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Banking Survey About Small Business

Posted by Wendell Brock on Wed, Sep 01, 2010

Survey Provides Insight for Serving Small Business Customers

The J.D. Power and Associates 2009 Small Business Banking Satisfaction StudySM shares insight on serving small business banking customers to create differentiation and grow revenues.

Small business customers represent revenue opportunities for banking institutions, particularly if the bank can obtain the personal banking relationship as well. The survey finds that small business owners’ average value exceeds the consumer average by $31,000 or 66 percent. Further, highly satisfied small business customers create about 20 percent more revenue for the bank relative to less-satisfied customers. The difference in annual revenue dollars, according to the survey, is $675 per customer.

Unlocking this extra revenue per small business customer requires a strong commitment to relationship management. The survey finds that higher levels of satisfaction are associated with:

  • Assignment of an account manager to every small business customer
  • Completion of a needs assessment
  • Account managers who proactively reach out to customers throughout the year
  • Account managers who focus on quick resolution to problems
  • Account managers who closely manage the credit process

Economic woes weighing on small business

The survey estimates that 48 percent of small business customers are negative about the economic outlook. Downbeat business owners have special needs with respect to banking. In particular, they generally appreciate working with a proactive banker who demonstrates a thorough understanding of their business and its needs. The J.D. Power survey establishes a link between the completion of a needs assessment at the beginning of the relationship and the customer’s belief that his banker “understands” the business. Sadly, only 45 percent of small business customers report that their banker has a complete understanding of the business.

Communicate to create upsell opportunities

Proactive communication is also important. Regular interaction between the account manager and small business customer can minimize misunderstandings about fees and services. It also helps the banker identify opportunities to provide the customer with additional business or personal banking services. The goal is to help the customer manage his business and personal finances more efficiently, while creating revenue opportunities for the bank. To fulfill that goal, the banker must a trusted advisor who maintains regular contact.

Manage new loans for higher satisfaction

Many small business customers are currently concerned about obtaining the funds they need to manage through this economic downturn. The J.D. Power survey reports that account managers who focus on streamlining the loan funding process tend to score higher on small business customer satisfaction metrics. Account managers who can identify a lending need and then move the customer through the application and funding process quickly add value and generate customer loyalty.

The survey also notes that small business account managers do not have to be high-level bank employees to be effective. Lower-level service personnel are able to achieve very high satisfaction scores, particularly when they focus on communication, quick problem resolution, and efficient loan funding.

See the video overview of the J.D. Power and Associates 2009 Small Business Banking Satisfaction Survey here: http://businesscenter.jdpower.com/library/videos.aspx?localID=286679 and read the press release here: http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2009227

Topics: Banking, banker's survey, Commercial Banks, Building Smarter Banks, Deposit Growth, Deposits

Unbanked and Underbanked Americans - Who Are They?

Posted by Wendell Brock on Thu, Dec 03, 2009

The U.S. Census Bureau conducted a National survey this year on behalf of the FDIC to ascertain the level of Unbanked and Underbanked households in the United States. The survey was designed to help the FDIC understand who is outside the banking system. The study which is the most comprehensive to date, reveals that just over a fourth (25.6 percent) of the households in the U.S. are unbanked or underbanked and those households are largely low-income and/or minority.

The survey additionally collected more accurate estimates of the Unbanked and Underbanked Households, and reasons why the people remain unbanked or underbanked. The survey estimates, represent the first time this kind of data has been collected in large metropolitan statistical areas (MSA), states, and across the nation.

"Access to an account at a federally insured institution provides households with an important first step toward achieving financial security - the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms," stated Sheila Bair, Chairman of the FDIC. "By better understanding the households that make up this group - who they are and their reasons for being unbanked or underbanked, we will be better positioned to help them take that first step."

Terms

Unbanked is determined by households who answered "no" to the question "Do you or does anyone in your household currently have a checking or a savings account?"

Underbanked households were determined by those who have a checking or savings account but rely on alternative financial services. Specifically, using money orders, nonbank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or tax refund anticipation loans at least once in the past five years.

Key Findings of the Study

  • Of the households surveyed, 7.7 percent were unbanked, which translates nationally to 9 million households - approximately 17 million adults. An additional 17.9 percent - or 21 million households nationally (approximately 43 million adults) - were found to be underbanked.
  • The proportion of U.S. households that are unbanked varies considerably across racial and ethnic groups with certain racial and ethnic groups being more likely to be unbanked than the population as a whole. Minorities more likely to be unbanked include blacks (21.7 percent of black households), Hispanics (19.3 percent), and American Indian/Alaskans (15.6 percent). Racial groups less likely to be unbanked are Asians (3.5 percent) and whites (3.3 percent).
  • Certain racial and ethnic minorities are more likely to be underbanked than the population as a whole. Minorities more likely to be underbanked include blacks (an estimated 31.6 percent), American Indian/Alaskans (28.9 percent), and Hispanics (24.0 percent). Asians and whites are less likely to be underbanked (7.2 percent and 14.9 percent, respectively).
  • Households with income under $30,000 account for at least 71 percent of unbanked households. As income increases, the share of households that are unbanked declines considerably. Nationally, nearly 20 percent of lower-income U.S. households - almost 7 million households earning below $30,000 per year - do not currently have a bank account. In contrast, only 4.2 percent of households with annual income between $30,000 and $50,000 and less than 1 percent of households with yearly income of $75,000 or higher are unbanked.
  • Households with an annual income between $30,000 and $50,000 are almost as likely as lower-income households to be underbanked.

This survey goes hand in hand with a survey the FDIC conducted earlier in the year of bankers efforts to serve the unbanked and underbanked households in their community, see FDIC's Unbanked Survey. The survey is of such important information to the FDIC that they created a special website to display the findings at online at www.economicinclusion.gov.

It appears that the unbanked and underbanked households are close to the same number of estimates of those without proper medical insurance. Is there a correlation here? Is this something congress should be addressing - making sure that every American has proper banking and financial services?

Topics: FDIC, underserved communities, underserved areas, Pay Day Loans, Banking, Unbanked customers, FDIC’s, Unbanked, Underbnked, banker's survey

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