Small Business Banking: A Captive Audience

Mercator Advisory Group’s latest report, Small Business Banking: A Captive Audience,is the third of three Insight Summary Reports summarizing the results of the 2018 U.S. Small Business Payments and Banking Survey, a web-based survey of 2,047 U.S. small businesses (between $500,000 and $10 million annual sales), which was fielded in the spring of 2018. The previous two reports presented the survey’s findings on payment acceptance and business-to-business payments. The new report analyzes small businesses’ use of banking services and alternative lenders.

Small businesses are a captive audience for financial institutions as they still visit the branch often. The survey finds that 79% of U.S. small businesses visit the branch of their primary business bank or credit union at least once a week, including 24% of firms that visit daily or more often. Retailers and services are especially likely to visit the branch daily or more.

Small businesses rely on their business banks for a variety of services although going to the branch remains primarily transactional in nature; 72% go to the branch to make teller deposits and 38% to make ATM deposits, and more deposit cash than checks. Yet, nearly 1 in 4 go to meet with a relationship manager, often for financial advice, to resolve problems or to seek assistance for online or mobile banking.

“Small businesses visit bank branches often. While they are primarily there to make quick deposits, they are a captive audience for a wealth of services to help small businesses grow and prosper, particularly lines of credit to support investments and manage their cash flow and wealth management accounts for their personal financial health,” notes Karen Augustine, Mercator Advisory Group’s Senior Manager of Primary Data Services, the author of this report.

This report contains 53 pages in slide form and 31 exhibits.

Companies mentioned include: Kabbage, Lending Club, OnDeck Capital, and Prosper.