September 12, 2003, Oakbrook Terrace, IL.  
Raddon Financial Group (RFG) recently conducted an online small business banking study for a nationally representative consortium of eight institutions with combined assets totaling over $600 billion. Survey invitations were posted on each of the bank’s Web sites. RFG gathered and analyzed the data from over 1000 business banking customers.

When business customers were asked which financial service providers they used as well as their reasons for using them, responses showed they used competing providers for very different reasons. These reasons varied by company demographics. Banks tend to be selected primarily based on convenience and quality of service – pricing came in third in importance. Discount brokers, credit unions, mortgage and finance companies are selected primarily for pricing. Mutual fund companies are chosen because of specialty products and full service stock brokers for advice provided.

When a customer considers a bank to be their primary business and well as primary personal financial institution, that bank benefits significantly from owning that mixed relationship. Results showed decreased customer use of financial service competitors (other banks, credit unions, mortgage and finance companies, etc.) The research also showed in mixed relationships, it was twice as likely that the personal, not the business relationship, was established first. The prevalence of this type of evolution is important for banks to consider when seeking that most profitable mixed banking relationship.

While some of the barriers to owning both relationships admittedly would be difficult for banks to counteract, other barriers cited by customers were clearly missed opportunities. When primary business customers were asked why the bank was not also their primary personal financial institution, here is how they responded (see graph): another competitor was more convenient (23%), pricing was better elsewhere (22%) and some customers simply preferred to keep separate business and personal providers (20%). However, nineteen percent (19%) of business customers said there was no incentive to make their business bank their personal bank also. In other words, they were not offered any benefit/reward for doing so. Additionally, as shown in the graph below, 17% were not even asked for the business, an omission that business customers themselves may not have made.

Of seventeen possible business banking online features, three of the four ranked highest in importance by business customers dealt with monitoring and controlling the company’s cash flow: viewing account balances, transferring money between accounts and check imaging. “Banks should keep these in mind when prioritizing and allocating resources for scarce IT support. Let the customers set the priorities and when the top priorities are taken care of, the lesser ranked, nice-to-have features should be enhanced,” said Bob O’Meara, Vice President, Director of Research for RFG.

Each consortium bank received their own customers’ feedback as well as benchmark comparisons of responses from over 1,000 small business bank customers. This national small business customer consortium is an ongoing research project by RFG, with more responses being added to the database as new clients complete their field survey cycle. As this database continues to grow, it will be a continuous source of small business customer intelligence to aid the industry in reaching critical business related decisions.

Banks are encouraged to participate in the online small business banking study provided by RFG. For more information about joining the consortium, contact Dr. Katy Koenig, Senior Research Analyst of RFG, at 800-827-3500 ext. 441.

About RFG
For more than 20 years, Raddon Financial Group, Inc (RFG) has provided primary research and marketing solutions to the financial services industry. Headquartered in Oakbrook Terrace, IL, RFG provides research solutions to over 1,000 financial institutions nationwide.