B2B Payments

Small Business, Big Banking Not A Winning Combo, Survey Finds

A new report from FIS finds small businesses continue to feel fed-up with their big banks, despite a rebound in large bank loan approval rates for SME borrowers.

The research, published last week, found that there are more aspects to small business banking than borrowing money that are frustrating SME customers. According to the FinTech’s latest “Performance Against Customer Expectations (PACE) Report,” SMEs are unhappy with a lack of options for high-tech products and services, and as more small businesses switch banks, analysts say this discontent could accelerate bank-switching among the nation’s small business community.

That’s bad news for some of the largest FIs, despite a recent uptick in small business lending activity. Separate data from Biz2Credit from its Small Business Lending Index found earlier this year that, for several months in a row, large banks have increased their loan approval rates for small businesses — meanwhile, small banks and alternative lenders’ approval rates dipped.

The 2017 report from FIS surveyed nearly 500 SMEs in the U.S. with revenues up to $500 million. The data is clear: While most small businesses use some type of large, global bank, a significant portion of them are not happy with the services being provided. PYMNTS examines some of the most telling data from the survey below.

-14% of SMEs using a large global bank have switched providers in the last year, while even more told FIS they are considering doing so in the next year. Between top 50 global banks, regional banks and community banks, the top banks have the lowest satisfaction rating of 87 percent (compared with 90 percent for community banks and 93 percent for regional banks). That data supports earlier stats released from ACI Worldwide, which found SMEs across the U.S. and Europe are looking at switching banks to access more high-tech services, like faster payment capabilities.

-48% of SMEs considering switching banks cite a lack of products and services as their main reason — a key statistic, analysts said, because it suggests small businesses are concerned about more than rejected loan applications and high fees. The statistic, the report said, also suggests that small businesses are in need of cutting-edge solutions and are eager to adopt innovative services as more small business owners emerge from the millennial generation. For instance, 68 percent of small business bank customers’ interactions are either online or mobile, researchers found, with mobile banking penetration highest among the youngest of small business owners.

-37% of SMBs use non-bank financial apps to make B2B payments, with even more doing the same when revenues cross the $25 million threshold. It suggests FinTechs and alternative financial service providers are cutting into banks’ markets if they fail to offer digital, mobile supplier payment solutions for a younger entrepreneurial community seeking enhanced mobile banking experiences.

-18% of community bank SMB customers are using the FI’s mobile offerings, which suggests that, despite community banks having a higher satisfaction rating among SMBs than the large banks, both community and regional banks fall behind on mobile SMB banking penetration (regional banks see just a 64 percent penetration rate for mobile SMB services). Top 50 banks, while struggling to meet their small business customers’ demands, have the highest mobile penetration among small businesses at 76 percent, the report found.

“It’s no secret that, following the financial crisis, small and mid-sized business owners have been long on complaints and short on love for their banks,” wrote FIS Chief Operating Officer of Banking and Payments Anthony Jabbour in an article for Business Insider. “While lending restrictions seem to be easing somewhat recently, SMBs have struggled mightily in terms of getting approved for business loans.”

“But it’s not just the difficulty of securing lines of credit or business loans that have SMBs unhappy,” the executive continued. “Business customers have also been vocal in complaining about the lack of leading-edge products and digital solutions available to them from their primary banking partners.”

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