Overall, the Web-based banking services geared towards the 22 million U.S. small businesses are anemic at best. (Know a good one? e-mail bizsites@netbanker.com ). But the situation is changing. Banks and others are beginning to put together respectable small business-oriented Webs with UK’s NatWest leading the pack. But the best work is still coming from non-banks such as American Express (on the Web at www.americanexpress.com/smallbusiness  or on American Online at keyword ExpressNet), which has integrated its financial services with travel services and general small business.

Opportunities Abound

Does anyone smell an opportunity here?

1. More than 70% of small businesses already manage their finances by computer (see chart above). QuickBook users alone number more than 1.5 million according to Intuit.

2. Small businesses are big purchasers of financial services, spending an average of $14,000 per year according to the recent McKinsey/BAI study, Unlocking Winning Strategies to Serve Small Businesses (see table below).

3. Small businesses are ready for online banking. Although current usage has been pegged at only 8%, a new study by Booz, Allen & Hamilton found that 33% of small businesses and 39% of larger ones expect to be banking on the Internet within three years.

4. Small businesses, unlike consumers, will actually pay extra for operational efficiencies realized through banking online.

There is a large gap between the 71% of small businesses managing their finances by computer and the 8% using online banking. We believe this 63% gap will be rapidly filled during the next 3-5 years by banks and non-banks who offer businesses a compelling package of online services and commercial loans/lines of credit. We project that small business usage of online banking will surpass 50% by year-end 2000.

While the current lackluster state of small business Web banking is bad news for the businesses themselves, it’s great news for banks looking to increase share in this lucrative market.

Even if you aren’t quite ready to provide online account access, you can still differentiate yourself with innovative online services. Small business banking Web sites today are where consumer sites were a year ago — at the electronic brochure stage. A relatively small Web investment in late ’97 or early ’98 could position you as a business-banking pioneer for years to come. Perhaps insulating your earnings against the ebb and flow of the fickle consumer market.