by PayPal or credit card, since there is a link between the name and payment made. Unfortunately, the same is not always true for wire transfers.
When I receive a wire transfer at PNC Bank, I receive notification that I have had a wire transfer deposit, but there is no indication of where the wire transfer came from. Instead, I need to wait another day for a payers name to be associated with the wire transfer.
4. Inefficient Funds Transfer Process
Transferring funds between accounts is as easy for a small business as it is for a personal account. The challenges are when transfers between financial institutions are desired. The process is not seamless to establish and may involve fund clearance delays.
In my situation, I found that the easiest, fastest and least expensive way to transfer funds was to write a check from my PNC account and do a mobile deposit into my Wells Fargo account. To say the least, after 5 years of not writing a check, I now write two checks a month so I can send a mobile deposit to my other bank.
5. Zero Flexibility
The most frustrating aspect of working with a bank as a start-up business is how banks fall back to the “it’s our policy” response at the worst possible times. This response was used when I tried to establish a moderately-priced credit card processing account, but didn’t have a small business credit rating.
The most recent example was when my business debit card was hacked right before I was scheduled to leave town for 10 days. My bank informed me that a new card would arrive in 3-5 days (after I would have left for vacation). When I asked whether they could send via Federal Express or Certified Mail, my bank said it was “against policy,” despite the fact that I have received cards the next day from other banks in the same scenario.
Making matters worse, when I informed my bank that I could not run a business without access to my funds via a debit card for 10 days, they offered me the option of visiting a branch for immediate card production. While this sounded like the perfect alternative, when I visited the branch, they said that creating an instant issue card for a small business was “against policy”.
Being Positioned for a New Economy
The diversity of small businesses is far greater than in the past. Well beyond the simple categories of manufacturing, retail and service, today’s scope of start-ups didn’t exist a decade ago. To positively impact small business customers’ perceptions of their banking experiences, financial institutions need to be armed with the specialized insights that will help them meet and exceed the ever-changing expectations of their customers. Understanding the shifts in customer perceptions, very specific micro-business trends, and the factors with the greatest impact on satisfaction is critical to a bank’s ability to grow their small business portfolio.
The first step would be to digitize the account opening and daily account management functions. It would also help to have micro-industry specialists beyond traditional categories. Finally, start-ups need a place to turn for small business advisory services (beyond lending). This includes cash flow management, tax regulations, basic accounting and business creation support.
Message to banks and credit unions – Don’t get lulled into a false sense of security when small business satisfaction ratings are released that show high levels of satisfaction. While established small businesses may love the service they receive, there is a growing dissatisfied segment of start-up small business owners.