BILL INGRAM
‘Real time’ demanded

The “untapped” small-business market is being identified as the biggest revenue stream for banks of all sizes, according to Boston-based Celent Communications, which recently held a joint conference with Concord-based Financial Fusion that focused on how banks can retain and increase revenue through online corporate banking.

Increasing the customer base with online corporate banking technology means banks have to upgrade the online products and services currently used to an easy-to-use, Web-based interface, which offers advanced features and functionality to meet all corporate customers’ needs, according to Christine Barry, bank analyst at Celent Communications.

“Despite popular belief, the United States banking industry has continued to show record profits, due to favorable interest-rate environments,” said Barry. “[Celent] believes there is a shift to [banks investing in] new vendor systems with a variety of [information technology] projects, mainly cash management and business banking. It’s an investment that is really needed.”

The “Food for Thought” Corporate Banking Webcast featured discussions with Barry and Bill Ingram, director of product management at Financial Fusion, and both panelists agreed that regardless of the size of the bank, investing in technology is the best way to increase revenue and gain small-business clients, but the type of technology should be universal to all sizes of clients.

“One size does not fit all, and banks must cater to all business needs. Banks have new revenue potential by advancing in technology.” said Barry. “Over the last two years, deployment has grown but there is still room for growth, mainly in smaller banks and in institutions that have focused on their corporate Internet banking needs first.”

Barry told bankers that it is essential for Web users to access corporate accounts on the Web with “one click,” simple terminology and the good customer service on the Web.

‘Greater Convenience’

According to research conducted in the past year by Celent Communications, which offers consulting and research services to the technology and financial industries, smaller banks have the lowest online banking penetration because they are focusing solely on retail relationships.

“Midsize banks look to browser-based technology and have leveled the playing field,” said Barry. “Smaller institutions are more focused on providing greater convenience and customer service. Typically, smaller institutional customers require less-sophisticated capabilities.”

Barry said smaller banks – those under $1 million in assets – should start focusing on larger corporate clients in an effort to compete with large and mid-size banks.

Ingram said corporate business clients would not be tempted to leave small banks for larger, more technologically advanced banks, as long as the business client is satisfied with the banking relationship.

“Businesses continue to retain community banking relationships as long as they are getting the services they need,” said Ingram. “Some smaller banks enter into a larger bank like Mellon Bank, and that’s a good strategy because it allows them to compete, but at the end of the day, the smaller banks aren’t getting the full relationship with the customer. As people become more [technologically] savvy, customers are going to require more features and community banks will be have to compete by improving features online and through browser-based technologies.”

According to Barry, watching dollars and cents is always at the forefront of business owners’ minds and in banking, the current trend is an increased focus on a greater customization of online banking technology.

“There is an increased pressure on banks to justify any money spent on information technology, but the current trend is that many institutions are consolidating online solutions because they need greater efficiency and a single [technology] platform that meets all the needs,” said Barry. “In 2002, there was only about 12 percent of small-business customer banking done online and by the end of 2005, we predict over 20 percent of small business clients will be banking online.”

Based on focus group surveys conducted by Financial Fusion, a financial services solutions company serving more than 200 banks and financial institutions worldwide with online banking technology, Ingram said that businesses would pay more for value added into the banking relationship.

“It’s important to ask your customers what the services are that they are willing to pay for and then ask what the [bank] or financial institution can do to improve the online penetration rate in the corporate customer segment,” said Ingram.

Most importantly, said Ingram, is for banks to recognize the small-business customers in their community.

“Small businesses grow and they often bring in the most revenue, and that allows [the bank] to grow its customer base and increase [the bank’s] fee income. Ideally, a focus on those customers will result in future business with that customer,” said Ingram.

But Ingram said it is imperative that banks are able to provide small businesses with the products and services to meet their needs in a real-time capacity.

Having the availability of information in real time is critical and “pushing a business to a Web browser to handle transactions that doesn’t have real time capability isn’t worth it,” said Ingram. “Real time is something that customers are demanding. Cash management is time-critical.”

Small banks need to eliminate the “no man’s land” between retail and corporate customers, Barry said, and offering retail solutions that do not meet the needs of larger clients, or are too expensive for smaller clients, can be the deciding factor in retaining small-business clients.

“Today’s solutions recognize that every business is different,” said Barry. “Looking ahead … browser-based cash management space will continue to evolve, vendor consolidations will occur, the introduction of new features and functionalities will appear, and incentives in marketing to make new clients comfortable” will help smaller banks achieve greater small-business market share.

Melanie Nayer may be reached at mnayer@thewarrengroup.com.