ShopTalk: The business side of banking

 

Small- and medium-sized businesses (SMBs) understand the importance of having strong relationships with their financial institutions. Some of the products that SMBs need to run their businesses overlap with retail personal banking offerings like checking accounts, money market accounts, and credit cards. But financial institutions are in a unique position to provide value-added services to their business clients. Think products like merchant services, Small Business Administration (SBA) loans, and payroll management, and it’s clear that financial institutions are a key component of an SMB’s success.

Financial institutions, in turn, are tasked with meeting the evolving needs of SMBs. In addition to offering competitive banking products that are custom-tailored to small- and medium-sized businesses, financial institutions must also offer the technology and convenience that SMBs are coming to expect. Online banking and mobile apps make financial transactions more accessible than ever, with benefits for retail and business customers alike. Convenient branch and ATM locations, as well as highly personalized relationships, can be key factors to keeping SMBs happy and establishing long-term relationships with their financial institutions.

To learn more about business and retail banking relationships, Vantiv and Socratic Technologies partnered for a survey of 500 consumers to learn more. Here are the key takeaways.

Consumers are satisfied with their financial institutions and tend to have long-term relationships with them

One of the key findings from the survey is that the majority of consumers are satisfied with their primary financial institution. Not only are they satisfied, but they’re also likely to share their positive feelings with their peers. In the survey, 70% of respondents say they are likely to recommend their financial institution to others.

Not only are respondents satisfied with their financial institutions, but they’re also in it for the long haul. The survey participants indicate that they have an average relationship of 7.5 years with their primary financial institution. Looking across generations, Retirees tend to have the longest relationships at an average of 9.1 years. Baby Boomers average 8.1 years, Gen Xers 7.5 years, and Millennials 5.6 years.

Millennials are the generation most likely to have a business account

In the survey, 99% of respondents report having a banking account with a financial institution. However, only 9% of respondents have a business account. And Millennials are the generation most likely to have business accounts at 21%. Compare this to Gen Xers (6%), Baby Boomers (5%), and Retirees (1%). The survey results suggest that Millennials are an important client base for financial institutions and an engine for growth into the future.

Checking accounts are the most popular banking product for businesses and retail customers

So which banking products are most popular for business account owners? The survey shows that business checking accounts lead the charge at 7%. This is followed by business loans (3%), business savings/money market savings accounts (2%), business line of credit (2%), business mortgage (1%), and business investments or retirement accounts (<0.5%).

On the retail banking side, personal checking accounts are the most popular banking product with 92% of survey respondents having one with their primary financial institution. Personal checking accounts are followed by debit cards (71%), savings/money market accounts (65%), credit cards (48%), and Certificates of Deposit (CDs) at 10%. Personal loans are popular as well, with 26% of survey respondents having a mortgage or home loan through their primary financial institution.

Convenience matters

Don’t underestimate the power of convenience. In the survey, 54% of respondents indicate that conveniently located banking branches are the reason why they chose their primary financial institution. Here is a breakdown of other driving factors:

  • Free services with minimal balances (such as checking accounts or electronic transfers) – 40%
  • Conveniently located ATMs – 39%
  • Offers low fees/competitive interest rates on loans – 22%
  • Offers overdraft protection – 20%
  • Has a credit card with attractive rewards – 19%
  • Offers fraud protection services such as alerts – 19%
  • Quality of their mobile banking app – 16%

Consumers think highly of financial institutions’ approach to fraud

The majority of survey respondents, 75%, indicate that their financial institutions are “extremely likely” to handle fraud in a way that would demonstrate wanting to keep their business.

New checking accounts are not on the horizon for most consumers, although Millennials are more likely to open them

In the survey, only 15% of consumers are highly likely to open a new checking account in the next 12 months. For Millennials, the number jumps to 37%. The key drivers for opening new accounts include no fees/free checking, higher interest rates, and customer service.

What are the most popular financial institutions?

Survey says that Bank of America (15%), credit unions (15%), and Chase (14%) are popular financial institutions across all generations.

One-fifth of survey respondents also have investment accounts with their financial institutions

Across generations, younger consumers are more likely to have them – 29% of Millennials that took the survey report owning these accounts. Popular investment products offered through financial institutions include brokerage accounts, Individual Retirement Accounts (IRAs), and 401 (k), 403 (b), and 457 plans.

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