In our last article, we took a look at a few important factors small-businesses consider when choosing a bank partner. Speaking well to the initial concerns of the business can get you a new customer, and help boost customer loyalty. But, in order to protect and grow the relationship it is important to know upfront what business-banking clients are missing in their present banking relationships. Listed below are some of the most commonly cited reasons why businesses leave their bank. We discovered that the vast majority of the issues resulting in small-business attrition could be grouped into four main categories:
We begin with the issue of performance. When we speak of bank performance, we are primarily referencing issues of Customer Service, however actual Bank Financial Performance can be a source of concern for businesses as well. With regards to customer service, as banking and wealth & investment management consultant Frank Mackris puts it, “Poor customer service and failure to resolve problems quickly and courteously is the No. 1 reason for the high fluidity with which small businesses switch banks.” In fact, every study we found revealed this to be the most significant factor in whether a business chooses to stay with their current bank. In a 2013 study conducted by Ernst & Young, 89% of business executives polled said quality of service was the single most important criterion for selecting and keeping their core bank, however roughly 73% gave their banks high marks in this area. When it comes to bank financial stability, the same study found that 76% of the business executives questioned ranked bank financial performance as a top criterion. However, less than half (43%) were found to be completely confident in the stability and security of their banking partners.
Not surprisingly, another key issue is pricing. Competitiveness, Consistency, and Simplicity of pricing structures are the three most frequently cited aspects of pricing that drive small business attrition. In a 2010 survey of small businesses, 84% of respondents said competitive fees on business products and services would be a top consideration in leaving their current bank. The same survey showed that more than 14% of those polled had actually switched financial providers in the previous two years because of subpar service and issues with bank fees. Consistency and simplicity are also very important factors when considering pricing strategy. Small business owners prefer easy to understand rates, and they want to be able to determine the cost of processing payments quickly. When a bank simplifies its pricing structure, small businesses have been willing to switch even if it may cost a bit more, because it helps reduce complexity and confusion.
The third issue relates to a bank’s product offerings. Businesses have found this category lacking in the following areas: Innovation, Quality, and Customization. In the previously mentioned Ernst & Young study, it was found that a majority (63%) gave innovative ideas and products a top rating in terms of importance, but only 40% were pleased with their banks’ performance in this area. It also revealed that business executives rank product quality and functionality highly in terms of importance, but find their banks lacking in this area as well, especially in terms of consistency and quality of services across geographies. Lastly, more than half of the studies’ participants expressed disappointment in their banks’ willingness and ability to customize their services and products to their individual needs.
Although included as a separate category for emphasis, small business frustration with outdated processes has a big impact on all of the abovementioned categories, most especially in regards to customer service, simplicity, product quality and innovation. Unfortunately, studies have shown outdated bank processes to be a frequent complaint among small businesses. Business owners are primarily concerned with three things when it comes to financial services: taking money in, paying money out, and managing their cash flow. Anything that can be done to make these things less costly to the business, both in time and money, is going to be key in solidifying and growing the client relationship.
Since we have now identified what factors cause businesses to leave their current bank, our next installment will focus on what actions you can take to mitigate small business banking customer attrition.
http://www.capco.com/capco-institute/capco-blog/the-key-to-attracting-small-business-clients http://www.ey.com/GL/en/Industries/Financial-Services/Banking—Capital-Markets/Successful-corporate-banking—Bank-performance-criteria http://www.americanbanker.com/magazine/120_2/six-ways-to-attract-and-retain-small-businesses-1006098-1.html http://recombo.com/2013/03/great-customer-onboarding-smallbusiness/ https://www.fiserv.com/resources/Winning_the_Business_POV_1308.pdf