Lender Beware: As Many as One-third of US Businesses Could Switch Banks
The tidal wave of bank switching has continued among US businesses even as the pandemic has ebbed. Although not relatively as high as a year ago, millions of companies across the county are fed up with their commercial bank and looking to switch. The latest Rivel Benchmarks—including results of 52,140 surveys with business owners and banking decision-makers—show that some banks are in danger of losing a big chunk of their commercial clients
The businesses open to switching are not Bencjust looking to save money. They are willing to go through the hassle of switching financial institutions because one or two specific pain points at their current institution are too much to bear. To win their business, you must convince them that your financial institution can solve those problems and offer more benefits than their current bank.
What Do Businesses Want from Their Banks?
Businesses all want excellent rates, services, technology, security, and reliability from a banking partner. But they will prioritize solving the main pain point that has convinced them to leave their current bank. For instance, if a business owner is frustrated with getting the runaround at their current bank, they will prioritize finding a new bank that avoids all the sidestepping.
The main pain points can vary a lot by market. For instance, businesses in Des Moines, IA, and Sacramento, CA, are incredibly frustrated with the poor responsiveness of their banks. In Burlington, VT, many companies think their bank does not understand their needs. In Hartford, CT, they are relatively pushy, while in Harrisburg, PA, and Boston, MA, they are not proactive enough for businesses there. Thus, it is critical to understand your local trade area.
Businesses always prefer financial institutions that anticipate their needs, solve their pain points, and offer solutions to problems before they arise. Additionally, companies want a bank that understands their industry and can provide insight and advice specific to their business. In each of these markets and every other market in the country, the banks that understand the critical pain points and address them in their marketing will be the ones that win much more than their fair share of new customers.
Businesses also want a bank that offers all the products and services they need, from loans and lines to merchant services to treasury management products. But as of Q3 this year, only 41% of all banking institutions get good marks on products and services from their customers. Banks can often improve by working with partners or white-labeled solutions.
Finally, many businesses want a bank with digital capabilities to make banking more convenient. These digital features should include transfers, mobile deposits, online bill pay, positive pay, notifications, and improved security to keep their financial data safe.
What Can You Do to Attract Business Customers?
The key to attracting new business customers is understanding why they are leaving their previous bank. Businesses do not leave banks they are happy with; they leave banks where they feel critically underserved. By understanding and speaking to that critical pain point, you will rise to the top of their consideration set when they decide to switch.
In Q3 of this year, two top reasons they are switching are to get a better rate on a loan/line or a better rate on their deposits. These reasons are a surprise to no one. But in many markets, businesses are also looking for ways to save money or avoid fees that are irritating or too high. For instance, in Houston, 31% of companies said they got low value for the prices they paid at their current bank. In this market, banks can offer free or low-cost business checking accounts or lower fees and minimum balance requirements to attract more business banking customers.
In other markets, technology is essential for attracting new business customers. In the latest Atlanta Benchmarks, 85% of businesses told us that their commercial bank needed to have a solid mobile app. However, 24% of those businesses said the one at their bank was not good. So, besides lowering the cost to serve, banks can also attract new customers based on the strength of their digital tools. But to be clear, to attract and retain businesses with your technology, you must first have decent technology. According to their customers, 21% of all community banks in the US have inadequate mobile tools. Ensure you are not one of them before promoting your tools to new clients.
Provide Resources to Help Businesses Grow
Businesses need more than just basic DDA accounts and technology; they also need more sophisticated business tools and services. And it varies by market. As of Q3, 40% of all businesses in New York City are currently looking for treasury management/cash management products, 25% of all companies in Birmingham are looking for a new loan or line of credit, and 24% of businesses in San Antonio are looking for merchant services. Banks in these markets can provide those directly or by partnering with other organizations.
Paycheck Protection Program (PPP) Experience
If your financial institution participated in the paycheck protection program that was part of the coronavirus aid relief, use this experience to attract more business banking customers. Many grateful business clients will be more than happy to give testimonials about how well you served them in times of crisis. And many businesses seek a bank with experience in government-backed programs like the PPP.
Businesses Are Rethinking Their Primary Banking Experience
The pandemic has driven bank switching to all-time highs. In many markets like Cleveland, Memphis, Boston, Sacramento, and Pittsburgh, switching has not yet fallen back to pre-COVID levels. So, now is the time to attract the droves of switchers.
Once businesses make the switch, ensure your institution delivers on your marketing promises. If your financial institution didn't provide the level of service or support those businesses needed during the pandemic, now is the time to make changes. Our historical data shows that about 34% of all customers who switch banks end up switching back to their original bank within a year.
Don't Overlook Branch Banking
Branch banking is still vital to many small and medium businesses. For instance, 70% of companies across Illinois say branches are fundamental to them. In Texas, it is even higher. These companies want direct access to banking partners to perform complex banking transactions, such as wire transfers, loan applications, and property investments.
There are many ways to attract new business banking customers, so it is essential to understand the key drivers in your specific footprint. Set your financial institution apart from the competition by understanding the critical needs and providing solutions to the frustration they are feeling elsewhere. This process can include a combination of the right customer approach, the right digital tools, the right policies, and the right message. You can build long-lasting relationships with loyal businesses in your community through the right approach.