Small business confidence in banks increased during COVID-19 – here’s how they can keep it
The following is an excerpt from a West Monroe report. Click here for the full report.
The stress test that the pandemic has imposed on small businesses has transformed their relationships with financial partners in countless ways. Some have requested PPP loans to maintain the wage bill. Even more reliant on digital products and service delivery in a largely remote work environment. Banks were ready to take on this challenge, providing reliable services when small businesses needed them most.
With the recovery of the US economy, banks will have ample opportunity to deepen these increasingly digital relationships. Meanwhile, government support ends and those who have received PPP loans enter the loan forgiveness process.
These headwinds raise many questions for banks, many of which have historically struggled to effectively serve small businesses. How are the needs of small businesses changing and how can banks better serve them?
West Monroe surveyed 401 small business owners in various industries to find the answers to these questions. We uncovered three key points and analyzed what banks can do next to optimize their offerings for small businesses in a post-pandemic landscape.
- As COVID-19 ebbs, small businesses trust their banks more and are content with a range of services, largely because banks have been successful in securing PPP and other loans.
- 82% of those surveyed have maintained (51%) or gained (31%) trust in their bank over the past year. Only 18% have lost confidence.
- Small businesses cite unresponsiveness, pricing, and feeling too small to deserve more attention as reasons they are unhappy with their current bank.
- 69% of those surveyed said their business was too small to deserve more attention from their banker. Sixty-six percent said their financial institution was not meeting their needs, while 56% said they received no special treatment (offers, fees, pricing).
- While small businesses are generally happy with their online banking experiences, their overwhelming digital preferences suggest the need for improvement and growth.
- 50% said they would like to apply for their next loan or account through a mobile app, and online (34%) was the second most common, while only 13% said they would like to apply in branch / in no one – 3% said they would like to on the phone.
What does this mean for the banks?
Banks have long struggled to effectively and profitably meet the demands of small businesses. In many cases, poorly designed product offerings, incompatible operating models, and disconnected legacy technologies have made the delivery of small businesses inefficient, not to mention the credit policy, procedures and pricing strategies designed for them. large commercial customers. At the same time, bringing products to business customers on a scale closer to retail banking is a real challenge.
Supporting the growth of small businesses as the economy comes to life will be a key opportunity for banks to demonstrate their responsiveness and make all customers feel valued.
To do this, business leaders of financial institutions can ask themselves the following questions:
- Do I support small businesses beyond deposits and loans? For example, respondents say their current banks support them with investment management (58%), cash management (55%), financial planning / advice (55%), safes (49 %) and estate planning (6%). If your facility does not currently offer these services, it may be time to explore options to expand and strengthen your relationships.
- Am I optimizing processes and leveraging automation to deliver streamlined service offerings? Improving the integration of technology systems and automating low-value activities can help improve customer service for small business owners who have limited time to spend on banking.
- Do I have pricing strategies, product offerings, and credit policies that can meet the needs of small businesses? In other words, are you making small business owners feel valued and are your small business client offerings tailored to their purpose?
- Am I sensitive to the needs of small business owners? Am I communicating as effectively as possible to show attention? These communications will increasingly take place in a digital environment.
Banks and many of the small businesses that use them have been through the worst of COVID-19. They even imposed themselves, creating greater trust with small business owners who saw their offerings as a lifeline. But COVID-19 was an anomaly. While this has nurtured those relationships, it likely hasn’t changed many of the fundamental problems banks had serving small businesses in the past. Non-integrated legacy technologies, a lack of appropriate product offerings, strategies and credit policies, and operating models designed for larger customers still present real barriers. This is especially true at a time when digital banking expectations are rising rapidly, where small businesses are looking to thrive in a newly vibrant economy.