Oft-overlooked segment is lucrative online opportunity

With more than $2 trillion in assets and liabilities up for grabs, the small business market remains attractive to financial institutions of all sizes. Smaller businesses are the lifeblood of many community banks, while the mega-banks look to the segment for growth opportunities. Even credit unions are jumping on the bandwagon, creating services to court small business owners. This report focuses on the online channel and how it can be used to improve profits and market share in the small business market, especially the smallest companies, the 6+ million so-called microbusiness with annual revenues less than $1 million.

But that’s just the tip of the iceberg. If you include all the home-based businesses, self-employed, contractors, independent sales agents, brokers, and those actively looking to launch a business, the number of “business oriented” households approaches 30% of all U.S. households.

Although most banks market aggressively to the 1.2 million larger small businesses with annual revenues of $1 to $10 million, the other 20+ million businesses mostly fly under the radar of most banks, and make do with consumer-oriented financial services.

However, as remote check scanning and other innovations lessen the need for convenient local branches, a new breed of direct banking competitor will be trolling for new accounts nationwide. But, incumbent financial institutions hold strong advantages in trust and convenience and will be difficult to unseat so long as their online services remain at parity with the competition.

Jim Bruene, Editor & Founder
jim@netbanker.com