Small Businesses Draw The Line On Lack Of Digital Banking

Europe’s largest banks have landed in the hot seat, thanks to a recent Fortytwo Data report that found 90 percent had been sanctioned for money laundering activities. Now, a new report is shining a spotlight on European banks’ lackluster performance in another area: small business (SMB) services.

Banking technology provider Avoka recently released its own survey on SMB bank customers to assess their satisfaction with their current financial service providers. The results were less than optimistic, as researchers concluded that many banks are at risk of losing their SMB clients and failing to compete for new small business customers.

In its report, “How Banks Can Win New Small Business Customers,” Avoka surveyed 300 small business owners and executives from the U.S., France, Spain, Belgium and the Netherlands. Key findings shed light on the importance SMBs place on having access to digital solutions, as well as several significant disparities between what small businesses want and what they get.

One finding found that nearly all small businesses surveyed said they recognize the benefits of being able to apply for bank products digitally. That may mean being able to apply for services from any location, during any time of day, or from any device, and having it take less time than paper-based applications. The vast majority of small businesses have already used some type of digital bank product, but key features of digital services are missing.

For example, one-third said they are unable to sign documents digitally, even though most agree it is a useful feature. Only 38 percent said they can provide all documents electronically when applying for a service — yet, again, most agree this would be useful. Similar gaps in functionality appear in banks’ support of automated data entry and auto-filling forms.

The consequences of a poor digital banking experience can be costly for a bank. Two-thirds of small businesses have abandoned an online application process outright before completion (though researchers did not delve into why). One-fifth of small business owners said they would tell another small business about their poor online experience, and 10 percent said they would be “extremely likely” to switch banks.

“Research shows that having digital onboarding options is a key factor in [SMB] customers’ loyalty [toward] their bank, what kind of recommendation they would make to similar businesses about their banking partner, and whether they would consider switching to a different bank in the future,” said Richard Austen, Avoka general manager, EMEA, in a statement announcing the report.

In the U.K. particularly, bank-switching initiatives have introduced new pressure among financial institutions (FIs) to enhance their customers’ experiences. Earlier research from Adaptive Lab suggested small businesses feel their FIs are not delivering tailored services, and that banks instead treat SMBs the same as consumers. However, another recent report published from Business Banking Insight (BBI) concluded that many small businesses — though they may be unsatisfied with their FI — lack the information and resources they need to actually switch banks.

“Navigating less traditional sources of finance is time-consuming and sometimes baffling to busy entrepreneurs working hard to run their businesses day to day,” said Federation of Small Business (FSB) National Chairman Mike Cherry in a statement earlier this year.

Avoka’s report suggests that digital application capabilities are an important part of small businesses being able to switch providers. One-third of SMBs said they would not work with an institution that did not support online product application.

“Traditionally, applying for business banking products was something that could only take place either in a local branch or over the telephone,” Austen concluded. “Now, however, digital channels are increasingly being used alongside these traditional approaches. Therefore, it’s massively important from a bank’s perspective that they are investing in modern, digital platforms that enable them to give their [SMB] customers exactly what they want and need.”