Overview:

Small businesses operating in the U.S. currently number at 29 million; and a major portion of these require financial solutions such as cash and credit management, trade financing, payroll processing, and treasury services. Banks that successfully targeted the small business segment have earned higher net interest margin (NIM) and return on assets (ROA).

Banks trying to gain a competitive edge and a bigger share of the small business markets have to be cognizant of various behavioral, economic, regulatory, and technological challenges. Banks also need to design their product portfolio to match the specific requirements of small businesses and also determine the best channel to deliver their products.

Bankers are focusing on direct marketing to meet the high financial challenges, i.e. the cost of serving small business owners. Acknowledging that the cost of serving new customers is almost 10 times the cost of serving existing customers, most small business bankers are now involved in up-selling and cross-selling of services to existing customers. The current economic environment has changed the landscape for small businesses. Banks also need to provide them the right product at attractive cost, and learn how to evolve their risk profile to accommodate a wider audience. 

‘U.S. Small Business Banking Trends’ is a study of small businesses using banking products and the changing trends in small business banking. The study is designed to provide insights on the behavioral aspects of the small businesses towards the banking products offered by large as well as small banks.

Scope of the report :

Strategy formulation

This section seeks to provide a schematic of the marketplace under study; and to enable the report user to determine their competitiveness and positioning in the market. Through our in-depth understanding of the financial services industry, we size the market, identify the trends and drivers, and develop the right framework for strategy formulation to help users maintain or enhance their market position.

Business Model

This section seeks to identify the already existing business models; and to optimize these models in order to help FIs enter new and lucrative markets.

Vendor Selection

This section seeks to profile the companies supporting the market under study. We profile the top vendors and analyze user perspectives to help you make the best decision for your financial institution. Every report includes in-depth reviews of the top vendors.

What makes our report unique?

A strong heritage of providing cutting-edge research: 
MarketsandMarkets provides clients with ground breaking marketing research.  M&M’s unique research methodology and expert analytical capabilities will provide you the tools to apply the best marketing practices to your Financial Institution. 

Ensure that your strategy is viable : 
Our study will help you examine the breadth of possibilities you may encounter when planning future strategies and product launches.  It will help you create plans that are resilient enough to meet the full range of unanticipated events. 

Discover new opportunities : 
This market research study will forecast the future roles, uses, and acceptances of new products, services, and applications emerging in the marketplace. It will identify opportunities where companies can get a leg up on the competition. 

Key questions answered : 

1. How is the landscape of small business banking industry changing?
2. What is the right channel or mix of channels that will drive conversion?
3. Can the message position your offer better than your competition? How can the message help you keep existing customers and acquire new customers?
4. Is there a vertical, demographic, or workflow benefit trait that identifies the small business owner as a potential customer?  For example, one such construct may be on customer value and financial value.
5. What process does the small business owner go through for selecting a banking product? Our unique process determines the trigger points to help you close every sale. 
6. Who are the industry leaders and what are they doing to retain their position?
7. What are the major drivers and opportunities in the market?
8. What is the competitive outlook, what are the major tools and services, who are the major players in the market segments?

Powerful Research and analysis : 

The analysts working with MarketsandMarkets come from renowned publishers and market research firms globally, adding their expertise and domain understanding. We get the facts from over 22,000 news and information sources, a huge database of key industry participants and draw on our relationships with more than 900 market research companies.

EXECUTIVE SUMMARY
SEGMENTING THE SMALL BUSINESS MARKET
FOCUS ON DEPOSITS TO IMPROVE CUSTOMER RETENTION
STRATEGIES TO IMPROVE DEPOSITS
BETTER PERFORMANCE OF BANKS FOCUSED ON SMALL BUSINESSES LENDING
STRATEGIES TO IMPROVE LENDING
CREATING SUCCESSFUL BUSINESS MODEL FOR SMALL BUSINESS BANKING

1 INTRODUCTION
1.1REPORT PURPOSE
1.1.1REPORT CATALYST
1.2REPORT STRUCTURE
1.3RESEARCH OBJECTIVES
1.4RESEARCH METHODOLOGY

2 DEFINING SMALL BUSINESSES
2.1KEY FINDINGS
2.2U.S. SMALL BUSINESS MARKET
2.3DEMOGRAPHICS
2.3.1BY ETHNICITY
2.3.2BY GENDER
2.4GEOGRAPHY
2.5NUMBER OF EMPLOYEES
2.6INDUSTRY

3 STRATEGY FORMULATION
3.1KEY FINDINGS
3.2BANKING NEEDS OF SMALL BUSINESSES
3.3BANK STRATEGIES FOR SMALL BUSINESS NEEDS
3.4CHALLENGES IN SERVING SMALL BUSINESSES
3.5SMALL BUSINESS BANKING STRATEGIES
3.5.1DEPOSIT PRODUCTS
3.5.2STRATEGIES FOR ATTRACTING DEPOSITS
3.5.2.1Simplified and innovative product set
3.5.2.2Emphasis on product packaging
3.5.2.3Competitive pricing for deposits
3.5.3LENDING
3.5.3.1Credit card products
3.5.4OPERATIONAL STRATEGIES
3.5.4.1Centralizing process to reduce operational costs
3.5.4.2Segmenting strategies
3.6SMALL BUSINESS SPENDING ON FINANCIAL PRODUCTS AND SERVICES
3.7WINNING MODEL FOR SMALL BUSINESS BANKING
3.8LENDING TO SMALL BUSINESSES
3.8.1NIM, ROA AND ROE COMPARISON
3.8.2BENCHMARKING LENDERS
3.8.2.1Banks with asset size of more than $50 billion
3.8.2.2Banks with asset size of $10 billion-$50 billion
3.8.2.3Banks with asset size of $1 billion - $10 billion

4 KEY TRENDS IMPACTING DEMAND OF SMALL BUSINESS BANKING PRODUCTS
4.1KEY FINDINGS
4.2TRENDS SUPPORTING SMALL BUSINESS BANKING
4.2.199.7% OF BUSINESSES ARE SMALL & MEDIUM ENTERPRISES
4.2.2IMPROVING ECONOMY TO HAVE A POSITIVE IMPACT
4.2.2.1Increasing small business confidence index
4.2.2.2Increased sales and profit expectations of small businesses
4.2.3INCREASING GOVERNMENT SUPPORT TO IMPROVE CREDIT AVAILABILITY
4.2.4GREATER SCOPE FOR UP-SELLING AND CROSS-SELLING
4.2.5INCREASING ADOPTION OF TECHNOLOGY AMONG SMALL BUSINESS OWNERS
4.2.6UNDERBANKED SMALL BUSINESSES EMERGING TARGET FOR BANKS
4.2.7SMALL BUSINESS LENDING EXPECTED TO INCREASE IN 2010
4.3RESTRAINTS IN SMALL BUSINESS BANKING
4.3.1INCREASINGS FAILURE RATE OF SMALL BUSINESSES
4.3.2RISING TRENDS IN SMALL BUSINESS LOAN DEFAULT RATE
4.3.3BREAKDOWN OF THE FINANCIAL MARKET

5 CASE STUDIES
5.1KEY FINDINGS
5.2WELLS FARGO
5.2.1CHALLENGES IN LENDING TO SMALL BUSINESSES
5.2.2STRATEGIES ADOPTED TO ADDRESS CHALLENGES
5.2.2.1Segmenting the small business market
5.2.2.2Identifying the target segment
5.2.2.3Reaching the target segment
5.2.2.4Community and relationship based lending for minority businesses
5.2.2.5Developing a credit scoring model for small business lending
5.2.3LENDING TO SMALL BUSINESSES DOUBLED IN FOUR YEARS
5.2.4DEVELOPMENTS THAT HELPED INCREASE SMALL BUSINESS LENDING
5.2.5CONCLUSION
5.3SAFE CREDIT UNION
5.3.1OBSACLES IN SAFE’S GROWTH PLAN
5.3.2STRATEGIES TO OVERCOME THE CHALLENGES
5.3.3ONLINE FINANCIAL MANAGEMENT SOLUTION
5.3.4SAFE SELECTS FINANCE WORKS FROM DIGITAL INSIGHT
5.3.5MEASURABLE OUTCOMES
5.3.6CONCLUSION

6 VENDOR ANALYSIS
6.1INTRODUCTION
6.2ONLINE FINANCIAL MANAGEMENT BANKING TOOLS
6.3KEY FEATURES
6.4VENDOR BENCHMARKING
6.4.1FUNCTIONAL BENCHMARKING
6.4.2MARKET BENCHMARKING
6.4.3COMMERCIAL BENCHMARKING
6.5VENDOR PROFILING
6.5.1INTUIT INC.
6.5.2FISERV
6.5.2.1Products and services
6.5.2.2Recent developments
6.5.3JWAALA
6.5.3.1Products and services
6.5.3.2Recent Developments
6.5.4HARLAND FINANCIAL SOLUTIONS
6.5.4.1Products and services
6.5.4.2Recent developments
6.5.5SI SOLUTIONS
6.5.5.1Products and services
6.5.5.2Recent Developments
6.5.6YODLEE
6.5.6.1Products and services
6.5.6.2Recent developments

LIST OF TABLES

TABLE 1BANKS AND DEVELOPMENTS
TABLE 2  BANKS AND PRODUCT BUNDLING
TABLE 3 BANKS AND NEW DEVELOPMENTS
TABLE 4  OPERATIONAL CHANGES INTRODUCED FOR IMPROVING SMALL BUSINESS LENDING
TABLE 5 COST COMPARISON FOR VARIOUS BANKING CHANNELS
TABLE 6 SOLUTIONS OFFERED BY KEY VENDORS
TABLE 7 FUNCTIONAL BENCHMARKING: ONLINE FINANCIAL MANAGEMENT TOOLS
TABLE 8  VENDOR SCORE: ONLINE FINANCIAL MANAGEMENT TOOLS
TABLE 9 COMMERCIAL BENCHMARKING: ONLINE FINANCIAL MANAGEMENT SOLUTIONS
TABLE 10 RECENT DEVELOPMENTS (2007-2010)
TABLE 11  RECENT DEVELOPMENTS (2007-2010)
TABLE 12 RECENT DEVELOPMENTS (2007-2010)
TABLE 13 RECENT DEVELOPMENTS (2007-2010)

LIST OF FIGURES

FIGURE 1 GROWTH OF SMALL BUSINESSES (MINORITY & NON MINORITY)
FIGURE 2 MINORITY OWNED BUSINESSES IN 2002
FIGURE 3 ARC LOANS TO SMALL BUSINESS OWNERS
FIGURE 4 GENDER BASED CLASSIFICATION OF SMALL BUSINESSES (2002)
FIGURE 5 GEOGRAPHICAL DISTRIBUTION OF SMALL BUSINESSES
FIGURE 6 MAJORITY OF SMALL BUSINESSES HAVE LESS THAN 10 EMPLOYEES (2007)
FIGURE 7 SMALL BUSINESSES SEGMENTATION BY INDUSTRY (2007)
FIGURE 8 SMALL BUSINESS BANKING PRODUCT NEEDS OVER THE BUSINESS LIFECYCLE
FIGURE 9  CHALLENGES FACED BY SMALL BUSINESS OWNERS DURING ECONOMIC CRISES
FIGURE 10  CURRENT CHALLENGES FACED BY SMALL BUSINESSES
FIGURE 11 KEY CHALLENGES & STRATEGIES
FIGURE 12 ADOPTION OF VARIOUS SMALL BUSINESS DEPOSIT PRODUCTS
FIGURE 13 USAGE TREND OF LENDING SOURCES AMONG SMALL BUSINESSES
FIGURE 14 IMPACT OF CENTRALIZATION OF PROCESSES ON CUSTOMER CONTACT TIME
FIGURE 15 SMALL BUSINESS SPENDING ON FINANCIAL PRODUCTS & SERVICES
FIGURE 16 WINNING MODEL FOR SMALL BUSINESS BANKING
FIGURE 17 SMALL BUSINESS LENDING SHARE, BY ASSET SIZE
FIGURE 18 NIM, ROA AND ROE COMPARISON FOR SMALL BUSINESS BANKS (2007)
FIGURE 19 BENCHMARKING LARGE LENDERS ON THE BASIS OF SMALL BUSINESS LENDING (ASSET SIZE > $50 BILLION)
FIGURE 20 BENCHMARKING MID SIZE LENDERS ON THE BASIS OF SMALL BUSINESS LENDING  (ASSET SIZE $10 BILLION - $50 BILLION)
FIGURE 21 BENCHMARKING SMALL LENDERS ON THE BASIS OF SMALL BUSINESS LENDING (ASSET SIZE $1 BILLION - $10 BILLION)
FIGURE 22 SMALL BUSINESS GROWTH TRENDS
FIGURE 23  SMALL BUSINESS CONFIDENCE INDEX
FIGURE 24 SALES AND PROFIT EXPECTATIONS OF SMALL BUSINESSES
FIGURE 25 CROSS-SELL RATIO
FIGURE 26 UNDERBANKED SMALL BUSINESSES
FIGURE 27 SMALL BUSINESS BANKRUPTCY RATE
FIGURE 28 7(A) AND 504 LOAN APPROVAL TRENDS
FIGURE 29  MAPPING WELLS FARGO PERFORMANCE AGAINST INDUSTRY PERFORMANCE
FIGURE 30 COMPARISON OF VENDORS ON THE BASIS OF NUMBER OF CLIENTS