Strategic Banking Insights

According to the SBA, 92% of all businesses in the United States are "Small Businesses."  As such, of the three "true" banking customer segments (commercial, consumer, small business), Business Banking represents perhaps the most important growth segment for banks.  And yet, most banks seriously underperform when it comes to servicing small business customers, primarily because banks don't really understand their needs. 

Banks spend considerable resources to court commercial customers, who already have banking relationships somewhere.  These customers are regularly called upon and visited by their assigned commercial bankers.  The commercial banker manages the entire banking relationship (personal and business).  Commercial customers receive all kinds of special perks (golf outings, tickets to bank-sponsored events, invitations to customer appreciation functions, etc.) from the bank to establish, nurture, and expand their banking relationships.   And commercial bankers are paid significantly more than Business Bankers, and certainly more than Consumer (Branch) Bankers.

Consumer banking today is largely commoditized, in that all "bankable" consumers already have a banking relationship somewhere, and the products are pretty much the same from bank to bank.  And except for the high value "private client" customers, mass marketing techniques are generally used to communicate with this segment.  The mass consumer segment is fickle, and will typically have a disjointed relationship with multiple financial institutions.  And because of this fragmented relationship, the customers have no loyalty to any particular bank, and will move their accounts based on offers of "free stuff," cash back rewards, low introductory rates, etc.

On the other hand, Small Businesses tend to be "orphans" in the banking world.  Of course, there are banks who would absolutely swear that they are committed to this segment, and they would point to their dedicated team of Business Bankers who service Small Business customers.  But most Business Bankers are only interested in securing loans.  And why shouldn't they be?  The Business Bankers' incentive plans are skewed towards loan growth, and any of the other products and services that small business customers need will only contribute to negligible financial rewards for the banker, so they don't bother trying to sell these products to customers.  The other problem is that most Business Bankers are only biding their time until they can move up to becoming Commercial Bankers.