Small Business Archives

Winning Checking/Deposits from Established Small Businesses

By Jim Bruene on July 24, 2014 4:17 PM | Comments

imageI was asked recently what it would take for me to move my business deposit relationship. My immediate answer: "There is nothing you could do to get me to move."

We have changed banks only once in our 20-year history, moving to Washington Mutual (now Chase) in 2007 in order to get a better line of credit (which ironically, was never granted, as WaMu was about to go into a death spiral).

We've been happy with Chase for the most part, and now have so many services and payees connected to it, that I can't imagine going through the headache of changing. Even if another bank or CU offered a fee-free account that matched Chase feature for feature, it's just not worth the considerable investment in time and energy to switch.  

But a few minutes later I changed my mind. Yes, there is one thing that would make me move my entire business account. And it's so basic that it seems ridiculous that I'd even have to ask for it.

It's the one thing that Chase, or any bank that I know of, isn't currently delivering to small business owners:

Guaranteed safety of our funds against all fraud/theft

Chase has state-of-the-art security as far as I can tell (e.g., two-factor authentication for all the risky moves). And we've never had a problem. However, every time I read about some nonprofit or small business having their account drained after a successful key-logging attack, I get that queasy feeling.

And I'm not even asking for the fraud guarantee to be free. I'd be more than willing to pay for it. How about $25/month for the first $100,000 covered, then $10 to $15 per $100,000 thereafter? That should be enough to make it a decent profit center for the bank and I could sleep better (note 1). A win-win.


1. Two years ago, I was encouraged by the new offering from EFTGuard (see post). They were offering coverage of $100,000 per account up to $500,000 total per customer. Insured customers were required to use fraud-monitoring software from Trusteer, Iron Key or Webroot. The price was $25/mo to the end-user with $10 of that pocketed by the bank distribution partner. But I haven't run across any banks currently offering it.


New Online Banking Report Published: Digital Small Business Banking

By Jim Bruene on December 16, 2013 11:20 AM | Comments


There is no other issue that ignites our passion like the lack of attention paid to small- and micro-businesses by many mainstream banks. With more than 20-million small businesses, 1 in 5 U.S. households owns a small business. And that doesn't even count all the independent sales reps and part-time contractors that need help managing their more complicated finances.

There are many reasons why the smallest businesses continue to fly under the radar: smaller balances, more complex needs, widely varying expertise, challenging underwriting issues and so on. Traditionally, this segment has been difficult to serve cost-effectively.

But with technology readily available to monitor daily financial performance, respond to service requests via email, outsource credit via crowdfunding and alt-lending (see note 1), and customize online banking services, the "it's too expensive" excuse is less and less believable.

That said, it's not easy determining how best to serve the varying needs of the elusive microbusiness segment. In this report, our sixth deep-dive (see note 2) into serving small biz online (and now mobile too), we outline what to look for and how best to get started.


About the report

Digital Small- and Micro-Business Banking (link)
How to use mobile and online services to capture more share in this huge market

Author: Ray Graber, Graber Associates

Editor: Jim Bruene, Editor & Founder

Published: 12 Dec 2013

Length: 32 pages, 7,500 words, 6 tables

Cost: No extra charge to OBR subscribers, US$395 for others (here)

Companies mentioned: Alabama Credit Union, American Airlines CU, American Express, Aptys, Bank of America, Bank of Montreal, Bank of New Zealand, Barclays (UK), BBVA Compass, BCSG, California Bank, CAN Capital, Columbia Bank, Deluxe, FirstData, Frost Bank, iBank, Illinois National Bank, Luminous, MB Financial, Mitek, Mineral Tree, P2B Investor, PNC Bank, SaaS Markets, Square, Swift Capital, The Receivables Exchange, Vancity, Vantiv, VerifyValid, Webster Bank, Yodlee


1. Crowdfunding/P2P lending may well be an area that finally begins to impact traditional banking revenues. But that's still a ways away. See our May 2013 report for more info (subscription).
2. Buyers of this report will also receive a free copy of our previous Small Business Report (OBR 172/173) published in 2009. It contains additional material still valid for today’s strategists and small-biz product managers.


Launching: Zazma Offers Drop-Dead Simple Short-term Business Credit

By Jim Bruene on September 4, 2013 6:39 PM | Comments

image To continue our look at outstanding lending UI's (previous post), I present to you Zazma. The startup, which came out of stealth yesterday, has raised $10 million to finance small loans of $300 to $5,000 for up to 60 days. The initial funding came from Sequoia and Spark Capital.  

This is a business that almost no bank wants, which makes it ripe for startups. But it can be lucrative. Because the business borrowers are using the money to buy needed equipment or inventory, they are much less focused on the interest rate, if they believe the cash advanced will earn them a profit. It's the secret sauce of successful startups Kabbage, Capital Access Network and On Deck Capital (note 1). 

As you can see from the screenshot below, the maximum loan, $5,000 for 60 days, earns Zazma a healthy $295 fee. Assuming it's paid back, that a 6% return over two months or an annual APR of 36%. While that's not enough of a return on VC funds, once the company has enough of a track record to attract debt funding, that could be a sustainable revenue model.

The company hopes to attract sellers who will offer Zazma-powered financing to their customers. That could be a real win-win. And because each transaction can potentially satisfy two businesses, it's a model that bank's should consider.  

The UI
While the business model is very promising, what I really love is their UI. Absolutely simple, with fewer words than Google's famously simplistic design. Potential borrowers type the loan amount, choose the payback date and press the large, red Get Funded bar. The applet automatically shows the amount that must be repaid.

It's a fantastic start to the borrowing experience, which I have not tested. Because this is business credit, they can avoid talking about the interest rate. But there is nothing hidden here. It is a model of simplicity and transparency. 


Zazma homepage (4 Sep 2013)


After clicking Get Funded, the box opens to ask for name, company and email



1. Follow these Finovate alums at our Finovate blog.
2. For more on small business services, including credit, see our Online Banking Report on micro and small businesses (subscription, published Oct 2009).


BBVA Compass Bundles Microbiz Checking with PAYware Mobile Card Processing

By Jim Bruene on July 30, 2013 7:09 PM | Comments

imageI rarely get a chance to write about checking accounts, so I was glad to see the BBVA Compass announcement on the wires yesterday.

The bank launched a Business Mobility Bundle which has checking, mobile card processing and a free Galaxy Tab 3 Android tablet (wifi-only), a $200 value (note 1). It's a soft bundle (note 2) of the bank's existing e-Business Checking Account and its Merchant Mobility Pack, powered by Verifone PAYware

imageThe checking account is fee-free up to a certain level of activity (note 3). But the optional card-acceptance piece is $24.95/mo, which is waived in this promo for 12 months. The offer is not currently visible on the bank's website, but a link in the press release leads to a landing page with the offer (see first screenshot).

Myimage take: The Business Mobility positioning is excellent, nicely tying two key business products together. The underlying accounts seem to be solid values, and the free Samsung tablet is sure to spark sales. 

However, my initial enthusiasm from the press release was somewhat tempered by the realities of the fine print (see second screenshot, note 1) and overall execution. For example:

  • No online application, it's a call-me form (albeit a good one)
  • Mobile deposit is limited to $1,200 every 30 days
  • Both the free e-Business Checking and the 12-month fee waiver for mobile card acceptance are currently available on the bank's website. There are no added benefits to the Business Mobility Bundle, outside the tablet premium
  • The free tablet is wifi only and sells for $199 online (it's no iPad)

The offer is not currently visible on the BBVA website, even through site search, presumably so it doesn't irk existing customers who cannot get the free tablet.

Bottom line: I like the promotion, although I wish the bundle had more features. For example, mobile banking pre-loaded on the Galaxy; customer service available via Skype; or even higher mobile-deposit limits for those using card processing (note 4).


BBVA Business Mobility landing page (link, 30 July 2013)


Fine print (positioned directly below the screen shown above)



1. Fine print: (A) New small business customers only, 1 per household/biz; (B) Must perform 10 transactions, not including intrabank funds transfers, within 30 days of account opening; (C) $100 minimum opening deposit
2. I just made up that term, but what I mean is that the customer is not required to add the Merchant Mobility piece to qualify for the free Samsung tablet. The checking account alone earns the premium.
3. Transaction limits before fees kick in:
- 50 items processed
- 2 in-branch deposits
- 5 processed checks and/or in-branch withdrawals
- $5,000 cash processing
In addition, mobile deposit has stingy initial limits of $500 max per item and only $1,200 max every 30 days  
4. The landing page could use more powerful visuals showing the BBVA mobile app and/or PAYware dongle in use.


New Online Banking Report Published: Crowdfunding Small Businesses

By Jim Bruene on May 27, 2013 11:09 PM | Comments

clip_image002We believe crowdfunding has the potential to materially impact banking market share in the next 20 years. Tapping the massive capital and higher risk tolerances of institutional and individual investors, these platforms will provide funding to segments currently underserved by traditional lenders (e.g., small and micro businesses).

We've written extensively about the consumer debt-based crowdfunding, which we've called P2P, or peer-to-peer, lending (note 1). Now, we turn to the new crop of startups arranging funding for small businesses and startups.

The report covers the three variations that promise financial returns to investors (note 2): 

  • Debt-based financing (crowdlending)
  • Equity-based funding (crowdinvesting)
  • Receivables-based funding (crowdfactoring)

Sixteen crowdfunding platforms are profiled, eight in the United States and eight in the United Kingdom:


  • Abundance Generation
  • Bolstr
  • Funding Circle
  • Mosaic
  • RealtyMogul
  • Relendex
  • Sofi
  • SoMoLend
  • ThinCats


  • AngelList
  • CrowdCube
  • FundersClub
  • Seedrs


  • Market Invoice
  • P2Binvestor
  • PlanetBlack

Finally, we look at specific opportunities for retail banks to leverage the new technology.


About the report

Crowdfund Investing Platforms: Debt & Equity (link)
Payments in the smartphone era

Author: Andy Davis, U.K. Financial writer

Editor: Jim Bruene, Editor & Founder

Published: 21 Feb 2013

Length: 68 pages, 24,000 words, 5 tables

Cost: No extra charge to OBR subscribers, US$495 for others (here)


1. We have published three reports in this area (OBR 127 in 2006, 148/149 in 2007, and SR-5 in 2009). In addition, we've created a 10-year forecast for U.S. P2P lending in each of our last six year-end reports.
2. We do not cover the donation or rewards models, such as Kickstarter. While those are effective ways for businesses to raise money and/or visibility for new products, they have fewer parallels and opportunities for retail banks.


Alt-Biz-Lenders Kabbage, On Deck Capital and Capital Access Network Disrupting Business Loan Underwriting

By Jim Bruene on October 24, 2012 10:56 PM | Comments

image My favorite session at Money2020 Expo, the massive new trade show organized by Google Payments execs(see note 1), was about as far away from the buzzy mobile wallet and payment schemes as one could get.

I was struck by the potential of alt-business lending. The technology could have a more lasting economic benefit, at least in developed countries, than the transition from plastic to mobile payments (note 2).

The session included the three key alt-biz lenders who are leading the way in disrupting the massive global market in commercial credit (note 3):

  • Glen Goldman, CEO, Capital Access Network (FinovateFall 2010 demo)
  • Kathryn Petralia, Co-founder & COO, Kabbage (FinovateSpring 2012 demo)
  • Noah Breslow, CEO, On Deck Capital (FinovateSpring 2012 demo)
  • image  image   image

    Like most disrupters, the three are gaining traction in a narrow niche largely avoided by legacy players: sub-$250k non-asset-backed commercial lending. In total, the three are on track to do roughly $2 billion in total lending next year. While impressive, that's not the big story. The disruptive piece is the technology the three use to underwrite the loans.

    They are redefining the borrower-lender relationship with real-time, ongoing electronic monitoring. Instead of borrowers providing static financials after the fact, these lenders have been granted access to the daily receipts of the business (via online banking), so the lenders know every day whether they should expand or contract the loan amount authorized. The lenders also get repayments frequently, sometimes daily, which helps reduce risk. 

    The result is that these companies are able to provide credit to businesses that are unable to get a loan elsewhere because they are just too small and/or the entrepreneurs don't have the necessary personal FICO scores (note 4).

    Capital Access shared an interesting story on stage. Apparently, they were pitching their service to a very large U.S. bank. Capital Access had extended $245 million in loans to the bank's customers which came as quite a surprise to the bank. However, when they found out the FICO scores of the biz owners were terrible (in the 500s), the bank said those could not be good loans. But it turns out the Capital Access loans had a 2.2% charge-off rate, bettering the bank's rate on its "lower-risk" borrowers.

    Given that the short-term loans were made at rates of 15% and up, that is one massive chunk of lost revenue.

    I talked to Noah Breslow, CEO of On Deck Capital, later that night, and he said they are seeing huge upticks in demand, which they are now able to meet with much cheaper capital recently acquired from Goldman and others. He said their 10-month-old program looking at US Bank business-card declines was showing great dividends for all parties. And they continue to actively seek more bank partners which can participate in a variety of ways.

    Bottom line: I believe that eventually most business credit (from banks and others) will be managed with this real-time transparency into the borrower's finances. It allows the lender to better price the risk, which assuming sufficient competition, allows more credit to be granted, at better overall prices. Banks, you don't have to do this all at once. But at least start working with one or more of these companies to give your loan declines a second look (note 5).

    1. Money2020 organizers, Anil Aggarwal and Jonathan Weiner, are serial entrepreneurs behind payments startup TxVia which Google acquired this spring. Money2020 (v1) attracted more than 2,000 attendees to its inaugural 3-day event held in Las Vegas. It was an amazing turnout, which speaks to the interest in Google Wallet, mobile payments, and Finance 2.0 in general. Kudos to the team that pulled together a mind-boggling 300+ speakers across 5 tracks over 2 and a half days.
    2. And I'm not downplaying the impact of the mobile-payments revolution, which has the potential to save billions in fraud and waste while creating enormous opportunities with card issuers large and small in advertising, loyalty, and so on.  
    3. I should also commend moderator Nick Holland (Yankee Group) who fed the participants great questions.
    4. The lenders all addressed the small-business owner "credit catch 22." Certain things that can lead to business growth, such as quitting your day job and maxing out your credit cards, kill personal FICO scores, even though they are exactly what the entrepreneur should do to maximize business results.
    5. According to CEO Glen Goldman, Wells Fargo is currently referring customers it can't help to Capital Access Network.   
    6. For more info on small biz online/mobile banking and lending, see our Online Banking Report on micro and small businesses (subscription, published Oct 2009).


    Everbank Takes Gold in Change Sciences Ranking of Small Biz Banking Online Sales, BB&T is Runner-up

    By Jim Bruene on August 6, 2012 10:58 AM | Comments

    Small Biz Banking Ranking from Change SciencesI've had a consumer account at Everbank since shortly after it launched in 1998. And I've continued to be a fan, both of the bank, and of its co-founder and product-guru Rob Foregger's subsequent work at Personal Capital and others. But I hadn't realized that Everbank excelled on the small biz side.

    Change Sciences, which quantifies and compares bank user experience in various verticals, ranked Everbank #1 in its just-published report (subscription) on online sales of small-business banking services.

    As you can see from the methodology below, Change Sciences is looking at the discovery and sales process for small biz banking, not the actual online banking experience itself.

    Everbank took first by a solid 3-point margin over runner-up BB&T. Most of the big banks were bunched just below BB&T. PNC Bank and US Bank were just a point lower and BofA was just two points lower. SunTrust and Wells also finished four points under BB&T.


    Everbank offers an extensive menu of business benefits via mouseover dropdown menu (6 Aug 2012)



    Note: Change Sciences methodology (from its website)

    Each site is evaluated (via desktop browser) against a series of criteria by a Change Sciences analyst. The analyst reviews pages and screens that are part of a critical user task. As the tasks are evaluated, the analyst does three things:
    • Looks for predefined user-experience characteristics and features.
    • Evaluates the page for ease of use or usability, and applies heuristics accordingly.
    • Looks for unexpected enhancements, which we call pleasant surprises.

    Tasks evaluated:
    • Getting a first impression
    • Learning about the bank’s approach to its small-business customers
    • Finding out about checking and lending products
    • Learning about online banking
    • Getting to apply options


    Launching: EFTGuard Provides $500k in Online Fraud Protection for Business Banking Customers

    By Jim Bruene on April 24, 2012 8:06 PM | Comments

    image That was fast. Just two weeks after my latest appeal to the industry to provide small business owners with more security options, a new product launched today aims to do just that. And it's packaged as a turn-key, fee-based service that could be sold by banks at a $10+ per month profit (MSRP is $25/mo).  

    That all sounds too good to be true. When I was first contacted by Greenway Solutions last week, I was more than a bit skeptical. But after speaking with CEO Jerry Tylman and Managing Consultant Jon Meyer, I was convinced they had something that as a business owner, I'd definitely buy.

    The product, EFTGuard, is a joint venture between Greenway Solutions and Royal Group Services. They say it's a "win-win-win" for banks:

    • Helps banks meet "UCC requirement for commercially reasonable security and their FFIEC requirement for customer education and awareness"
    • Provides peace of mind to bank clients
    • Protects both the bank and each client up to $500,000 in unauthorized online transfers
    • Helps differentiate checking and deposit offerings


    How it works

    EFTGuard provides protection against fraudulent online-account withdrawals of $100,000 per account (with no deductible), with a maximum of $500,000 per customer. And because it's not true "insurance" (it just behaves like it), there is no underwriting hassle and the product can be purchased in just a few minutes via online form (demo here). There is, however, the usual list of coverage exclusions; for example, it doesn't cover insider theft. 

    The catch? To qualify, business customers must download and install anti-malware software from Trusteer, Iron Key, or Webroot. And every computer accessing the business account must be running these protective software programs. For the time being, that appears to leave out any mobile access. 

    Initially, banks looking to offer EFTGuard will need to work with one of these three malware-protection vendors in order to qualify their clients for the fraud protection. Other than that, EFTGuard is turn-key and comes with marketing support, a co-branded signup page, and full claims management.

    The $500,000 coverage is backed by Chartis Specialty Insurance Company.


    Bottom line

    Your business customers are rightly concerned about fraud. Offering them an option to protect themselves is a great way to differentiate your deposit offerings while preventing you from getting bogged down in messy litigation with your customers.

    I still have questions about how often the list of exclusions will invalidate claims when actual fraud occurs. But the company assures me that the protections are very real.

    Assuming EFTGuard delivers on its protection promise AND creates a small profit center, what's not to like? I, for one, will be the first business owner in line to buy it. 


    EFTGuard homepage (24 April 2012)



    1. I believe insurance is one of the best growth areas in retail banking, especially in niche lines that can be explained and delivered online (see our December Online Banking Report for more about banks delivering insurance online).


    Target Fee-Based Security & Control Packages to Small Business Owners

    By Jim Bruene on April 10, 2012 11:21 AM | Comments

    image A few days ago we published a new Online Banking Report: Delivering that Secure Feeling, arguing for the creation of fee-based subscription packages for those that need more security/privacy assurance than the typical consumer.

    What we probably should have made clearer is that this is NOT a product strategy for the mass market. It's geared toward high-end, wealthier customers and/or businesses that have a lot more to lose if their accounts are compromised.

    The need for more security is especially acute for the small business owner, especially larger small businesses keeping five- and six-figure balances, sharing account access with accountants, bookkeepers, and partners, while making 100s of transactions per month.

    In addition, business accounts generally operate without Federal consumer protections, so fraud losses may have to be absorbed by the business, unless they can prove negligence by financial institution. Litigating a major fraud loss is an ugly situation that should be avoided if at all possible.

    That's why it's a win-win-win when a biz-banking client pays a fee for extra fraud protection:

    • Biz customers have fewer worries
    • Bank profits from the fee-based service
    • Fewer unreimbursed fraud losses save both parties time, money and potentially massive ill will

    Take it from this small-biz owner. For 15+ years I have wished for more security/control and would be more than happy to pay for it, really! (see note 1). Every single day I dread opening the multiple email alerts from my biz bank afraid that one day I will join the the small but growing number of biz owners that have had their accounts looted (note 2).

    Commercial customers have sophisticated tools at their disposal, but the smaller biz is often left using consumer-type controls. This is not how it should be.


    1. I've long said that I'd be willing to pay $500/mo for the perfect package of online business banking, payment, bookkeeping, and customer-management services. I stand by that statement (though I'd probably pay even more now that we have more international issues with the Finovate event). See our Online Bankin Report on micro and small businesses for more info.
    2. Here's one of the paradoxes of more communications, more "worry events." In the past, I would have only dreaded opening my statement once per month. Now I have that little pit in my stomach several times each day. That doesn't seem right.
    3. Image licensed from Shutterstock.


    Kickstart Your Banking Community with Crowdfunding

    By Jim Bruene on February 13, 2012 4:59 PM | Comments (1)


    image If you read much tech news, you've probably heard about Kickstarter, or at least their most famous project that helped a budding entrepreneur make watches from iPod Nanos (above).

    Kickstarter is the best known (note 1) of the so-called crowdfunding sites where the Internet is invited to help fund new projects in return for recognition and/or a tangible good related to the project. Kickstarter focuses on the arts world, helping connect artists, designers, publishers, and performers with patrons around the world, who kick in as little as a $1 to help get a project off the ground. There are dozens of others focusing on other areas as well. 

    You're a Backerimage I used Kickstarter this weekend to fund publication of a new comic book called Steamfunk (screenshot below). I came across it when searching for local Seattle-area projects.

    My niece is a steampunk fan, so I thought it would be a nice surprise for her. I dropped $15 into its pledge drive, and assuming the artist Zilla Doty receives at least the $3,000 he was seeking (note 2), in April I'll have a signed copy of his inaugural edition to send to my niece (note 3).

    Not only do I get a cool one-of-a-kind gift, I gain the satisfaction of helping a local artist get a project off the ground. Very gratifying.

    Bank Opportunity

    I bring this up, not because it's a slow news day, but because I think leveraging crowdfunding could be a good way for community banks or credit unions to distinguish themselves in the local market. It would not be an easy project, getting people to part with their money never is, but it has the potential to attract new small business clients while supporting your community.   

    Here's how it would work (note 4):

    1. Bank sends customers to a third-party crowdfunding site, which could be operated independently, or private-branded for the bank

    2. Bank publicizes new community projects via its website, blog, Facebook page, and so on

    3. OPTIONAL: Bank offers to match the crowd's funding with a credit line/loan (if needed and assuming reasonable credit risks) or other banking services

    For extra credit: Integrate crowdfunding with peer-to-peer lending. 


    Kickstarter project page
    Note: This is how it looks after you've made a pledge

    Kickstarter project page


    1. According to Compete, Kickstarter had 750,000 unique U.S. visitors in Dec. 2011.
    2. With 20 hours to go, the project has easily surpassed the $3,000 goal. 175 backers have pledged almost $5,000.
    3. The pledge process is very smooth. Payment is made when you make the pledge and fulfilled through Amazon Payments. If the project fails to reach 100% funding by the end date, you get your money refunded. According to the company, 90% of the projects who make it past the 25%-funded mark end up with 100% funding. That's an amazing stat.
    4. No, I don't have a clue what objections you might get from compliance, but I'll bet it will be an interesting conversation.
    5. We haven't written specifically about crowdfunding at Online Banking Report, but we've covered P2P lending and small biz banking services.

    Comments (1)

    Chase Bank's Jot App Shows the Future of Mobile Transaction Processing

    By Jim Bruene on June 8, 2011 7:54 PM | Comments (2)

    image image I've been waiting for something like Chase Bank's Jot (see note 1). It's part of the "second wave" of mobile apps that demonstrate why mobile banking will soon be better than online banking.

    Mobile banking phase 1: 2008 through 2011

    Mobile's first wave was all about porting the most-used online functions, balance inquiry and statement viewing, to a smaller screen. That was convenient for smartphone owners on the go, but it didn't add much to the overall user experience. 

    The test of whether you've nailed the mobile UX is if that even if you are within arm's reach of your laptop, you still pick up the mobile to perform a function. Most mobile banking systems fail that test, i.e. you only use mobile banking when online access is inconvenient or insecure.

    Mobile banking phase 2: 2011+

    The second wave is much more interesting. Your mobile phone can do financial chores that simply cannot be accomplished online, for example:

    • Deposit a paper check via mobile camera (USAA, Chase, PayPal and many more)
    • Transfer money to your friend by "bumping" phones (PayPal, ING Direct)
    • Alert you to special merchant offers in your exact location that are redeemable simply by using your bankcard (BankOns)
    • Pay your bill automatically by scanning the billing statement (Mitek)
    • Upload paper receipts and append them to expense reports (Expensify)

    And the latest addition to that list:

    • Receive feed of transactions and tag them with categories for future reference and reporting (Chase Jot)


    How Jot works

    Chase's new app (announced 1 June 2011) may not be as cool as remotely depositing a check, but it's much more useful for most cardholders. The iPhone and Android app, which is currently available only for the bank's Ink business credit card, sends push notifications of each transaction (see inset) and enables users to (relatively) quickly append transactions with category information, i.e. "tag" transactions. 

    image One key Jot feature, missing in most mobile banking services, is a running list of the transactions waiting to be tagged (see right).

    That way, when the business owner has a few spare moments, they can quickly get caught up with their categorizing work. This ongoing attention will reduce the quarterly game of "what's that transaction" played when finalizing the company books.

    So not only does Jot save time, it potentially improves the quality of the accounting data, always a good thing for business management. 

    The app also includes other business credit card management functions such as basic reports by tag, the ability to change employee credit limits, and info on outstanding balances and payment due dates.

    While the functionality is still pretty basic (e.g., there is no way to add more than one tag to a transaction), there are only 60 days of transactions available, and login needs to be simplified, overall Jot is a winner. We are tagging it with an A-.


    1. The Jot landing page is well done and includes a series of four short demo videos.
    2. For OBR subscribers, see our previous Online Banking Reports on mobile banking and payments.

    Comments (2)

    Out of the Inbox: Chase Invites Business Clients to a Free Webinar with Google

    By Jim Bruene on May 6, 2011 12:34 PM | Comments

    imageOn the one hand, it's easy for a bank to get the attention of business clients and prospects. Just announce a streamlined commercial loan-app process. But since that's unlikely to happen in the wake of the Financial Meltdown, a Webinar with Google is a pretty solid Plan B.

    Chase has a winning effort here. The topic, 7 ways to sell online, is so compelling that Google is tossing in a $100 AdWords credit for attendees (see note). And it never hurts to associate with a powerful and well-regarded Internet brand.  

    The email design is good with an interesting subject line, an email to ask questions, and a big green button for the call-to- action. The copy is a bit predictable, but it's short and to-the-point and doesn't distract. There are small quibbles regarding design-layout; perhaps, a Gmail issue; and they forgot to capitalize the W in AdWords, but those are minor glitches.    

    Grade: A-

    Chase email to existing business clients (6 May, 10:33 AM, Pacific)

    Chase Email to Existing Business Clients announcing webinar with google

    Landing page hosted by Google and co-branded with Chase (link)

    Registration page hosted by Google and co-branded with Chase 


    1. Google usually offers the $100 only to new clients, but I don't seen any fine print limiting the bonus. I hope they don't add a restriction after the fact, which could negate the positive energy Chase generates from the Webinar offer.
    2. For more info on the space, see Online Banking Report: Micro- and Small Business Online Banking (published Oct. 2009)


    Chase Bank Plays the Ecommerce Card: Offers $100 Bonus for its "Instant Storefront" Solution

    By Jim Bruene on April 4, 2011 7:51 PM | Comments

    image Chase Bank is aggressively pushing its latest small biz initiative, Instant Storefront, billed as a way for old-school "9 to 5" businesses to sell online 24/7. Here's where I ran across it last week: 

    • A radio ad a few days ago (in Seattle)
    • Full-page ad in the San Francisco Business Times (p. 24 of March 25-31 issue)
    • On the main account management page within online banking
    • Small ad on Chase's business banking public page today (see last screenshot, note 1)
    • Email yesterday offering a $100 bonus to give it a try (see first screenshot, note 2). 

    The email is short and sweet with a good subject line and appealing design. The green button leads to a landing page with more info (second screenshot). The page includes an old-school, and very effective lead-gen technique, offering to email the $100 coupon to interested visitors (third screenshot).

    The cost is $30 per month, and the bank throws in a $350 POS terminal and waives $150 in startup fees for new Chase Paymentech merchant customers.

    To redeem the offer, customers must visit with a business banking specialist in a Chase Branch. Ecommerce website development seems like a bit of a stretch for a business banker to be conversant with, but hopefully it's very turn-key. And I like how the service positions Chase as an online partner to small biz, so it may be a brilliant branding tool.

    Using a browser with cookies removed (note 1), I don't see any mention of the new service on Chase's website and searching for "storefront" in its site search returns nothing (note 3). So Instant Storefront may be a western market test.


    Chase Bank email to business customers about Instant Storefront (30 March 2011)

    Chase Bank email to business customers about Instant Storefront (30 March 2011)

    Landing page for Instant Storefront (link)

    Landing page for Instant Storefronts

    Lead-gen page where users enter their email address to get the $100 coupon

    Chase Lead-gen page where users enter their email address to get the $100 coupon

    Chase public business banking site (with Washington state customer cookie)

    Chase public business banking site (with Washington state customer cookie)

    1. The ad appears only on the browser I use to access my Chase account. On browser with cookies disabled, I do not see the Instant Storefront ad.
    2. The print and radio ads also offer the $100 bonus.
    3. The bank uses the URL: in its radio ad.
    4. For more info, see Online Banking Report: Micro- and Small Business Online Banking (published Oct. 2009)


    Launching: Balance Financial Introduces Hybrid Billpay/PFM/Bookkeeper

    By Jim Bruene on March 3, 2011 2:38 PM | Comments

    image Internet-enabling every service and device on the planet creates fascinating new business opportunities. And we are seeing our share of them in the fintech space (note 1). Knowing how to deliver the proper blend of personal service and automation is an area of extreme importance to financial institutions: The optimal solution varies by customer, by product, and even by time of day.

    One relatively neglected area involves premium services that offer state-of-the-art tech married to specialized human service, for a fee. Large banks have private banking departments that handle the bills and day-to-day finances of households with millions in assets. But those that fall outside the private banking threshold are generally offered free, self-service tools available to everyone.

    Back when only 10% to 20% of households were online, that distinction was necessary. But now that 60% to 70% or even more of a bank's households use the Internet, there are enough customers to slice and dice financial management services into a variety of offerings and price points. There's a lot of revenue available for service offerings in the wide range between free and private banking.

    Enter the newest player in high-end bill payment: Balance Financial, an angel-funded company based in Seattle that launched its new service this week. CEO Devin Miller was also involved in the launch of one of our favorites new services of 2010, Finsphere's PinPoint mobile location-aware fraud-alert service (previous post).


    How it works

    image Balance is a unique mixture of automatic bill pay and human bookkeeper, with an online PFM thrown in to help keep track of it all. The company has built a rich PFM, added billpay powered by Online Resources, and given each customer their very own actual person who oversees the account.

    Unlike previous generations of billpay and the scan-and-pay offerings from PayTrust and others, Balance Financial does everything for you. It receives the printed or electronic billing statement, it uploads the docs to its website, and then the most important piece, it pays the bills automatically based on your prior instructions, just like the private banking officer. The end user is only contacted if the bill falls outside the preexisting parameters.

    Sound too good to be true? Maybe, if it were free, but it's far from it. The company tested a variety of pricing options and settled on a price that's borderline ridiculous for the retail banking mindset: $75 per month.



    Are they crazy? Maybe, but probably not. The company has been delivering personal bookkeeping services for seven years, and has paid more than 100,000 bills for its clients (note 3). It knows from experience there are affluent households and small businesses that are happy to offload this task for much more than $75 per month. When paying larger bills, the late fees alone can easily be in this range (note 2).

    Balance admits the audience for $75/mo is tiny. But as its technology gets better, and its bookkeepers can take on bigger client loads, it believes it can push this price down, maybe even way down. So if you are interested in finding a new way to serve your mass affluents with something they can't get anywhere else, take a look at Balance.

    Balance Financial integrates the human side throughout the Web-based app (3 March 2011)

    Balance Financial integrates the human side throughout the web-based app (3 March 2011)



    1. From the look of the applications for the upcoming FinovateSpring, the number of startups is growing at an even faster pace.
    2. Our record penalty for paying a bill late at our business is $1,100. We'd just made a huge charge and by being that one day late, our APR was bounced to 25%, and we went into revolving mode over two cycles. Even though we paid the balance off within 7 days of making the charge, it still cost $700 one month and $400 the next. Anyway, that one incident alone would pay for Balance for 1.25 years, not to mention avoiding the huge frustration of making a thousand-dollar blunder.
    3. The original bookkeeping service was founded in 2004, by Devin's wife, Rebecca Miller.
    4. For more on online personal financial management (OFM/PFM), see our Online Banking Report.


    Chase Bank Offering Small Business Clients $2,000 in Free Remote Deposit Capture Services

    By Jim Bruene on June 15, 2010 6:26 PM | Comments (1)

    image Two thousand is the largest banking premium I've ever seen, although Chase's out-of-pocket costs are probably less than $500. The offer was made last week via email (see first screenshot) to existing business-banking customers not already enrolled in Chase Quick Deposit, a scanner-based remote check-deposit service.

    The details:


    From: Chase Bank 
    To: Business Banking clients
    Date: 10 June 2010 (1 PM)

    Offer: Two years of free remote deposit services (Chase Quick Deposit), normally $50/mo, plus the $855 Panini 50-50 business-class scanner to power it. Total retail value = $2,055 

    Fine print:
    -- Users must deposit at least 10 checks per month to maintain fee-free service
    -- New Quick Deposit users only; not valid for current or previous users
    -- $500 cancellation fee if discontinued within 12 months
    -- Offer good through July 31, 2010

    Notes: This offer does not appear to be available to the general public. On the bank's website, the current offer is a free scanner with a 2-year contract at $50/mo.


    Analysis: It's definitely attention-getting and will drive new remote-deposit business. But I'm a bit surprised Chase is giving away both the razor and the blades (see note 1). Perhaps the bank is testing different offers. But it will be two years before Chase finds out what percentage of its users convert to paying customers. Of course, they are also banking on an account-retention lift to repay the significant cost of the offer.   

    Email from Chase offering free remote deposit services (10 June 2010, 1 PM)


    Landing page


    Users accepting the offer must first log in to their account to enroll


    1. Offer made to a single-service (DDA) small business checking client converted from WaMu.
    2. For more info, see Online Banking Report: Micro- and Small Business Online Banking (published Oct. 2009)

    Comments (1)

    Finovate Alumni News from BrightScope, BillShrink, and

    By Andrew Dolbeck on February 10, 2010 11:11 AM | Comments

    We just launched a new blog focused on important developments at nearly 100 of the most innovative financial companies on the planet: those chosen to demo at our Finovate conference series. We'll have capsule summaries each week on Netbanker, but for the full post we encourage you to subscribe to the Finovate email list or RSS feed here.

    We'll also be keeping you posted on even more Finovate alumni news via our Twitter feed here. Launches New 1099 Tax Filing Service

    image Free online bookkeeping site has added its first fee-based service, shedding light on its business model for the first time. The company's new service helps small business owners manage 1099 tax forms for contractors, charging $5 per. Outright intends to introduce more fee-based services in the future while keeping the core service free.

    Along with the launch of its 1099 service, Outright also launched a new tax information website, Right Taxes Now. The new site provides tax advice and offers opportunities to sign petitions regarding small-business tax relief legislation.

    Read more about and its new offerings here.

    BillShrink Expands into Small Business Market with Launch of Credit Card Advisor

    image BillShrink, which provides money-savings advice on a variety of consumer products, has expanded its offerings to include help for business owners.

    The company's new BillShrink for Business service helps businesses find better credit card deals. The company also has online tools in the works for comparing business wireless phone services and savings accounts.

    Read more about BillShrink's new business services here.

    BrightScope Launches 401(k) Data Tool

    image On January 19, BrightScope launched a new online tool, the Personal 401(k) Fee Report. The new tool expands on BrightScope's previous 401(k) data offerings by comparing the costs and retirement results of selected plans against alternatives such as IRAs, making the data more useful to financial advisors.

    The report also provides detailed information on each 401(k) plan, such as a breakdown of the fees and a list of the associated funds. Read more about BrightScope's new 401(k) product here.


    Chase Bank Invites Business Customers to Join Business Advisory Board

    By Jim Bruene on January 19, 2010 8:30 PM | Comments

    image I received an email this morning (see below) from Chase Bank inviting me to participate in a new Business Advisory Board, powered by Lightspeed Research. My colleague also received the same invite for his separate account, so it doesn't appear to have been a particularly selective emailing. Both accounts were acquired by Chase in the 2008 WaMu debacle.

    To sign up, users simply complete a 10-question one-page online form (first part shown below in screenshot 2) which took just under six minutes (note 1).

    After completing the registration, I expected to be ushered into some type of special club, but all I received was a 15-word paragraph telling me to confirm my email address (screenshot #3). That's a bit of a letdown after giving the bank nearly 10 minutes of my day. I surmised the big payoff would come after confirming and logging back in. 

    I was wrong. After logging in, I was greeted with a short thank-you statement and an invitation to take the "welcome survey," which turned out to be three questions about the 2010 economic outlook (screenshot #4). And that was it. Nothing more to see or do. No blog. No "online community" (promised in email). No special offers (note 2). They didn't even have the courtesy to share the results from the survey I just took (note 3). I began to wonder if I'd been scammed.

    Analysis: On the surface I love this idea: inviting customers to participate in an online advisory board. Customers like to be noticed and heard, and a chance to win $100 is icing on the cake. But if you intend to ask business customers to take 15 minutes out of their day, it better be for something real. So far, I just feel stupid for signing up and thinking that I was actually going to make a difference at the bank.

    Hopefully, they'll make up for the bad start with interesting opportunities down the road. But the bank will have to work doubly hard to get my attention after this wasted effort. 

    Email from Chase Business Banking (received 19 Jan. 2010, 1:55 PM Pacific)
    Note: Highlighting mine


    1. Landing page from email (link, 19 Jan. 2010)


    2. Registration page (click to enlarge; link)
    Note: Registrants are entered into a sweepstakes to win one of ten $100 prizes.


    3. Registration thank-you screen


    4. Three-question welcome survey is available after confirming your email address


    1. Although the site says it's for business-banking customers of Chase and WaMu, it appears that anyone that finds the website can join.
    2. Under the "Rewards" tab, information tantalizes regarding earning "cash, prizes, sweepstakes entries" for survey-respondents. But there are no examples or surveys available, so it's one more small letdown.
    3. Business owners that read through the online FAQs will find out that they may be contacted one or two times per month with "research opportunities," but Chase shouldn't bury this key info in the FAQs where only a small percentage of users will find it.
    4. See our recent Online Banking Report for more ideas on how to serve small- and micro-businesses through the online and mobile channels.


    Another Bank Unleashes Remote Deposit for the iPhone: Royal Bank America

    By Jim Bruene on January 7, 2010 6:33 PM | Comments (1)

    image Another bank is about to join USAA (post), WV United FCU  (post), and Randolph-Brooks FCU (post) in the smartphone-enabled deposit sphere. Royal Bank America, a $1.3 billion (asset) Philadelphia-area institution, is in final testing of its new deposit-taking iPhone app called RoyalRDC (iTunes link).

    image The new app appeared in Apple's iTunes store on Monday, but currently the bank is accepting only beta testers (see screenshot below). The app, said to be coming "within weeks," allows a check to be deposited within 30 seconds using any model iPhone.

    The bank is currently promoting the benefits of remote deposit on its home page (see screenshot below). Not only can RDC users skip the trip to the branch, they have 2 additional hours to make a deposit for same-day credit (6 PM instead of 4 PM). That's an enticing additional benefit nicely highlighted through the shaded-clock image below. 

    Royal Bank America homepage (7 Jan. 2010)
    Note: This is the homepage view after refreshing the page once; yellow highlight is mine.


    Royal Bank call for beta testers (link)


    Note: For more info on mobile banking on the iPhone, see our March Online Banking Report.

    Comments (1)

    Nobel Winner Calls for First National Bank of Innovation

    By Jim Bruene on January 6, 2010 9:43 AM | Comments

    image Perusing the newsstand at the Minneapolis airport last night, I picked up the latest Harvard Business Review issue entitled Reinvent. One article in particular prompted me to shell out the $16.95 for the double issue: Wanted: A First National Bank of Innovation by Edmund Phelps, a 2006 Nobel winner in economics, and Leo Tilman, a Columbia prof and author of Financial Darwinism.

    Their case was laid out at the beginning of the article:

    Ever since Alexander Hamilton, the U.S. economy has been about ideas, experimentation, and exploration: businesspeople imagining new concepts and launching new ventures; entrepreneurs engineering new products or methods based on new ideas; marketers conceiving of niches for new products or new niches for old ones; managers and consumers assessing novel products; and financiers with strategic vision judging which innovations to back.

    The authors argue that it's the funding of new ideas, not arbitrary pet stimulus projects, that really drives our economy in the long-term. And with credit and venture funding difficult to obtain, the government should step in with a new GSE (government-sponsored entity), their so-called First National Bank of Innovation, to help fill the funding gap.

    My take: After the recent debacles with the major GSEs, Fannie and Freddie, I'm not so sure that we need more taxpayer guarantees on our nation's books. But the economy would probably be better off long-term if some of the money flowing to housing and roads was invested in entrepreneurial-driven activity.

    But, I'm not about to get involved (again) in telling the government what to do. Instead, I'd rather see the private sector step up and implement the ideas presented by Phelps and Tilman. Why not create your own in-house Bank of Innovation, where local startups could go for support, banking services, and help in finding financing. Umpqua Bank has been trying some interesting things in this area (see Umpqua Lab screenshot below).

    Pulling ourselves back up from The Great Recession is no easy task. And banks, rightly or wrongly, are currently seen as part of the problem. Wouldn't it be great if people started seeing the financial industry as part of the solution? That's a New Year's resolution I think we can all get behind.

    Umpqua Bank labs microsite <> (6 Jan. 2010)


    Note: See our recent Online Banking Report for more ideas on how to serve small- and micro-businesses through the online and mobile channels.

    Categories: Small Business, Strategies

    Out of the Inbox: Upbeat Customer Email Message from Umpqua Bank

    By Jim Bruene on November 2, 2009 10:40 PM | Comments

    image I recently opted in to the Umpqua Bank email list. And even though I'm not a customer, I received an upbeat message this morning from bank president Ray Davis (screenshot below).

    This email appears to be geared towards businesses (see the closing line below). And that makes sense because I'd recently been looking into its business social network (note 1). But the message is on-target for consumers as well.

    The well-written 185-word letter covers three main topics:

    • A cautiously optimistic message about the overall economy
    • Some tangible evidence (new banking division, new lending teams, new capital, and 20,000 hours of community service) that the bank is a forward-moving survivor
    • Reassurances to customers that they were well-capitalized and moving closer to repaying TARP money

    The tone was completely soft sell. There is a link to its online switch kit at the bottom and links to its LocalSpace business social network and Twitter feed (note 2) on the right. It's more "we're in this together" than sales pitch and closes with this wonderful line:

    As we wrap up 2009 and look ahead, I encourage you to commit to the spirit of recovery and take action that positions you for the future.

    We recommend that every other well-capitalized bank and credit union send a similar message before the holidays. We are about to move into the annual "year in review" exercise in the media, and this year's 100+ U.S. bank failures will be high on the list. Remind your customers, members, employees that you are still a vital member of the community. And that for every financial institution that went under, there were a 100 like yourself that did not. 


    1. For more info on the small-business market, see our latest Online Banking Report: Small Business Online & Mobile Banking.
    2. Umpqua dreamed up one of the most compelling reasons we've seen to follow a bank, or any company for that matter, on Twitter (with the possible exception of the tweeting bakery): updates on its truck handing out free ice cream (Umpqua Twitter page).


    New Online Banking Report Published: Serving Small Businesses with Online & Mobile Banking

    By Jim Bruene on October 30, 2009 2:30 PM | Comments

    image Since we began publishing Online Banking Report in 1995, we've taken a deep dive into the small- and micro-business online banking market five times. The latest was published yesterday (here). Online Banking Report subscribers can access it now as part of your subscription  (note 1). Others may purchase it for US$495 (abstract here).

    Small business banking is one of my favorite subjects. It's near-and-dear to our hearts because we've experienced first-hand the frustration of trying to manage our business with neither the resources, nor frankly the interest, to tap sophisticated business-management tools.

    So, we've hobbled along over the years using Word, ACT, Excel, Microsoft Money, a hand-written ledger, and a moderately customized ecommerce back-end on our website. But we've clearly paid a price (note 2) for our lackadaisical approach to business finance.  

    The reason I share our foibles is to point out the need for banks (note 3) and others to look at the opportunity more broadly. You can do so much more than simply help small businesses manage their checking accounts and credit lines. It's the day-to-day business drudgery, billing, account receivables, record-keeping, tax prep, payroll, compliance, and so on, where small and micro businesses really need help.

    As I've said many times over the past decade, I'd gladly pay $500 per MONTH for an online, small-business financial management service that handled ALL our needs. Ultimately, it would save us thousands per year, while delivering much more timely info about the health of our business.

    Our latest report is a true product-manager's guide to small-business product/service development with 76 pages of ideas plus examples from leading banks worldwide. We tie it all together with detailed descriptions of four levels of small-business package accounts (starting on p. 45 in the OBR Small Business Report; note 4):

    • Virtual Checking Account: A transaction-oriented service priced at $25 or so per month
    • Virtual Business Manager: Organizes most financial management duties for $50 to $100 per month
    • Virtual CPA: Handles most business-management functions including customer relationship management and billings for a monthly fee of $100 to $250
    • Virtual CFO: The works for $500+ per month

    The report also includes data on the size of the U.S. market and a forecast for online banking usage for the next 10 years.

    1. Printed copies will be mailed late next week.
    2. According to our accountant, we've spent well into five-figures more than necessary, mostly in extra taxes. Then again, we've avoided paying bookkeeping and software expenses that could have been just as high. 
    3. Why do I think this is an opportunity for banks and credit unions, when it is outside of their core deposit and credit offerings? Very small businesses have neither the time nor resources to search for solutions, and then perform the due diligence necessary to determine whether the solution provider or professional services firm is trustworthy. On the other hand, while business owners may not always hold their bank in the highest regard, they at least trust them to safeguard their info. An army of regulators and class-action lawyers makes sure that the bank does not take its fiduciary responsibilities lightly. 

    But few financial institutions will look to build sophisticated financial management features in house. Most will look to outsiders, both startups such and established bank-tech firms such as Intuit, to build and maintain the business-management features.
    4. See also, our recent post on small-business dashboards. 


    The Missing Link for Small Businesses: Banking, Finance & CRM Dashboard

    By Jim Bruene on October 28, 2009 5:12 PM | Comments

    I finally finished our latest report on small business online banking last night. Just as I was about to upload it, I realized there was something missing in the "dream online banking solution" for small businesses.

    So I stopped the "presses" and added it to the report. What was the missing piece? A financial and business management dashboard integrated with online banking.

    I poked around the web today and found a few interesting products (see update below), none of which were quite what I was looking for, and had no direct connection to financial institutions:

    • image MyBizHomepage has a dashboard that integrates with QuickBooks and sounds pretty slick. But there website hasn't been updated for more than a year, so not sure if this is a viable business or just a hobby site. I have an inquiry in to the owner.
    • image DreamFactory Software also offers QuickBooks-integrated dashboards. I found it in the new Intuit App Center for QuickBooks add-ins (here). It's a powerful program, but not the kind of plug-and-play dashboard I'm looking for.
    • image iDashboards: Has impressive sample dashboards to view. None integrate directly with online banking, but many include financial data (see screenshot below).

    So I'm still looking for financial institution examples. Know any? Comment below or email me. It's too late to make our report, but we'll report it here.

    iDashboards mockup of a healthcare "billing scorecard" (link, 28 Oct 2009)


    Update (29 Oct 2009):

    Here's another QuickBooks dashboard from



    Cascade Bank Has a Business Banker Directory on its Website

    By Jim Bruene on October 20, 2009 6:48 PM | Comments

    image Isn't business banking supposed to be all about the people? Then why don't financial institutions use their websites to publicize their business banking talent? None of the several dozen business banking sites I recently reviewed allows prospective business clients to connect with an actual human being in advance of calling or emailing a general number for more info.

    The only bank I'm aware of that actually puts its business bankers on its website is Cascade Bank headquartered in Everett, WA, a few miles north of Seattle. The bank has posted the following info for years (see screenshot below):

    • Headshot
    • Name, title, location
    • Short mission statement/bio (note 1)
    • Phone number and email address

    That's a respectable start. But with today's virtually free Web-based tools such as Twitter, blogs, and Linked:In (note 2), every business banker should have their own online presence. Sure, the bank or credit union will need to provide guidance and oversight, but it's not like these sales folks don't know how to put their best foot forward.

    Cascade Bank Commercial Banker Directory (link, 20 Oct 2009)


    1. Unfortunately, the bio area is blank for 3 of the 12 business bankers listed. That looks pretty bad, especially with 2 of the first 3 blank. Come on Lar, Cynthia and Patrick, get those bios over to marketing ASAP.
    2. Those Cascade listings would look much more impressive with Linked:in links by each name.


    Last Day to File Extended U.S. Income Tax Returns, Why Doesn't Anyone Remind Me?

    By Jim Bruene on October 15, 2009 9:59 AM | Comments

    image If you are like me, you put off filing the dreaded 1040 as long as possible, and may often have no clue that the final due date (for extended returns) has snuck up on you once again. Then there are those quarterly filing dates that aren't spaced three months apart (see screenshot; note 1). 

    That's why every financial institution that serves small businesses and the self-employed should do three things:

    • Post the IRS due dates on its website (see screenshot)
    • Provide email/text reminders (opt-in naturally)
    • Blog/Twitter them

    Small biz accounting startup (a Finovate 2009 presenter) is ahead of the curve with its handy Self-Employment Tax Calendar:


    1. I've been paying quarterly estimated taxes for 15 years, and thanks to the calendar, this is the first time I realized they were spaced 3-2-3-4 months apart. No wonder, I can't remember. 


    Intuit Offers Low-Cost Online Accounting via QuickBooks Free or Basic

    By Jim Bruene on October 14, 2009 6:25 PM | Comments (1)

    imageI was poking around the various small business online accounting sites today researching our next Online Banking Report and thinking about which service would suit our business, given that Microsoft is pulling the plug on Money.

    I was already familiar with (a Finovate 2009 presenter; demo video coming soon), FreshBooks, and LessAccounting. But I was completely surprised by one contender in the free category: Intuit QuickBooks Online.

    The software giant offers three flavors of online-only accounting (see screenshot below; full comparison here):

    • QuickBooks Online Free: Create and send invoices, print checks, track money flow for up to 20 customers and run basic reports; even includes email support
    • QuickBooks Online Basic: In addition to the above, for $9.95/mo, users can manage an unlimited number of customers, set permissions for others to access data, and choose from a library of 40 standard reports
    • QuickBooks Online Plus: Full-fledged QuickBooks for $34.95/mo, mimics most features of QuickBooks Pro (see comparison here)

    Financial institution opportunities:
    All four online accounting companies offer free versions and premium fee-based options (note 1). Consider linking to them from your small business resource center. For extra credit, develop a co-branded version you can offer your customers or negotiate discounts for the fee-based versions.

    Intuit's QuickBooks Online product line (14 Oct 2009)


    1. is currently free for all users, but says it is working on value-added, fee-based options.
    2. For more info on the small biz space, see our Online Banking Report: Small & Microbusiness Banking (June 2004). Note: Anyone who purchases the 2004 version now, will automatically receive the newer version when it's published later this month.

    Comments (1)

    Bank of America Promotes Small Business Online Community at Logout

    By Jim Bruene on September 23, 2009 5:00 PM | Comments (2)

    image Logging out from my Bank of America credit card account (both personal and business accounts), I was greeted with this pitch for the bank's small business community (see first screenshot). The pitch is straightforward and emphasizes three benefits:

    • Get answers to your business questions
    • Exchange ideas with other entrepreneurs
    • Free

    Clicking the red Join Today button drops users onto the Forums page at the small business site (see second screenshot).

    Bottom line: The logout effort is a good brand-building exercise for Bank of America, and it should drive much-needed traffic to the site. According to Compete (see chart below), in August the small business community site had an estimated 70,000 unique visitors, two-thirds more than the 40,000 a year ago. But traffic was down almost a third from the springtime peak.

    Bank of America logout screen (23 Sep 2009, 4 PM Pacific)


    Landing page (link)


    Compete traffic estimates, Aug 2008 through Aug 2009 (link)


    Comments (2)

    PNC Bank Does a Great Job Packaging Business Banking Benefits into its CFO Account, but Misses Mobile

    By Jim Bruene on August 19, 2009 7:39 PM | Comments

    imageToo often we don't give online business banking the coverage it deserves, both here and in Online Banking Report (note 1). Online services can be far more valuable for a business customer than for the average consumer. But consumer services, with bigger advertising budgets and much more press coverage, tend to be more visible when we search for examples of financial innovations.  

    image That's why I was especially intrigued with the PNC Bank ad in the Aug/Sep issue of BusinessWeek SmallBiz magazine. Not only had PNC Bank shelled out for a full-page ad (p. 20, see inset; note 2), the creative was interesting and included a tease for the CFO product combined with easy-to-recall URL <>.  

    The new account, cleverly dubbed PNC|CFO, an acronym for Cash Flow Options, covers all the major headaches of business owners:

    • Accelerate accounts receivable
    • Improve your outgoing payments
    • Invest your cash wisely
    • Access information online
    • Ensure access to cash (note 3)

    Naturally, I was most interested in the second-to-last bullet, online information. The audio-visual online banking demo is thorough, but surprisingly neglects mobile banking services. The only mention of mobile banking is at the end of the last paragraph on the online banking landing page. With business owners increasingly tethered to their businesses via Blackberry or iPhone, mobile capabilities should be front-and-center. 

    The other thing missing from the web-based marketing: a human connection. The main call-to-action is the big orange Contact Request button (see screenshot below). Presumably a biz banker will quickly get on the horn and make that connection. However, the bank should make it clear that they have a bevy of qualified bankers available to usher new clients into the CFO account.

    Simply changing the button to Contact a Business Banker would be an improvement. But I'd also like to see a bullet point that talks about customer  service. The only thing I saw was a few generic screenshots in the online demo which talked about responding to most questions "within 24 hours." That doesn't make the reader feel particularly special.

    Finally, a small rant about the bank's contact form. I received error messages the first three times I attempted to submit it. Evidently, commas are not allowed in the company name or address fields. That not good programming and creates a needless poor first impression. There's is also no space in the form for comments from prospective customers. PNC Bank has been on the web for 14 years, it should have flawless forms (note 4).

    Grade: Overall, I really like what PNC is doing so I'll give the marketing site an A for design and B- for execution.

    Landing page for PNC's Cash Flow Options service (link, 19 Aug 2009)


    PNC new account "contact me" form with error message


    1. Our last report on Online Small Business Banking is available here (June 2004).
    2. Key Bank (p. 9) and Bank of America (p. 29) also bought full pagers.
    3. The bank is referring to credit lines and loans; I'm not sure why they didn't state that more clearly. Access to cash sounds more like a checking account feature.
    4. While I'm at it, here are a few more minor flaws: (a) Even though I made two errors in the form, the error message only identified the first one; (b) When an error is made, the form automatically clears the checks in the bottom column of boxes; (c) The bank has neglected to turn off auto-fill (at least in Firefox 3.0) in the "confirm your email" field. 


    Pitney Bowes Goes After Remote Deposit Capture Market with Email to Postage-Meter Clients

    By Jim Bruene on July 22, 2009 4:53 PM | Comments (3)

    image Pitney Bowes (PB) hit me with a cross-sale message this morning, and surprisingly it was for a banking service, remote deposit capture (see email below). Because we already do ACH transactions through PB to load our postage meter, it's something I would consider buying from them, especially since our business bank does not offer RDC.  

    The service called Click Deposit (note 1) works with any bank or credit union checking account and is powered by Jack Henry ProfitStars. The cost runs $39.95 to $149.95 per month, depending on volume. You get up to 150 monthly scans at the lower level and 1,000 at the high end. Buyers must sign a nine-page contract (PitneyBowes_RDC_app.pdf), committing to the service, and leased scanner, for 36 months.

    Because I don't want to lock us in at $500/yr for three years, I think we'll pass on this deal. Hopefully, we'll be able to tap a lower-cost iPhone-based service in the near future, such as that offered by WV United FCU (see previous post).  

    Email from Pitney Bowes (22 July 2009, 9:36 AM Pacific)


    Landing page (link)


    1. Although, Jack Henry announced the relationship in May (press release), I found no mention at the main Pitney Bowes site ( or the services site (, so this may be a marketing test.  

    Comments (3)

    Xpenser Masters Mobile Expense Input

    By Jim Bruene on March 31, 2009 4:06 PM | Comments (1)


    Launched in Oct. 2007, Xpenser (see note 1) is a financial tool designed for tracking items for business expense reports. Monthly traffic is about 6,000 unique visitors according to Compete.

    To understand Xpenser, visualize how Mint works, then think of the opposite.

    • Mint is full automated; Xpenser is all one-off data entry.
    • Mint has graphics that will blow you away; Xpenser has lists.
    • Mint requires you to divulge your banking usernames and passwords; Xpenser just needs your email address.
    • With Mint, you can track your bank accounts, investment accounts and net worth; Xpenser only helps you submit your next expense report.

    Xpenser's mission from its website:

    We were fed up with how painful expense reports and tracking were. After many experiments we found a workable solution: record expenses as soon as they happen and forget about them.

    How it works
    image After a registration process that requires no more than your email address, you can begin immediately submitting expenses to the service via:

    • Email by sending a message to with the free-form expense listed in the subject line
    • iPhone optimized site (see inset); it's not in the App Store, but you can add an Xpenser button to your iPhone by navigating to the Xpenser website and pressing the + button
    • SMS by sending a text message to 66937 (MOZES), using "exp" followed by the free-form expense description
    • Voice via Jott or Dial2Do (both free services)
    • Twitter via direct message from your registered Twitter account
    • IM via Yahoo Messenger, AOL Messenger, MSN Messenger, or Google Talk
    • Browser search box in Firefox or IE 7+ (see below)
    • Secure website via standard input form

    Once the expenses are collected, users go online and move each expense to the appropriate report. Transaction amounts and descriptions can be edited.

    The company is building open APIs, so developers, including banks, can use the service to kick-start their own personal finance tools. The company says it will build premium fee-based versions with long-term archives along with other features.

    Xpenser competes directly with Expensify (see note 2), a company that will be demo'ing at our upcoming FinovateStartup conference.

    Data entry via the browser search box
    Although, it's not a core piece of the program, I was perplexed when I saw that one of the methods of entering expense data into your Xpenser account was through the "search box." That was probably what convinced me to sign up for the account.

    Here's how it works in Firefox (also works in IE 7+ and any browser that supports OpenSearch):

    • Navigate to the Xpenser website
    • Click on the drop-down area next to the browser search box
    • Add Xpenser as a "search engine"
    • Then simply type the expense amount and description in the search box making sure that Xpenser is the selected as search engine (see second screenshot below), and press enter; Xpenser recognizes your account through cookies and adds the "search term" to your data file

    That feature is so clever, it's almost creepy. I'm not sure a bank would want to use this feature since it could capture any search term the user inadvertently input while the bank's "search engine" was selected in the browser search box. 

    Xpenser main account page (30 March 2009)


    Input via the browser search box (30 March 2009)



    1. Not to be confused with FinovateStartup alum, Expensr, now part of Strands.

    2. Expensify has abandoned the decoupled debit business model it was using when we wrote about it's launch last fall (previous post).  It now offers the choice of a prepaid MasterCard or an American Express-issued card.

    3. For more information, see our Online Banking Report on Personal Finance Features for Online Banking and our Online Banking Report on Social Personal Finance

    Comments (1)

    EFT Network Inc. Launches Remote Deposit Capture via Fax

    By Jim Bruene on January 13, 2009 6:29 PM | Comments

    imageRemote deposit capture (RDC) via mobile phone has to be the coolest way to make paper checks disappear from your office and reappear in your account. But from a usability standpoint, it leaves something to be desired, limiting its appeal to geeks with a check to deposit every once in a while. 

    Businesses with several checks or more every week need something more convenient and easy to use. Proprietary scanners connecting to PC-based software apps work well, but require installation and training, not to mention $30+ per month in service fees.

    image Enter FAXTellerPLUS, a new solution from Hawthorn, NY-based EFT Network, that uses the common fax machine for the input mechanism. The bank runs the software on its end freeing the user to get back to their business once the fax transmits.

    Today's press release says the four banks using the system are processing "thousands of transactions per month."

    How it works:

    1. Bank sends customers a special sleeve that holds up to 3 checks to be transmitted and includes info on the customer so deposit can be directed to the correct account.
    2. Customer transmits the check (front and back) to the bank via standard fax machine.
    3. Bank sends confirmation back to customer via fax or email.
    4. Funds are deposited in customer's account and images viewable online.

    If this works as billed, it could put RDC into the hands of micro- and small-businesses as well as consumers with access to fax machines at home or work. If any readers have used or tested the system, please let me know your experience by commenting here or emailing.


    Receivables Exchange Launching Auction Platform for Financing Accounts Receivables

    By Jim Bruene on November 11, 2008 8:01 PM | Comments (1)

    image A new financial market will open Monday where businesses as small as $1.5 million in annual sales can borrow against their receivables with prices set in an auction market.

    New Orleans-based The Receivables Exchange opens for trades on Monday (17 Nov) after an 18-month development cycle.

    Businesses register with the exchange, a process that entails uploading financial statements and completing an application. The Receivables Exchange conducts due diligence on the potential participant to ensure that it is legitimate.

    Businesses must meet the following criteria:

    • Minimum of $1.5 million in annual sales
    • At least 2 years of operating history
    • Registered to do business in the United States

    Upon approval, the business can list specific invoices for financing, with a minimum total value of $10,000. Then accredited investors (SEC definition here) bid to provide short-term financing until the receivables are collected. Sellers are encouraged to upload PDF copies of invoices, proof of delivery, and so on to get the best rates. However, many documentation requirements are optional.

    Sellers select the terms they are willing to accept and the bidder that beats those terms by the widest margin wins the credit. If no bidder meets the minimum terms, the auction ends without a trade.

    Co-founders: Justin A. Brownhill and Nicolas R. Perkin

    VC backers: Prism VentureWorks LLC and Fidelity Ventures

    In an era of tight credit, it's a welcome addition to the financing tools available for small and mid-sized businesses. Larger businesses typically have more options through commercial paper and other capital markets.

    The startup expects banks to be valuable sources of referrals. Although, at this point, there are no referral fees or revenue-sharing options.

    So far, The Receivables Exchange has signed up sellers with a total of $2 billion in annual sales. And there's been a lot of interest. Founder Nicolas Perkin says his company has been approached by 20 $1+ billion companies.

    But what about the other side of the trade, the lender/investor? The company says it has access to $8 billion deployable capital. Of course, that doesn't mean that the capital will be easily enticed into actual deals.

    Starting Monday, we'll see what the buy side thinks. Are they willing to risk their capital in the unproven market? If The Receivables Exchange can drive out fraud and deliver on its promises, we think the answer will be yes.

    The Receivables Exchange homepage (11 Nov 2008)


    Comments (1)

    Finovate 2008 Digital Insight

    By Jim Bruene on October 14, 2008 11:55 AM | Comments

    image Next up is Digital Insight, now part of Intuit. Karen Van Kirk, director of small business solutions, will conduct the demo.

    Calabasas, CA-based Digital Insight will be demonstrating its Small Business Finance Works online banking platform.

    FinanceWorks has all the same functionality of Quicken Online. The small business version has been designed to be simple and easy to use for the small business manager. The accounts receivable function includes integrated email capabilities to send personalized payment reminders on the fly.

    The service includes integrated remote deposit-capture capabilities.


    Small Business Networks from American Express, Capital One, Advanta, Bank of America, QuickBooks, and HSBC

    By Jim Bruene on June 26, 2008 4:00 PM | Comments (1)

    Earlier this week, Visa launched its Facebook Business Network. While the first to use Facebook, several other major financial institutions have opened small biz networks on the Web in the past six months:

    • image Advanta's Ideablob launched last September at DEMOfall (previous post here). It's a unique website with monthly contests awarding $10,000 to the best idea, as voted on by users. It's an intriguing concept with decent traction, almost 30,000 unique visitors last month according to Compete (see chart below). (Full disclosure: I just realized I'm wearing an Ideablob t-shirt; schwag can still pay off!)
    • image American Express's OpenForum: As the name suggests, it's a business forum and resource directory, not unlike Bank of America's (see below). American Express has added posts from several prominent bloggers such as John Battelle's Searchblog and Anita Campbell's Small Biz Trends to keep the site fresh. The site has 5,400 members and monthly traffic of about 11,000 unique visitors, up threefold from a year ago.  
    • image Bank of America's Small Business Online Community, a general forum and resource directory, launched in October 2007 (see original post here). It's primarily a forum, with some additional articles on the side. Total membership is just under 15,000.
    • image Capital One's Slingshot, launched in February, is primarily a business directory. But it does aim for community involvement with user-submitted business reviews and comments on certain topics.
    • image HSBC's (UK) Business Network: Another forum-and-blog site similar to AmEx's OpenForum. So far it appears lightly used, with just six blog entries this year and 270 member profiles.
    • image Intuit's Quickbooks Group: Although not a financial institution, the Quickbooks site is a good example of an active community with more content, including ten blogs, and as much traffic as the others combined (not including BofA which is unknown) with nearly 90,000 unique visitors, almost double the number a year ago.

     Unique website visitors in May 2008 (source: Compete)


    Comments (1)

    Person-to-Business Lending: A Wake-Up Call for Small Business Lenders?

    By Jim Bruene on March 12, 2008 3:16 PM | Comments

    image Talk about turning the tables. Now individuals are lending to businesses. Has the credit crunch gotten to that level?

    Small business lending, or the lack thereof, was highlighted in today's Wall Street Journal in a column by Jane Kim that ran on the front page of the Personal Journal section, Where Either a Borrower or Lender Can Be: Small-Business Owners Turn to Online Networks for Funds as Banks Tighten Credit (here).

    The article includes three examples of small business owners, frustrated with the stinginess of bank lending departments, that turned to person-to-person exchanges for loans. Apparently, all three had excellent credit since Mr. Walsh was able to borrow $22,500 at 10.25% and Mr. Kelley $18,500 at 10.97%, both from Prosper. And Mr. Kalempa received $15,000 from LendingClub for 9.6%. You don't get funded for loans of that size unless your credit is good and your story even better.

    Small business owners may not have time to shop for credit, but they do network. And given how unique positive borrowing experience are, these P2P success stories will be told and re-told dozens of times. The credit-crunch induced conservatism of the banking community, especially towards growing businesses, could be an HUGE opportunity for the new P2P marketplaces.

    It could be the crossing-the-chasm market niche that the loan exchanges need in order to gain traction and profitability as they position themselves for the mainstream consumer marketplace. The credit markets are huge and complicated and it's impossible to predict how this plays out. But if I worked in small business banking product management, I'd circulate this story to senior management and start working on my response to the P2P lending threat. 


    Virgin Money P2P Lending on the Cover of Fortune Small Business

    By Jim Bruene on November 26, 2007 6:42 PM | Comments

    Jeff Bezos may have grabbed the cover of Newsweek for the latest high-tech gadget, the Amazon Kindle, but that's old hat for him. The bigger news in online banking circles is Richard Branson gracing the cover of the December/January issue of Fortune Small Business (click on the inset to read the magazine online). His smiling mug is shown tossing hundred-dollar bills out of a teller cage. 

    The reason: Virgin Money USA (previously Circle Lending) is one of six new products/services the magazine included in its annual "The Next Little Thing for 2008" series. To be part of the article, the innovation must be coming from a "small business," although I'm not sure Virgin qualifies as small anymore.

    The 1.5 page story discusses the Business Builder "friends and family" loans that Virgin will administer for a one-time cost of $199 to $299 plus $9 per payment. The company says it plans to offer a business loan product later in 2008 or 2009 that will match outside money to the original friends and family loan, provided it's been paid on time. 

    Could 2008 be the year of person-to-person lending? Given Branson's track record, there's a good chance the relatively unknown service will take off next year.   


    1. According to my recollection. 


    American Express Plum Card Update

    By Jim Bruene on November 7, 2007 11:28 AM | Comments

    As promised in its teaser print buy, American Express delivered my Plum Card invitation in the wee hours Monday morning (2:06 AM Pacific time, see screenshot below). The message, with my first and last name in the salutation, was short and sweet and directed me back to the main website to apply at <>.

    It's all first class work, but the generic call-to-action surprised me a bit since I'd put my name on the "wait list" last week (see post here). I expected a more personalized invitation and link. The website doesn't appear to recognize me either (see screenshot below).

    Email Invitation (1 Nov 2007)

    American Express email invite for Plum Card 

    Plum Card homepage (5 Nov. 2007)

    American Express Plum Card homepage


    Advanta Creates Social Network Around Small Business Innovation: Ideablob

    By Jim Bruene on October 25, 2007 2:01 PM | Comments (1)

    I don't know how I missed this one, but Advanta, a major credit card issuer with 1.2 million small business customers, launched a new Web 2.0 microsite on Sept. 24 at the high-tech DEMOfall conference (press release here). Just being there amongst the digerati was a coup for the card issuer, but they did much better, managing to come home with a coveted DemoGod Peoples Choice trophy at the conference.

    The Web 2.0-laden site is called ideablob, and it's a place where entrepreneurs, inventors, and anyone else can post their business idea and compete for the monthly $10,000 prizes (contest rules here).

    One month after launch, the site is generating a fair amount of activity. The eight October finalists showcased on the homepage (see below) have received the following: 

    • 691 total votes (must be registered to vote, can vote on more than one idea)
    • 216 total comments (must be registered to comment)
    • 10,300 total views (anyone can view the idea)

    Traffic to the site should grow rapidly once word of the $10k prize circulates. That's a large incentive for the millions of Internet users who think they have a better idea. 

    Advanta, which uses fairly subdued branding on the site (see small "inspired by Advanta" under the main ideablob logo), is positioned to gain in three ways:

    • By associating its brand with innovation, social networks, and a Web 2.0 attitude
    • Assuming a good viral kick, and $10k/mo should do it, the site could generate leads more cost effectively than through other channels
    • Publicity in blogs and traditional media

    Bank of America launched a good business networking site recently, but without the fun of the $10,000 in prize money (see previous coverage here).

    Advanta's ideablob main page (25 Oct 2007)

    An idea page

    Comments (1)

    First Look: Bank of America's New Networking Site -- Small Business Online Community

    By Jim Bruene on October 10, 2007 10:02 AM | Comments

    In the past 10 years, we've seen dozens of bank-powered sites targeting small businesses. Citibank ran one for a few years called Bizzed. Back then, they were called "portals." Now, they are "social networks." But the purpose remains the same: Create a destination site for business owners to learn how to run their business better while reinforcing the bank brand as small business savvy.

    In general, it's a good idea. But it's extremely difficult to get traction with small business owners who usually lack the time and/or interest to read extensively about how to run their business (note 1).

    Bank of America's effort, Small Business Online Community, tries to get around the attention problem by creating forums where specific questions and answers can be posted (press release here). Again, not a new concept, but probably the best way to get something like this off the ground.

    I registered (see note 2) and spent a few minutes poking around the site. In addition to the forum, the site includes columns by business experts and reader-submitted stories. It will be interesting to see if the so-called user-generated content in the latter category is all self-serving promotions from the small business participants, or meaningful perspectives that allow conversations to begin.

    The well-designed site, with Web 2.0 touches, is off to a good start from a registration standpoint. This morning alone (as of noon Eastern time), 300 new members had signed up. They may all be bankers in disguise, but it's still far more than I would have expected.

    Other than the small "powered by" link in the upper right corner, the site doesn't appear to have any direct involvement from the bank. Frankly, I'd like to see bank officers weighing in on the financial topics, as long as they take a consultative approach and disclose their affiliation. But I understand the bank's initial restraint.


    1. However, entrepreneurs in the research phase, what is sometimes called "pre startup," often devour reams of material. And since they are often highly interested in financing opportunities, a bank-sponsored site could gain their attention.  

    2. A couple nitpicks:

    • Usernames are case sensitive; a twist that tripped me up when trying to log in the first time. The bank should remove that stipulation, especially in a less security-sensitive application such as this.
    • Lots of the material is available as RSS feeds, but other than the little orange icon, it's not very obvious how to subscribe via RSS or email. 

    Bank of America Integrates Small Business Financial Services into Microsoft's Startup Center

    By Jim Bruene on June 25, 2007 11:34 PM | Comments

    It's extremely difficult to win the transaction accounts of small businesses. By the time you know of their existence, they already have their bank accounts in place. And most small businesses are too busy to bother switching accounts to save a few bucks a month, or even to get better products or services.  

    One way to grab market share is to find businesses when they are in the pre-startup phase, before they've set up banking accounts. In pre-startup, the prospective business owner is in pure research mode, spending little or no cash. To find these businesses, you need to offer online information that startups value and can find at your site, such as new-business planning advice. Then entice the owner to establish bank accounts with a package of services that appeal to a new business owner.

    Bank of America is on the right track with its sponsorship of Microsoft's new Startup Center <>. It's more like a product placement than a "banner ad" sponsorship. The BofA logo is never even seen in the main content area.

    However, the bank's content is tightly integrated throughout, especially in the Finances area. For instance, if a business owner wants to "set up a checking account," the links to detailed information such as "compare now," "get a recommendation," and "get a business check card" all link directly to content housed on Bank of America's website (see screenshot below).

    MasterCard is also a primary sponsor, but its content is less integrated. The third core sponsor is Startup Nation.

    Microsoft Startup Center Finance section

    It makes sense for Bank of America to be involved in Microsoft's Startup Center, a  beautifully designed tool all decked out in "Web 2.0" colors and graphics. The content seems appropriate and useful for a startup. However, it will be a challenge for the area to gain traction with actual startups, who are unlikely to be looking to Microsoft for assistance, unless they are software developers.

    But you don't have to be a mega-bank or mega-software company to provide valuable services to startups. Financial institutions can partner with local professional service firms such as accountants, consultants, and attorneys, to create content for startups such as Webinars, and in-person seminars. A well-priced package of banking services, positioned and priced for startups, will help you grab new business in the startup sector.

    Examples of startup products and services at financial institutions:

    For more information, see our Online Banking Report on Small and Microbusiness Online Banking (here). Thanks to Payments News for the link.


    Internet Banking Pioneer Chip Mahan Takes the Helm of Banking Startup Targeting the Pet Care Industry

    By Jim Bruene on June 12, 2007 3:04 PM | Comments


    I first met Chip Mahan in 1995 when he was at the helm of Cardinal Bancshares and about to launch the first Internet-only bank in the world, Security First Network Bank. That effort eventually spawned S1 Corporation, now a leading banking tech company, with a half-billion market cap. 

    Unfortunately, the Internet bank was sold off and eventually shuttered by Royal Bank, in a move I've never quite understood. Why would you take the pioneering brand name in one of the hottest sectors of the last 25 years and just close it down? Royal didn't even bother spending the $9/yr to keep the domain name <>, now a generic link site. 

    After his stint at the helm of S1 ended in October, Chip is back in the banking business taking the reins of startup Live Oak Banking Company. The Wilmington, NC-based company is still in formation. But it recently passed a regulatory milestone, raising $8 million in capital from fewer than 10 investors (see note 1, 2). David Lucht, who worked with Mahan as a credit officer for Cardinal Bancshares, is the Live Oak's President.

    Live Oak was recently profiled in the local business press (here), and will apparently specialize in lending to veterinarian practices and kennels. 

    While a number of banks target health care practices including veterinarians, none appear to be aggressive online marketers with the possible exception of Bank of America, which is the only mainstream financial institutions using Google to market vet practice loans (note 3).  Also, BB&T's Vine Street Financial lists vet practices on its menu of commercial health care lending services (see inset).

    With Mahan at the helm, its almost certain their will be a web-based component to the bank's strategy. This is the long-tail of lending at work, targeting a highly specific area that needs a national focus in order to create enough volume to survive. Eventually, we expect to see national lenders targeting hundreds, if not thousands, of business niches online.

    For more information on small business strategies, refer to Online Banking Report #107/108 (here).



    1. It looks like the company may have registered the URL <> as their URL, but its not currently live and the registration info is unlisted.

    2. Here's what the North Carolina banking commission has listed for the company:

    • Required capitalization: $8 million
    • Prospective employees: 15
    • Address: 2605 Iron Gate Dr., Wilmington
    • Principals: James "Chip" Mahan, CEO; David Lucht, president
    • Focus: Business lending to vets, kennels and children's day care operations

    3. Source: Google search, 14 June 2007, from Seattle IP address, 2 PM PDT

    Categories: Small Business, Strategies

    Remote Deposit Sightings: Wall Street Journal & PNC Bank

    By Jim Bruene on March 19, 2007 9:54 AM | Comments

    It takes a long time before a new process or technology becomes "conventional wisdom," something that is accepted at face value without questioning its pros and cons. While we are still years away from that happening with remote deposit technology, at least the mainstream press has picked up on its benefits, one of the first steps towards mass adoption.

    The latest example was in today's Wall Street Journal special Small Business section. In "Branching Out," a general article on banks' growing interest in small businesses, author David Enrich prefaced an Aite Group "levels the playing field" quote with this (p. R6):  

    Remote deposit makes it less important to select a bank based on its location or number of branches--which many big banks tout as a key selling point.

    The key take-away here is that banks should make sure remote deposit services are prominently featured in checking/cash management offers aimed at attracting new business clients. 

    Google search on remote deposit capture CLICK TO ENLARGE For example, PNC Bank is currently running a remote deposit promotion with a free scanner for customers who sign up before the end of April (see landing page screenshot below). The service is powered by Bankserv (PNC data sheet here;

    The promotion is well-placed on Google, with the fourth-highest AdWords placement giving PNC the top-right slot (see inset).

    However, neither the promotion or remote deposit are mentioned on the bank's main business checking account marketing page (see second screenshot below). We like the promotion, the first we've seen advertising a free scanner via Google, but the bank seems to be missing the chance to grab new accounts with the freebie.  

    PNC Bank landing page from Google search on "remote deposit capture"
    (Seattle IP address, 19 March 2007, 9 AM PDT)

    PNC Bank landing page from Google search on "remote deposit capture"

    PNC Bank main business checking page (19 March 2007)

    PNC Bank main business checking page (19 March 2007)


    Digital Insight Now Officially Part of Intuit

    By Jim Bruene on February 8, 2007 3:16 PM | Comments

    Link to Digital Insight website Intuit's $1.3 billion acquisition of Digital Insight closed yesterday, marking the beginning of a new era of innovation in small business online banking (previous coverage here). It's a market that's been underserved for years (see Online Banking Report'sSmall- and Microbusiness Online Banking, #107/108).

    Intuit, which has iPod-like domination of small business accounting and bookkeeping via Quicken and QuickBooks, can now leverage the software relationship into the banking relationship.  The bloggers at Intuit's QuickBooks team-blog expanded on that theme here, discussing their goal of integrating electronic invoicing and payments into the bank site:

    Why the purchase? One reason is to try to sell functionality of our record-keeping software as a service through banks, letting small businesses create, send, and get paid for invoices, all online at a bank's site. With millions of QuickBooks customers, we think we have some insight into small business' needs.... We learned from our tax return business how quickly packaged software can move to a Web service. Last year, for the first time, more people used the online version of our Turbo Tax Web service than the desktop version.

    This is not necessarily bad for financial institutions. In fact, it probably levels the playing field for the smaller banks and credit unions that are the core of the DI client base. Through integration into Intuit's accounting products, smaller banks will be able to offer sophisticated small business solutions that equal or surpass what Bank of America or Wells Fargo offers today.


    Remote Deposit Capture is Virtually Invisible at Google

    By Jim Bruene on January 5, 2007 10:21 AM | Comments

    Remote deposit capture is one of the most significant new technologies to hit online business banking since, well, online banking. According to Celent, 60 of the largest 100 banks, including 20 of the top 25, now offer it. In addition, hundreds of smaller community banks now offer it.

    So why can't I find it through Google? (see note 1)

    For two years I've been coveting the service and waiting for my bank to offer it to small businesses such as ours. I'm still waiting.

    Today, I happened to see it mentioned on the homepage of a local community bank here, First Mutual Bank (see screenshot below).

    First Mutual Bank showcases remote deposit capture on homepage CLICK TO ENLARGE

    Not wanting the hassle of moving my account relationship, especially to a bank on the other side of Lake Washington (a major traffic hassle), I tried a little Googling to see what other banks in the area might have it. 

    It fails to show up in the organic results, and only two banks, Wells Fargo and Main Street Bank <> are advertising on "remote deposit capture" and the shorter "remote deposits." Main Street Bank is located out of state and Wells Fargo, while just up the street from my office, appears to target its remote capture to larger businesses. I'd be willing to pay $20 to $30 a month for it, but I'm guessing that's not even close to the Wells Fargo commercial customer price.   

    Action items (see note 2)

    1. If you offer remote deposit capture, make sure you have a dedicated page touting the features and benefits.
    2. On the dedicated page, make sure you use the term "remote deposit capture" in addition to any cute name you've branded it with. That will help users find it on search results.
    3. Market it through Google and other search engines. At this point, it doesn't appear that there's much competition for ads, meaning your cost per click should be low.
    4. Create a landing page that captures leads for your business banking officers. Check out Wells Fargo's approach at
      (see screenshot below)

    Wells Fargo landing page for its Google ad under "remote deposit capture" CLICK TO ENLARGE


    1. I am searching from a Seattle IP address. In other markets, there may be financial institutions using Google to market remote deposit services.
    2. We will post an additional article on remote deposit marketing later today

    Intuit's Billion-Dollar Online Banking Play

    By Jim Bruene on December 2, 2006 1:50 PM | Comments

    Intuit merger graphic on its website Intuit's bold move to purchase online banking pioneer Digital Insight came as a surprise, both to analysts and shareholders. Reactions were mixed, with shares drifting downward after the 8 AM EST announcement Thursday, ending the week off 3% (see chart here; Intuit presentation on the acquisition here).

    Although the software developer has made a few forays into selling bank technology, including owning a bill payment processor in the mid-90s, it has generally stayed focused on packaged software for consumers and small businesses.

    Just two weeks ago, I met with Intuit execs at the coming out party for its financial institution services unit at the China Grill down the hall from BAI's Retail Delivery Conference in Las Vegas. They were excited about several new services built on the Teknowledge unit purchased last year (see previous post here).

    Only time will tell whether the acquisition makes sense for Intuit. It's a savvy company that understands the personal finance space as well as anyone, so I tend to believe they know what they are doing.

    Regardless of what it does for Intuit's share price, the merger is bound to shake up the online banking product offerings at banks and credit unions, especially for smaller businesses, the Quicken and QuickBooks crowd.

    In September, we published a report predicting significant growth in personal finance functionality in online banking services (see Note 1). This merger should further accelerate that growth. As Intuit integrates Quicken, TurboTax, and QuickBooks features into the Digital Insight line, other platform providers will feel pressured to keep up.

    This is good news for U.S. consumers who've generally NOT been able to enjoy the benefits of tightly integrated personal finance and online banking.

    End Notes:

    (1) See Online Banking Report #130/131, Personal Finance Features for Online Banking: Why MySpendingReport Trumps Free Bill Pay


    Online Banking by Businesses Surpasses 50%

    By Jim Bruene on June 16, 2006 11:09 AM | Comments

    Break out the bubbly. Twenty years after online banking became widely available, and ten years after it migrated to the Internet, more than half of U.S. small businesses (sales between $500,000 and $10 million) bank online. And one-third of the laggards say they'll move online within the next year.

    Online banking usage
    Here's the breakdown of online banking usage by business size as reported by BAI Research at the company's recent TransPay Conference:

    Small business
    48% >>>$500k to $1 million
    51% >>>$1 mil to $5 million
    54% >>>$5 mil to $10 million

    61% >>>$10 mil to $50 million
    67% >>>$50 mil to $100 million
    89% >>>$100 mil to $250 million

    Satisfaction with online banking
    These companies are relatively satisfied with the service. Only 2%, a remarkably low number, report dissatisfaction. However, there is room to move users into the very satisfied category occupied by 44% of the sample.

    Here's the breakdown, again courtesy of BAI Research:

    44% >>> Very satisfied
    46% >>> Somewhat satisfied
    8%   >>> Neither satisfied or nor dissatisfied
    2%   >>> Somewhat dissatisfied
    0%   >>> Very dissatisfied

    Online banking features
    And what are they doing online?

    91% >>> Deposit tracking
    86% >>> Balance reporting
    48% >>> Wire transfers
    45% >>> Stop payments
    38% >>> Tax payments
    36% >>> Initiate ACH transfers

    Finally, if you need some market sizes for your spreadsheet, click on the link below to see a good breakdown in payments by business size.


    Bank of America Aggressively Courts Small Business

    By Jim Bruene on June 9, 2006 9:49 AM | Comments

    You couldn't miss BofA's bright-red, full-page spread in the business section of yesterday's New York Times (national edition, printed in Seattle, code YT, p. C9). In two-inch reverse type the ad screamed:

    Payroll Free.

    Below the heading:

    Introducing Business 24/7, a suite of remarkable new online banking tools for small business owners.

    Then in smaller print under the red box:

    Business 24/7 is a remarkable new way to manage your small business finances. Online Business Suite only from Bank of America lets you send invoices and receive payments online so you get paid faster. Easy Online Payroll is the first complete online payroll service that's free.* Visit your nearest Bank of America banking center to open a business checking account and take advantage of these services.

    To learn more visit

    Fine print:

    *Easy Online Payroll is free when all your employees have direct deposit to a Bank of America  account. Otherwise, there is a monthly fee of $5 per employee up to a maximum of $15 per month.

    Bofa_smallbiz_landingThe landing page specified in the print ad, opens to an impressive Flash animation that's a lot like watching an interactive TV ad. You can see what it looks like by clicking on the screenshot right, but you should look at it live to see how voice and animation are used to create an excellent sales pitch.

    To leave the commercial, users select the "Get Started" button in the lower right, which leads to another landing page highlighting five key aspects of the service: Business Checking, Easy Online Payroll, Online Business Suite, Small Business Health Insurance, and Business Credit (see screenshot below right).

    Bofa_smallbiz_landing2The core of the account from an online banking perspective, is the Online Business Suite. It is comprised of three modules, as shown below. The payables and receivables modules are optional, but the online banking is required. The total package runs $35/mo as follows:

    1. Online banking for $15/mo
    2. Online accounts payables (bill pay) for $10/mo
    3. Online accounts receivable (invoicing) for $10/mo


    Like bill payment, BofA is using FREE online banking services to grab attention, a tried-and-true technique. In this case, the free payroll isn't as free as bill payment, since it requires the employee to have direct deposit with the bank. But with the fee capped at $15 per month, most small businesses won't be complaining about payroll fees.

    And the entire account is far from free. In addition to the cost of the checking account, the Business Suite runs $35/mo, payroll for three or more is $15/mo additional, bringing the entire online package to $50/mo. This won't appeal to the microbusiness market, the under-$50,000 crowd of part-time entrepreneurs, but for a full-time business with three or more employees, it's a good value (businesses must be under $20 million in revenue to use this service). When BofA adds remote deposit-capture capabilities, it will be even better.



    Consumer Remote Deposit Coming in July

    By Jim Bruene on June 8, 2006 3:52 PM | Comments

    Scanner The first remote deposit solution using a generic document scanner will launch in July, according to its developer Community Bank Systems <>. Without the requirement of buying a $300+ check scanner, remote deposit services will be able to capture a large number of small and micro-businesses.

    We'll reserve judgment on CBS's ePosit solution until we have more details, but this could be an important way to grab more share of your area's small business customers. And it will make a good copy point for personal checking accounts, though most consumers won't want to learn a new system to deposit a couple checks every month. Conversely, if you lag on adopting this new technology, you may find yourself vulnerable.

    As a matter of fact, we could envision a long-term branding campaign around better deposit taking, from reduced hold requirements, deposit-item images available via online banking, and the convenience of 24/7 remote deposit of paper checks. Read some of the rants at HomeStreet Bank's <> site and you can see that deposit INconvenience creates some strong feelings (see this rant and this one).



    Chase Bank Pioneers New Advertising Outlet

    By Jim Bruene on February 21, 2006 9:58 AM | Comments

    ImagesIn a novel advertising gimmick, Chase Bank affixed two-foot long banners, each pointing to one of 90 electrical outlets in the Indianapolis International Airport. The unique signage, which also includes four months of exposure on in-terminal flight-information monitors, will cost the bank $65,000 for the year, or just under $200 per day.

    The signs and slogans are designed to appeal to traveling businesspeople. They include:

    This outlet works. Now you can too.

    You and your laptop may sigh with relief now.

    Congratulations. You found a charge chair.

    We'll leave the question of cost effectiveness of "outlet advertising" to the outdoor advertising pros. However, similar tactics could be used throughout a community to market online banking and small business services to users of WiFi-equipped cafes and coffee shops. For example, a bank could sponsor a WiFi directory that included names, locations, and hours of WiFi-equipped locations throughout town. For extra credit, include a map of electrical outlets, desired by many laptop owners so they don't have to worry about having to rely on their batteries which are drained relatively quickly when going online.

    Most coffee shops aren't going to want a bank slapping advertising stickers on their walls. However, tent cards or brochures carrying the bank's logo could provide WiFi instructions and locations of wall outlets.

    With summer just a few months away, this would be a perfect task for a summer intern. Working with existing WiFi directories, the intern could scout out possible locations, map the electrical outlets, document contact information at each location, and post it all to the bank's website. Alternatively, a bank could contract directly with an existing locator service to carry the bank's advertising message.



    Unique Identity for Business Banking

    By Jim Bruene on December 19, 2005 7:28 PM | Comments

    There are several ways to make it easier for business banking customers to find the right area of your website:

    • Complete unique URL such as Abbey National's <>
    • Business/biz appended to the URL such as Vancity's <>
    • Business added within the URL such as Barclay's <> or LaSalle Bank's <> for its private banking area
    • Use cookies to automatically display the business area when users type your normal URL. Wellsfargo_homepage_defaultsetting_2 Wells Fargo uses this technique. When homepage visitors choose the Small Business area, a small text link asks, Make this the first link you see on (click on inset for a closeup) which sets a cookie to redirect users to the Small Business area each time they go to the main bank site.

    All of these techniques are trivial to program and can help differentiate your business offerings from your personal product line. We especially like Abbey National's unique business URL that can be a memorable device in print ads and direct mail. Also, anyone with a separate business offering should consider the optional user-set cookie approach of Wells Fargo.



    By Jim Bruene on November 15, 2005 1:23 PM | Comments

    Ebank_ambankerOn the front page of today's American Banker and on the cover of its Retail Delivery pullout section (see inset), there is an eye-catching EBANK logo presented in eBay's distinctive font. It's an intriguing lead-in to an otherwise predictable story on eBay's PayPal unit and the extent to which it competes with banks. (Note: For American Banker, the cover graphic gave it more "street appeal" so that the paper was more likely to be picked up by the thousands of attendees at BAI's big technology conference in Orlando.)

    This is an old story. PayPal has offered a suite of consumer banking services for more Payment_choices_1than four years (click on table below) including debit cards, bill payment, credit card (issuer), consumer finance loans, credit card processing, ACH processing, money market mutual funds, international payments, interbank transfers, fraud protection, and insurance for funds on deposit. The only new service this year is the credit card payments gateway business it purchased from VeriSign earlier this year; though that is more of a line extension than a new business.

    Paypal_timelineYes, PayPal competes with bank, primarily in merchant processing, an area most banks got out of more than a decade ago. And we'll see more ecommerce players, such as domain registration services company GoDaddy, offering integrated PayPal payment options (see inset). However, none of PayPal's other financial service offerings have a measurable market share, and are unlikely to be causing any lost sleep by execs at Bank of America, Citi, or any other financial institution.

    The American Banker article speculated on eBay's interest in moving further into banking by buying a charter and opening a full-service Internet bank. But no evidence was presented for either side of that argument, nor did the author find any industry analysts to comment.

    It reminds me of the "controversy" in the mid-90s about Microsoft competing against banks. Although it was mostly fodder for the trade press, we debunked the notion In the very first issue of Online Banking Report (April 1995). There was no way that a successful software company, accustomed to 50%+ margins, would invite the regulatory scrutiny and compliance hassles of the relatively low-margin banking business.

    Although eBay has done some strange things, such as jumping into the telecom business via its recent Skype acquisition, we seriously doubt that the auction giant has any plans to open or even lend its name to a full-service Internet bank. It doesn't need those regulatory and compliance headaches.

    However, the company will continue to exploit areas of ecommerce, like auction payments and auction purchase financing, that are not well-served by existing players. But if you've put together a franchise that can hold its own against BofA/MBNA, ING Direct, and Schwab, you have little to fear from eBay or Microsoft. In fact, there are opportunities to leverage these trusted brand names to INCREASE your revenues. For example, PayPal provides developer tools that would allow a bank to integrate with the online payments provider to facilitate financing for bank customers.

    Previous articles:



    Yahoo Pursues Small Businesses

    By Jim Bruene on April 13, 2005 6:31 PM | Comments

    Free_yahoo_website Did you see Yahoo's full-page ad in today's Wall Street Journal (or was it the New York Times)? Anyway, it was on the back page of one of the interior sections, and it declared:
    A free website for every small business in America.

    Now, everyone reading the paper knew it was a come-on; when you go to the Yahoo Local website they try to upsell you on the $9.95/mo premium version (click on the inset for details). Furthermore, the ad probably cost more than the sum total of "free" websites given away. I don't know if it will pay off, but it certainly got my attention.

    Financial Institution Opportunities
    I got to thinking, what could a bank give away that wouldn't sound too hokey or cost too much? The free website isn't a bad idea, especially if you wrapped some ecommerce services around it, but Yahoo and many others have been doing that for years.

    What about bill payment? If you were willing to open up your bill payment system to allow payments to originate from other banks, you could mimic the Yahoo ad in your market with:

    A free online bill payment for every business in <yourtown>!
    (exclamation point optional)

    But a lot of banks already offer free bill payment, so try this on for size:

    Free lifetime storage of your checks* for every business in <yourtown> *images of course

    The creatives would have a blast with that one.

    Finally, since those both have system implications, here's something anyone could offer:

    Free local online directory listing for every business in <yourtown>

    To pull this off, you'd need to create a database (ideally) or an even an HTML page that lists the web and business addresses for every business in your market. Bank clients could be given premium listings/linkages. And you'd need to give the directory exposure with visible links off your website.



    Self-Employed Totals 10% of Work Force

    By Jim Bruene on December 10, 2004 4:20 PM | Comments

    Link: SBA Self-employed Research Results

    A new report released this month by the U.S. Small Business Administration, estimates that U.S workforce is now comprised of 12.2 million self-employed (9.8% of the total) and 112 million employed (90.2%) workers.

    What it Means
    The self-employed are a significant market segment on their own right. At approximately 10% of your customer base, they warrant attention and possible product offerings specifically geared to their needs. See Online Banking Report 107/108 for more information on creating compelling online services for small and microbusinesses.

    Action Items

    1. Review your website and other marketing collateral, especially small-business-oriented material, to make sure it includes references to the self-employed.

    2. Create a "self-employed" area on your website.

    3. Consider creating special product bundles geared to this segment. Since traditional loan underwriting often penalizes self-employment, look closely at what you might do to enhance the credit aspects of the bundle.

    4. Include "self-employed" in your search engine advertising buys and in other online promotional efforts.

    5. Create a quarterly or monthly email newsletter specifically targeted to the segment.

    -- JB

    Categories: Small Business

    Small and Microbusiness Strategy Matrix

    By Jim Bruene on September 6, 2004 2:31 PM | Comments

    In theory, small and micro businesses represent one of the most lucrative, and relatively untapped, sources of incremental business. The reality is that most small and even mid-size businesses are too busy to spend much time changing banking relationships, unless they are a pre-startup1 and/or shopping for a credit line or loan. As we outlined in OBR 107/108, a product offering optimized for business will differ somewhat from one built for consumers. The following chart summarizes the product options for small- and microbusinesses. See our prior report for more detail on each feature. The options are divided into nine categories:

    1.       Statement data: viewing and organizing balance

    2.       Customer service: customer care delivered over the Internet

    3.       Accounting services: financial management tools

    4.       Payments and billing: e-checks, bill pay, email payments, ACH, wires, invoicing, card processing

    5.       Security/privacy: privacy, security, permissions, guarantees

    6.       Lending: business tools, news, information

    7.       Website content/features: non-financial tools and information

    8.       Alerts: email, fax, telephone, and mail activity- and balance-level alerts

    1Pre-startup: The time immediately preceding business startup phase. One of the first things an entrepreneur will do is open separate bank account(s) for a new business venture; it helps keep records straight for tax-reporting purposes. So it does little good to target any startup, since most will already have business banking relationships established; you really need a foot in the door in “pre-startup” mode, when the kernel of an idea is just forming (see OBR 107/108, for ideas on how to target pre-startups).


    Online Services for Microbusinesses
    checkmark = must have feature; R = recommended feature; O = optional feature


    Source: Online Banking Report, 9/04 checkmark = must have feature; R = recommended feature; O = optional feature

    Categories: Small Business

    Ten Quick Hits to Boost Revenues in 2005

    By Jim Bruene on September 5, 2004 2:13 PM | Comments

    Following are our ten most-promising tactics for generating incremental revenues during calendar year 2005.


    Categories: Small Business

    Top 10 Financial Services Providers by Small Business Market Penetration

    By Jim Bruene on June 11, 2004 12:23 PM | Comments

    In the 2002 study of small business, TNS (formerly NFO Global Financial Services) looked at which banks had the largest share of small businesses relationships and which were ranked highest by small business clients. SunTrust ranked highest in customer loyalty, followed by Wachovia and Washington Mutual.

    1. Bank of America



    ·         Three levels of business online banking: online banking with bill pay, Business Connect for multi-users with varied levels of access, and Bank of America Direct to manage all business finances online.

    ·         Good comparison chart of the three choices

    ·         Resource center with informative articles on starting a business and other topics

    ·         Protect against online fraud link


    ·         Must scroll down to see all choices

    ·         Hard-to-read small blue font for most links

    ·         No separate URL or bookmark helper


    2. Wells Fargo



    ·         Small business tab

    ·         Excellent navigation and design, all viewable on a single screen without needing to scroll.

    ·         Clients can view personal and business accounts from a single sign-on

    ·         Single page, informative Small Business Newsletter

    ·         Customers and non-customers can enter email address to signup for newsletter

    ·         Relevant and useful tips on product pages

    ·         Product comparison pages as well as best product for your business quiz

    ·         Push a button to switch from English to Spanish and back again

    ·         Link to Make this your first page at



    ·         No link to Security on the main page

    ·         Not using liquid layout, so homepage appears small and off-center at higher resolutions


    3. Wachovia



    ·         Small business is one of the four main navigation choices on the top

    ·         Copy and headlines are solutions-oriented, e.g., Meeting Your Needs, Resource Center

    ·         Excellent navigation and layout on a single page

    ·         Separate small business FAQs

    ·         Relevant products and services packaged into “centers”: Banking Center, Lending Center, Investing Center, Online Services Center, Insurance Center, and HR Solutions Center


    ·         Must scroll to see information on bottom of screen

    ·         No link to Security


    4. U. S. Bank




    ·         All major links are contained on a single page without scrolling

    ·         The no-frills style is easy to read

    ·         Two solutions-oriented sections: Achieve Your Goals and
    Small Business Center

    ·         Separate Small Business login

    ·         Link to Newsletter subscription


    ·         Layout and design could be improved

    ·         No link to Security


    5. Bank One




    ·         Product-oriented layout makes it easy to find specific products

    ·         Small link to Security on bottom (not visible on screenshot)


    ·         There is no small business section, in fact the term is not used in any header, although it is mentioned in the opening paragraph; choices are Business Banking and Commercial, that defies industry conventions and could cause lost business

    ·         No solutions-oriented areas or resources section

    ·         Copy is cliché-ridden and not benefits oriented;
    for example under Insurance:
         “You’ve invested your heart in your small business.
          We can help you find ways to protect it.”


    6. Chase





    ·         Small business is one of the four primary navigation choices on the top

    ·         Excellent design and layout that fits on one page without scrolling

    ·         Solutions-oriented sections: Plan and Learn, Solutions, and Business Stages

    ·         Link on left to Have Chase Small Business contact you

    ·         Privacy & Security link on top

    ·         Prominent Open an Account and Online Banking: Enroll Now boxes in upper right

    ·         Liquid layout


    ·         No quick navigation or separate URL for the small business page, you have to click on the Small Business section on the home page, then move your cursor down the cascading menu to the Small Business Home, it only takes a few seconds but it’s still unnecessary extra effort


    7. Fleet




    ·         Separate URL

    ·         Tabs across the top help users find important subjects

    ·         Link to Small Business Value Package (Note: Fleet also offers a Small Business Platinum Program with a dedicated relationship manager, faster funds availability, and priority phone service

    ·         Solutions-oriented areas: Ideas and Information, Business Tools & Resources


    ·         Layout and design is a bit overwhelming


    8. Citibank






    ·         Using the drop-down menu you can navigate directly to relevant business unit pages; the AAdvantage Business Card main page for example is very well done


    ·         Poor navigation off the home page: The only way to navigate to the small business section is to use the drop-down menu on the right; and because it doesn’t have a Go button, it took us 30 seconds before we figured out you have to cursor down to Small Business at-a-glance (screenshot above) in order to move to the small business section

    ·         Poor navigation within the small business section: The four main choices at the top of the page (Products, Planning, Investing, and Special Offers) are NOT related to small business, they take you back to consumer  pages, and if you don’t use your back button, you have to go through the full navigation routine to get back to small business

    ·         Must scroll down to see all the choices

    ·         Main banking link (Checking, Savings, & Financial Services) as well as the Online banking link cause a pop-up screen to load which is dominated by an outdated self-promotion for online personal banking with 2001 testimonial from Forbes magazine


    9. SunTrust





    ·         Small Business Resource Center is a good area, although it’s buried under the Online Services tab in the Business Solutions area

    ·         View only option for online banking, no money movement allowed

    ·         Ask SunTrust search box in upper right is handy, but it doesn’t distinguish whether user in searching from business or personal pages



    ·         The top navigation bar is a mine field of cascading menus that launch when the mouse travels over them, an out-of-date and annoying method for primary navigation

    ·         No dedicated Small Business homepage, other than the Small Business Resource Center mentioned above and a mid-page link to Your Small Business Solution which leads to a curious page entitled Benefits that talks about Total Business Banking, but it’s not clear if it’s geared to small businesses or not.

    ·         Unclear and vastly different navigation/organization in the various areas devoted to small business (e.g., Small Business Resource Center)


    10. Washington Mutual






    ·      Link to content from StartupNation in upper-left corner; the only bank in top 10 with headline targeting startups (see back page for more information)

    ·      Good online banking demo with audio highlights

    ·      All the information shows on a single page without scrolling

    ·      Liquid layout


    ·         No link to Security

    ·         Copy and headlines could be more solutions-oriented

    ·        Layout is a bit sparse for a bank


    Categories: Small Business

    Small Business Case Studies: Putting it all Together

    By Jim Bruene on June 9, 2004 12:09 PM | Comments

    Case Study: Financial product usage at one small business

    Microbusinesses typically purchase a hodgepodge of services culled from both retail and commercial banking product lines. For example, at our own small business, we purchase 16 financial products evenly split between consumer and business products (see Table 52, below). Nine are sourced from banks, six are from non-banks, and one is a combined effort. Overall, we spend $6,700 annually in fees, interest paid, and interest foregone (for checking). But the internal costs for managing our billings, payments, and banking, are more than three times as much, an estimated $24,000 per year. We would gladly outsource these to a high-quality and VERY trustworthy third party, preferably someone with a regulatory and fiduciary responsibility to safeguard our information and assets, like a bank.

    Table 52

    Financial Products & Services Used by One Small Business


    Source: Online Banking Report, 6/04         1Fees and net interest foregone (deposits) or paid (loans) assuming 2% cost of funds
    2Purchased through US Bank, but processed by CheckFree and user interface by Microsoft Money

    Package accounts targeted to business segments

    Most banks offer small business bundles that include checking and other basic transaction services. However, we believe the online platform can be used to assemble more valuable offerings targeted to small businesses with various financial management needs. Table 53 (below) shows ways that the small business market could be segmented. Table 54 (p 53) outlines major feature that could be included in package accounts targeted to the financial management needs of the small business.

    Table 53

    Potential Business Segments to Target


    Virtual financial management packages

    Most banks offer small business account bundles that include checking and other basic transaction. We believe that there is a significant opportunity to expand into hosted financial and customer management systems with monthly fees of $100 or more. Following are the pros and cons of moving into the financial management arena:

    •          Profitable, incremental fee income
    •          Publicity and image enhancement from being the first in your market to integrate banking functionality into an overall Web-based small business management suite
    •           Product differentiation and an impressive unique selling proposition
    •           Positive word-of-mouth within the local business community
    •           Powerful retention tool
    •           Potential for licensing to other financial institutions


    •           Weak/uncertain demandd: Until recently, small businesses have been slow to adopt new banking technology. It may take several years of marketing, sales, and training before you begin to see a payback.
    •           Development costss: Building a robust, highly secure new system will be pricey; you will probably want to partner with an accounting software developer that already has code for the basic functionality.
    •           Uncertain ongoing servicing costss: Being on the bleeding edge has its risks; it will be difficult to predict ongoing costs for system maintenance, software development, and customer support.
    •           Lack of employee confidence: Financial institution front-line personnel have been known to steer clear of discussing small business and/or online banking subjects due to uncertainty with their operation, cost, and overall value.


    Table 54

    Features of Virtual Accounting Package Accounts

    *Approximate monthly subscription price; additional transaction fees would apply for certain services.


    Package Account Descriptions

    Virtual Business Manager

    Description: A secure place for small businesses to set up an online home base, similar to corporate intranets. Possible names: virtual office, virtual desk, virtual briefcase, or personal intranet. It could also be marketed to the estimated 39 million U.S. households with a home office.

    Functionality: For a financial institution, the key to making it work is tight integration with banking and financial matters. A further emphasis on local content/links could keep you ahead of the competition. Banking and financial management feature are listed in Table 54 (previous page), including:

    •           Financial calendar/datebook/reminder service integrated with bill payment
    •           Virtual safe deposit service that automatically stores financial and other files in secure, encrypted, off-site back-up files not accessible by anyone but the owner (not even bank personnel); can be retrieved on CD for disaster recovery
    •           Virtual receptionist that tells visitors how to get in touch with someone at your business
    •           Company message boards for internal users
    •           Company blogs for external users
    •           Ability to post documents to the Web, which can be shared with everyone or just authorized employees and/or customers

    Virtual CPAA

    Description: As its name implies, the Virtual CPA provides extensive accounts-receivable and accounts-payable services from a Web interface.

    Functionality: In addition to the Virtual Business Manager features listed above and the banking/financial management features listed in Table 54, the VirtualCPA could also provide the following features (for more ideas, see the features built into Intuit’s QuickBooks

    •           Billing statements and invoicing via email, fax, or snail mail; includes reminders, and confirmations
    •           Online, cash-based accounting functions including data entry, categorizing, and basic report generation
    •           Bill-payment/accounts-payable monitoring functions, such as email notification when payment transactions are awaiting authorization by business owner; email flags when payment transactions don’t clear in a reasonable time
    •           Autopay function that pays certain bills automatically each month when preauthorized by the client
    •           Virtual credit card terminal with integrated email and accounting
    •           Lock-box service for paper check processing with full integration to client’s accounting system
    •           Option to share selected information with outside advisors, such as a CPA


    Virtual CFOO

    Description: This top-of-the-line service has it all. Just as in the real world, the Virtual CFO takes the raw data and puts it into a broader perspective that allows a business to be more profitable.

    Functionality: The following features could be added to those already offered in the Virtual CPA and Virtual Business Manager modules:

    •           Online payroll with paper or direct-deposit paychecks and electronic tax payments
    •           Online federal and state tax return preparation and filing
    •           Full-fledged, double-entry online accounting
    •           Complete disaster-recovery services including a redundant data center – an area in which banks’ inherent in-house expertise could be turned into a profit center
    •           Complete Web-based customer file management and communications including:
      - invoicing/billing with Web integration, e.g., bill presentmentt
      - payment services/inquiry via the Web
      - email/fax/voice messages automatically confirming payment
    •           Access to a CPA-on-calll for accounting and tax questions; advice could be delivered publicly on your Web, privately through confidential conversations, or both.
    •           Automatic excess funds allocation to minimize interest expense and/or maximize interest income. For added value, the funds “sweep” could go to investment and loan accounts at any financial institution (not just yours).
    •           E-commerce services for hosting secure transactions
    •           Accounts-receivable management that automatically notifies the business owner and/or customers when accounts are past due; includes linkages to a virtual payment window
    •           Bank-branded virtual payment windoww, which clients can display on their website to increase end-user confidence in paying by credit card or electronic check (ACH); includes integrated messaging confirming orders.
    •           Extensive management reporting easily customizable using drop-down menus; for example, revenue reports by customer, accounts receivable aging, quarterly P&L; and so on.
    •           Mail-merge capabilities that work across any medium, email, fax, page, voice message, or snail mail; option to outsource snail mail services to a mail house; includes label-printing utility.
    •           Retirement plan administration including Web views for participants
    •           Project tracking module integrated with reminders and other Virtual Officee services
    •           Employee-expense reporting, cash advances and reimbursement services
    •            The ability to issue/reload prepaid credit cards for customer rebates, expense account cash advances, and so on..


    Categories: Small Business

    Recommended Online Products and Services for Micro Businesses

    By Jim Bruene on June 8, 2004 11:52 AM | Comments

    Small business attitudes are changing as online banking services become easier to navigate and more useful. While it currently seems impossible to eliminate the dependence on the branch for physical deposits, with the widespread adoption of check imaging and electronic payments, most non-cash-oriented businesses will be able to bank remotely. Both PNC Bank and NetBank have announced plans to equip their business customers with paper check scanners that will allow the remote deposit of paper checks.

    But even the best website and product offering cannot substitute entirely for the human touch. Every business should have a contact available by phone, email, or instant message. Small business owners should be treated like private banking clients.

    Recommended online products and services

    In theory, small and micro businesses represent one of the most lucrative, and relatively untapped, sources of incremental business. The reality is that businesses are difficult to reach unless you are competing for their loan business. A product offering optimized for business will differ somewhat from one built for consumers. The following sections detail potential online features for various microbusiness products.


    A. Transaction accounts: checking & cards

    While the overall banking relationship may revolve around the commercial loan, online banking is all about the transaction account(s), e.g., checking and credit card accounts. Smaller businesses often track their financial progress through their bank accounts, using them as a proxy for sales, cash flow, and profits. Business users are also more likely than consumers to value advanced features such as downloads, reporting, alerts, and multiple authorization levels. Some of the more promising features:

    •          Custom data delivery: Periodic summaries of account activity whenever (daily, weekly, monthly) and wherever (text email, HTML email, or fax) the client chooses
    •          Long-term archives: If Google can provide 1GB of storage for users of its FREE email service, banks should be able to provide unlimited archives for a fee

    Table 27

    Checking & Savings Account Deposit Options



    Table 28

    Online Features for Transaction Accounts: Data Display, Storage, and Value Adds


    Table 29

    Event Triggered Alerts & Authorization Messages to Support Transaction Accounts



    Table 30

    Balance, Activity, & Account Management Messages for Transaction Accounts



    B. Payment and billing services

    Next to statement information, epayment services are the second most important drivers to the adoption of online banking by small businesses. And unlike data access, epayments have the potential to become profit centers and/or a significant source of online differentiation. Most businesses make far more payments than consumers, so the importance of electronic alternatives is magnified. On the other hand, existing businesses already have a system for payment and billing, so it may be difficult to convert them to a new one that requires changes in internal procedures or software.

    Your best opportunities may be in less systematic services (i.e. one-offs) such as electronic transfers between a business’s accounts at other financial institution (account-to-account transfers) and the occasional rush payment.

    Table 31

    Online Features for Billing, Payment Processing, & Funds Transfer Services


    Table 32

    Online Features for Payment and Accounts Payable Services


    Table 33

    E-messaging to Support Epayments and Ebilling



    C. Credit and loan accounts

    Every small business relationship should include a credit component. It’s the lifeblood of business, and a profitable product for financial institutions. However, many banks have been reluctant to make commercial loans to the microbusiness market. Average loan sizes, which are dwarfed by typical commercial loans, make the effort seem fruitless. Yet profit margins on the small business segment can be higher. Microbusinesses often use personal credit, primarily credit cards and home equity secured loans, to finance their businesses.

    We believe every creditworthy microbusiness customer should have a package of three or four credit lines with your financial institution: an overdraft line of credit (connected to checking), a home equity line of credit secured by their personal real estate (if applicable), a business line of credit, and a business credit card. Even if the total commitment is no more than $10,000 initially, it will make the business owner feel like a valued customer; and each line can grow larger over time.

    Table 34 contains a number of ways to use the online channel to strengthen credit relationships with small businesses. Some of the more important tactics:

    •          Loan/line Hybrid: A flexible financing vehicle that includes an integrated line of credit and the ability to take out fixed loans from the overall credit line.
    •          Startup Center: Information, tools, and resources geared towards startup businesses.

    Table 34

    Online Features for Lending and Credit




    Table 35

    Triggered Alerts for Credit and Loans



    Table 36

    Account Management Messages for Credit and Loans



    Table 37

    Example: Potential Annual Credit Product Revenue from a Microbusiness1


    Source: Online Banking Report, 6/04

    1Example for illustration purposes only, not based on actual research results

    Table 38

    Example: Potential Annual Credit Product Revenue from a Larger Small Business1


    Source: Online Banking Report, 6/04

    1Example for illustration purposes only, not based on actual research result



    D. Deposit and investment accounts

    The online component of deposit and investment accounts is far less important than for transaction and payment services. However, a robust online offering can boost deposit-gathering initiatives and improve retention. Key online components are listed below: Refer to the Checking/Transaction section for more ideas.

    Table 39

    Online Features for Investment and Deposit Products




    Table 40

    E-messaging for Deposits and Investments



    E. Financial management & accounting

    Although automated accounting and financial management services offer the biggest potential payback to small business owners, they are challenging to deliver. However, working through third parties, financial institutions of all sizes can help cement banking relationships with financial management services such as:

    •          Visible and easy-to-use data downloading services
    •          Tools to make annual financial updates and tax prep simpler
    •          Online wrap accounts that handle all financial and accounting needs for an annual fee, see the section on the Virtual CFO, CPA, and Business Manager

    Eventually, it won’t be enough to simply offer robust cash management and online balance reporting to your business clients. Using the Web as a platform to build industry- and customer-specific service offerings, we expect a proliferation of specialized small business services during the next few years. For example, several years ago QuickBooks opened its code to developers  spawning numerous niche services built on the small business accounting program. Check out the QuickBooks Solutions Marketplace  


    As the economy continues to improve, big banks will aggressively court small and mid-size businesses with creative financial management via Web-based services. These innovations will help counteract the perception that community banks provide better service. In turn, community banks will fight back with online offerings that enhance personal service delivered to local businesses. Luckily, vendor offerings will make even the most complicated Web-based service affordable to the smaller financial institution.

    Intuit has already built impressive software-to-bank linkages for QuickBooks and Quicken customers. To some extent, the shrink-wrapped software is a Trojan horse, positioning Intuit-controlled links to its partner banks right on the desktops of your best clients. You can fight back by incorporating billing, accounting, and financial management functions on your website using account aggregation, instant messaging, and “push” publishing technologies. Although, it will take time, we think smaller businesses will be very receptive to financial and management services running on encrypted, secure, and trusted servers controlled by the bank..



    Table 41

    Online Features for Financial Management



    F. Service & client relations

    Online services and other automation tools can be used to help relationship managers service and cross-sell to small business clients. Used judiciously, these tools can improve the perception of personalized service, even while they improve the productivity of the relationship managers by allowing him or her to handle a larger portfolio. Key components include (see Table 42 below for more):

    •          Library of recommended preformatted emails that relationship managers can easily customize and send to clients
    •          Private-banking-like service that treats small business owners like VIPs
    •          Instant messaging for more private/secure connection between the client and their business banking officer

    Table 42

    Online Features for Self-Service


    Table 43

    Online Features for Client Relations


    Table 44

    General E-messaging to Support Client Relationship Management


    G. Security and privacy

    Although business users may understand the tradeoff between convenience and risk, the stakes are much higher. A breached small business bank account could cause thousands of dollars of lost productivity and sales, in addition to any funds that disappear. In addition, larger small businesses are always up against the threat of insider theft and fraud. So business owners need, expect, and will pay for more sophisticated security controls. For example:

    •          Additional authentication and/or authorization for outbound funds transfers or payments
    •          Token- or SMS-based authorization to access the account’s master level where new payees can be added, permissions can be granted, and so on
    •          Frequent email messages tracking online account access and alerting the business owner to any suspicious or out-of-character usage, e.g., login from an IP address in Liberia
    •          Comprehensive assurances and guarantees that accounts will not be compromised

    Table 45

    Online Features for Security & Privacy


    Table 46

    E-messaging to Support Security & Privacy





    H. General website content/features

    As branches are gradually replaced by websites as the place where most banking business is conducted, your online presence will become a critical part of your overall brand image. Branches will still have a role, but it will be limited to account openings, cash deposits, and the occasional visit to the safe deposit box. Websites catering to small businesses will become far more sophisticated, yet highly customizable and easier to use. Important features include:

    •          Resources and discounted banking packages for start-up businesses
    •          Separate URL that business clients can enter to skip the consumer section

    Table 47

    General Website Features to Support Small Business



    I. Insurance

    Compared to consumers, small businesses buy a lot of insurance compared to consumers. While banks may not be “top of mind” when it comes to supplying insurance, financial institutions can use their online presence to change that perception.

    Table 48

    Online Features for Insurance


    Table 49

    E-messaging to Support Insurance




    J. Online sales and marketing

    Even though microbusinesses are difficult to reach through traditional direct marketing, we believe they will readily seek you out if you provide credit and payment solutions targeted specifically to them, especially when in startup mode.

    It’s important to make sure everyone, especially the line staff, understands that microbusinesses are to be actively courted, not avoided. Typically, bankers roll their eyes and trot out horror stories about past “nightmares” with flaky microbusinesses. Staff must be educated to the facts: Microbusinesses can be risky, but with proper pricing and risk management, the segment provides an excellent source of incremental profits.

    In sales efforts, leverage the cachet of the branch manager. A single telephone call or visit with the local branch manager could be enough to land an entire microbusiness account. This all-important relationship with a human must be nurtured after the initial sale. Email, instant messaging, and other electronic tools can be effective in keeping the communication channels open.

    Some other effective ways to increase your share of the microbusiness market:

    •          Uncover microbusinesses within your own retail customer base by looking for random and fluctuating deposit activity.
    •          Develop Web content that caters directly to the small business segments you are targeting, such as
      •         - Part-time businesses
      •         - Self-employed (including full-time sales) or 1-person business
      •          - Micro employers with fewer than 5 employees
    •          Use professional copywriters familiar with small business terminology to create website copy, including FAQs.
    •          Give business bankers “ownership” of the business part of your Web site to make sure it is up-to-date and speaks to the target markets.
    •          Enlist business owners to evaluate your website and other marketing material

    Table 50

    Online Marketing & Sales Tactics for Small Business Acquisition and Retention


    Table 51

    E-messaging to Support Small Business Sales & Marketing



    Categories: Small Business

    Small Business Online Banking Usage

    By Jim Bruene on June 7, 2004 11:21 AM | Comments

    Online banking usage

    Up until a few years ago, small business usage of online banking trailed consumer adoption. In late 2000, 13% of small and microbusinesses used online banking compared to 16% of consumers . Three years later, online banking penetration is similar to that of consumers, an estimated 30% overall. At the largest small businesses, those with sales between $5 and $10 million, usage is now more than 40%, double the rate three years earlier.

    It’s likely we’ll see continued rapid growth for a few more years. Almost all (99%) small businesses are computerized, either at the business or at the owner’s home, or both (see Table 18, above) and more than 75% are using their personal computers for financial activity (see Table 21, next page). It’s only a matter of time before the majority of small businesses bank online. Looking at the 7.3 million small and microbusinesses universe, we predict that we’ll pass the 50% penetration point within four years. However, we may reach that point much sooner. One researcher, Synergistics Research, is already saying that online banking usage has passed the 50% mark in the $100,000- to $10-million segment, with the largest small businesses
    ($5 to $10 million) topping out at 75% penetration.

    Table 21

    Small business online and PC financial services usage, 2002


    Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online and Channel Use

    Reasons for not banking online are typical, with security and inconvenience (compared to current methods) the most-cited reasons (see Table 22, below). Only 8% mentioned it was too expensive and only 5% said they didn’t have the necessary equipment (presumably convenient online access).

    Table 22

    Reasons for not conducting either business banking or investing online


    Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online and Channel Use



    Table 23

    Online banking, billing, payment and other online activities

    Q. Does your company use the Internet …?   


    Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online and Channel Use, April 2003



    Table 24

    Cash Management Usage

    Q. Please indicate if the service is used?


    Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online and Channel Use, April 2003

    Advisor usage

    While small businesses still turn to their banker for loan advice, only 17% use a banker for cash management advice, and just 4% for retirement planning (see Table 25, below). Because small businesses are skeptical of bankers’ expertise in non-traditional areas, banking organizations must first explain why they are selling the product, and why the bank’s solution is superior to more traditional sources. It may be advantageous to partner with brand names that are more closely associated with the non-traditional product, e.g., Safeco for business insurance.

    Regardless of the channel the customer chooses to get information and make transactions, a human is usually needed to close the sale. In a recent Synergistics Research survey of 600 small businesses, only 7% had opened bank accounts remotely (see Table 26, below). The sales process can be assisted by email and phone with a branch manager, business banking officer, or a special small business liaison.

    Categories: Small Business

    Small Business Loyalty & Growth Potential

    By Jim Bruene on June 6, 2004 11:18 AM | Comments

    Small business loyalty

    One consistent trait across all small businesses: loyalty. Once you land one, it takes significant upheaval, such as a new commercial loan relationship, before they make a move. NFO research indicates that 81% of small businesses use the same bank for personal and business services. And in a survey of Barlow Research clients, about 60% said they kept their personal and business accounts at the same bank. Evidently, it’s just not worth the entrepreneur’s time and energy to shop banks, unless they are in the midst of raising capital. That’s why we believe it is vitally important to establish a credit relationship with every small business customer regardless of size.

    However, high loyalty is not necessarily the same as high satisfaction. According to NFO, in 2003 57% of small businesses are very or extremely satisfied with their primary financial institution, up from 50% in 2002. This is a mediocre score overall. And with the advent of the online channel, it is easier than ever to shop around. And since only 22% of small business customers report being actively courted for their deposits and investments, incumbent financial institution may be vulnerable.

    Typically it has been the interaction between the business owner and the commercial loan officer that has maintained, or sunk, the relationship. Though personal relationships are still the primary factor, electronic communications and online services are becoming important side benefits. The savvy loan or banking officer can use email, instant messaging, and a Web presence to supplement and extend the face-to-face relationship. Staying in touch, asking for feedback, and identifying new needs can all be done through frequent electronic communications.

    Growth potential


    Table 17

    Accounting Method by Small Business Type


    Annual Revenues

    Who Does Banking?

    Accounting Method

    Typical Software







    $0.25 to
    $1 mil


    Double entry


    Small business

    $1 to
    $10 mil


    Double entry


    Source: Online Banking Report, 5/04

    The small and microbusiness market holds much promise for financial institutions looking to grow revenues and profits. Smaller businesses, which are almost 100% computerized (Table 18, next page), are particularly well-suited for online delivery; however, since most lack dedicated resources to handle banking matters, they can be reluctant to change existing processes and procedures. Even though your bank’s latest online feature may draw an enthusiastic response in focus groups, expect slow adoption by small business clients. They are simply too busy to pay attention to incremental banking improvements.  

    While banks and other financial providers have long coveted the small business market, most have found it difficult to provide the high-touch services needed by business owners at prices that a smaller business can afford. However, we believe small business online banking offers a new paradigm. Automated online tools and electronic communications such as instant messaging and webinars, allow banks to deliver customized products at affordable price points, both for the smallest home-office-based sole proprietor as well as companies with hundreds of employees.


    Table 18

    Small business PC ownership


    Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online and Channel Use
    Categories: Small Business

    The Forecast Growth New Small Business Online Banking

    By Jim Bruene on June 5, 2004 11:06 AM | Comments

    Looking at the entire universe (including self-employed and contractors), for 2004 we project growth of 2 million new small business online banking users, a slight decline from the 2.5 million who came online in 2003. And the rate of growth, due to the higher base, will slow to 17% from 2003’s 28% (see Table 9, below).

    Table 9
    Forecast of U.S. Small, Microbusiness, and Self-Employed Online Banking Usage

    includes broadest definition of small business users, population estimated at 23 million

    Source: Online Banking Report projections based on industry data (+/- 30%), 3/04;
    % OLB = percent of total population that is actively banking and/or paying bills online (activity within past 6 months)


    Table 10

    OBR Forecast: Small Business Use of Online Banking
    businesses with annual revenues from $50,000 to $10 million, not including self-employed/contractors

    Sources: 1998 to 2002 estimates, TNS Financial Services Small Business Market Track, April ’03; (1) 1995 to 1997 and 2003 to 2013: Online Banking Report estimates plus or minus 33%



    The opportunity at your financial institution

    For a rough approximation of the small business potential in your market, use the national average business-to-consumer penetration. For example, there are approximately 90 million U.S. households with bank accounts. Therefore about 25% (23/90) are business owners. About 8% (7.3/90) own businesses that are relatively easy to find via identifiable business phone lines, D&B reports, compiled lists and so on. The difference, about 16 million, are harder-to-find self-employed and contractors.

    Table 11

    Estimating the Number of Microbusinesses in Your Market

    Number of banking households in your market                                                     (fill in)

    Multiply by the percentage of all households that are microbusinesses                 x 8% or 25%*

    Approximate number of microbusinesses in your market                          =                        _____

    Source: Online Banking Report, 6/04 *Depends on whether you are looking at all businesses including self-employed/contractors, or just the larger small and microbusiness segment

    Total market size of balance-driven banking products

    Looking at just the 1.2 million larger small businesses with revenues from $1 million to $10 million (not including self-employed/contractors), TNS Financial estimates total business deposits of $240 billion and the total loans and lines of $160 billion for a total of $400 billion. In addition, we estimated the microbusiness segment ($50k to $1 million) has another $240 billion in deposits and loans. In addition, NFO estimates that small- and microbusiness owners have another $1.6 trillion of deposit and loan balances in their personal accounts, for a total of $2.2 trillion. Assuming a 200 basis point (2%) spread on the balances, the sector is generating about $44 billion in net interest revenues, an average of $6,000 per business/owner.

    But, this only accounts the money paid out to financial services companies. It ignores the significant internal and often hidden costs associated with financial management: accounting, bookkeeping, payroll, treasury, and so on. With the Web, banks have an opportunity to compete not just for the traditional financial products, but also for the entire financial operations of the business.

    Table 12

    Deposit and Loan Balances and Net Interest Margin from Small-and Microbusinesses


    Source: Small business ($1 to $10 million) segment and owner balances from TNS Financial Services Group 2003 Small Business Studies, 4/03; Microbusiness balances and average net interest margin are estimates from Online Banking Report, accuracy estimated at plus 100%, minus 50%

    1OBR estimate of $15,000 per microbusiness, n = 6.0 million

    2OBR estimate of $25,000 per microbusiness, n = 6.0 million


    Table 13

    Small Business Assets by Type, Numbers and Balances


    Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03


    Table 14

    Small Business Liabilities by Type, Numbers and Balances


    Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03




    Table 15

    Misc. Product Usage


    Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03



    Table 16

    Financial Products Purchased for Personal Use1 by Small Business Owners

    Warning: Small sample sizes of respondents with large balances may distort the numbers.


    Source: Balances from TNS Financial Services (formerly NFO World Group/PSI Global) 2002 SOHO and
    Small Business Owner Studies, 4/02; number of small and microbusinesses from NFO’s 2003 Small Business Study, 4/03

    Total population (N) = 7.3 million U.S. small and microbusinesses, not including self-employed/contractors, OBR estimate +/- 20%

    Does not include the value of the owner’s business, commercial real estate investments, stock options, and other misc. categories

    1Products used personally, not for the business

    2Total market = (% using) x (average balance) x (7.3 million micro and small business owners)

    3Total balances only, does not include auto leases or insurance

    4Across all business owners, users and non-users

    5Net worth = personal assets less personal liabilities, does not include net value of business or non-residential real estate holdings

    6Total personal assets less value of residential real estate, does not include net value of business or non-residential real estate



    Barclays Small Business Banking

    By Jim Bruene on June 4, 2004 3:55 PM | Comments

    Q. When is a business most likely to open a new bank account?
    A. When they are first starting out.

    Recognizing that the best time to get their foot in the door at a business is before the doors even open, Barclays Bank (UK), addresses the issue front and center on its small business banking home page Barclays Small Business Banking : Small Business.

    The company offers a number of startup service including complimentary consultations with business advisors and fee-free checking accounts (18 months if you also bank personally at Barclays, 12 months otherwise).

    Categories: Barclays, Small Business

    Types of Small Business : Research Results

    By Jim Bruene on June 3, 2004 10:55 AM | Comments

    Types of Small Business

    Small business means different things to different people. For the sake of simplicity, in this report we’ll usually use the term “small businesses” to refer to the following segments:

    Two major classifications used in this report:

    1.    Microbusiness: Basic financial needs, such as Quicken support, simple invoicing,
    credit card processing, bill payment, home equity credit lines, and tax reporting; usually sole proprietorships, partnerships, or S-corps (includes self-employed); often with less than 20 employees; total revenue of $50,000 to $1 million annually; total credit lines of less than $250,000.

    2.    Small Business: More complex financial needs, such as accounting support, invoicing, payment processing, bill payment, commercial credit lines, tax reporting, and internal security and fraud controls; less than 500 employees; total revenue of $1 to 10 million annually; total credit lines more than $250,000.

    Other business types included in above classifications:

    ·      In-formation Business: Initially, may be more interested in advice and information on credit, payment processing, and other banking services; depending on many factors, may move rapidly towards launch and need to quickly establish accounts and line up financing. Financial needs vary depending on the business plan and funding.

    ·      SOHO (small office, home office): Smaller, work-from-home sole proprietorships. It can also be used to describe mobile workers such as home-based salespeople in insurance and manufacturing. We classify these companies as microbusinesses.

    ·      Self-employed: Persons who primarily work for themselves, either as contractors, consultants, or commission-based sales reps. We classify these individuals as microbusinesses.

    ·      SMB/SME (small and medium business/enterprise): Usually refers to the largest segment of “small” businesses, companies with at least several million in annual revenues. We classify these companies as small businesses.

    Primary Data Source

    The primary data source for this report is TNS Financial Services Group (formerly NFO WorldGroup-Financial Services, and before that, PSI Global). Our thanks to EVP Maria Erickson and her staff for answering our questions and making data from their Small Business and SOHO studies available. For more information on purchasing financial services research contact Ms. Erickson at (813) 227-8562.

    The Small Business and the Affluent Entrepreneur 2003 Study was fielded between April and May 2003; the owners of 3000 U. S.-based small businesses with annual sales between $500,000 and
    $10 million were contacted by telephone or mail to provide the most accurate and reliable
    information possible.

    Using the same methodology, 900 small businesses were contacted for the SOHO and the Entrepreneur Study 2002 between September and October 2002.


    The big picture in small business

    Small businesses exist in all markets, in every town and at every crossing. Using a broad definition that includes smaller part-time business endeavors, there are more than 20 million businesses in the United States, one of every five households. And that understates the market potential. If you also include the personal product usage of the “business-owning” segment, the total could be as much as 50% of your revenues.

    Depending on the definition, as many as 30 million business entities exist in the United States, including self-employed or part-time sideline businesses such as selling collectibles on eBay, or as few as 1.2 million if you only look at companies with at least $1 million in annual revenues
    . For the purposes of this report, we are defining the total small business market as 23 million, a figure taken from U.S. Small Business Administration statistics1.

    The total includes

    ·         16 million self-employed/contractors

    ·         6.0 million microbusinesses with revenues less than $1 million

    ·         1.3 million of that is the larger small business with revenues of $1 to $10 million

    Small businesses account for:

    ·         99% of all employers

    ·         51% of private sector employment

    ·         67% of net new jobs

    ·         52% of U.S. gross domestic product


    ·         600,000 new businesses are started each year1

    ·         13% of U.S. households own privately held businesses2

    ·         Business-owning households had higher income, more education, significantly higher net worth, and were led by individuals in the prime age group 35-602

    ·         Boeing Employees Credit Union’s recent survey showed that 50,000 of its 350,000 (14%) members reported owning businesses or being key decision-makers in one3

    ·         IDC reports there are now 15 million U.S. home-based businesses, 10 million full-time and
    5 million part-time4

    ·         More than 400,000 people make most or all of their living from selling on eBay5

    (1)     SBA Research Summary #211, “Small Business Share of Economic Growth,” Jan. 2002

    (2)     George W. Haynes, Assistant Professor at Montana State, and Charles Ou, SBA Economist, presented an Advocacy Working Paper at the Conference of Entrepreneurial and Financial Research in April 2002

    (3)     American Banker, 4/13/04

    (4)     2004 estimates from IDC as cited in The Wall Street Journal, 6/17/2004

    (5)     Estimate from AuctionDrop, a company that earns commissions selling merchandise on consignment through Ebay, as cited in The Wall Street Journal, 6/17/2004


    Who wants to be a microbusiness?


    Table 3

    Number of U.S. Home-based Businesses



    Change 2004 vs. 1999






    9.9 million

    9.6 million




    5.2 million

    6.9 million

    (1.7 million)



    15.1 million

    16.5 million

    (1.4 million)


    Source: IDC, as cited in The Wall Street Journal, 6/17/04

    Everyone it seems. While American attitudes towards big business have declined markedly during the past four years thanks scandals at Enron, MCI, and others, the small business remains on a pedestal. Its human nature to root for the underdog, and the smaller the business the bigger their perceived disadvantage.  

    As you plan your business offerings, keep in mind that a majority of Americans aspire to run their own business; fully two-thirds (67%) profess a longing to be in business for themselves. And thanks to computers and the Internet, there are 15 million home-based businesses in the U.S., 400,000 of which make their living from selling on eBay. Surprisingly, though, the number of part-time, home-based businesses has fallen dramatically in the past five years, probably victims of the flat economy
    (see Table 3, above).

    Since most tax experts recommend separate personal and business transaction accounts for even the smallest business, companion personal/business checking, savings, and card products can be a lucrative niche for financial institutions. Once you’ve convinced retail households running businesses from home to add a business transaction account, you can cross-sell credit and accounting services as the businesses grow.

    Channel Preferences


    Table 4

    Primary Banking Channel Among Businesses using Online Financial Services



    Online banking


    Equal mix




    Source: Gartner G2, 2002

    When it comes to financial matters, small businesses want it all, every channel, all the time, at the lowest cost. Even among online business banking users, only one-third say that the online channel is primary
    (see Table 4, right). Although businesses may want it all, they often do not have the resources or inclination to shop aggressively for the lowest-cost source. The smaller the business, the likelier it is the principal or a spouse handles banking matters. And these owners are unlikely to make it a priority to wring every last dollar out of the cost of their financial services. The story is quite different if the business has a dedicated bookkeeper or financial manager on staff. This person may have both the time and motivation to comparison shop; it’s a feather in their cap if they find cost savings. So you may want to segment your business customers, not
    on total revenues, but on whether the owner handles the banking. And shower special
    attention on staffers hired to handle the
    business’s financial affairs.  



    Table 5

    Number of U.S. Small Businesses by Annual Revenues

    Source: TNS Financial Services Group, Small Business data 4/03, SOHO/Entrepreneur data 10/02, updated to year-end 2003 by Online Banking Report, +/- 20%


    Table 6

    U.S. Businesses Entities by Annual Revenues
    not including self-employed/contractors

    Source: TNS Financial Small Business Market Study 2002, 4/03 (commercial banking numbers from 4/00); updated to year-end 2003 by Online Banking Report, =/- 20%

    1The person at the company that handles the majority of banking activities

    2Could be serviced by commercial banking department depending on circumstances


    Table 7

    U.S. Small, Micro, and Self-Employed Businesses Using Online Banking and/or Bill Pay

    millions, n = 23 million (2003)

    Source: Online Banking Report estimates 6/04; accuracy estimated at plus or minus 30% U.S.
    All = All small businesses including self-employed, n = 23 million (2002)
    Larger = Small and microbusinesses with annual revenues between $50,000 and $10 million, not including self-employed and contractors, n = 7.3 million (2003)

    Table 8

    Annual Growth Rate of Small, Micro and Self-Employed Businesses Using Online Banking

    millions of net new U.S. small business online banking users and percent change from previous year


    Source: Online Banking Report estimates, 6/04; accuracy estimated at plus or minus 30%

    Categories: Small Business

    Introduction to Micro Business Strategic Imperatives

    By Jim Bruene on June 2, 2004 10:51 AM | Comments





    Table 1

    Strategic Imperatives for Small Business Success

    1.       Identify small business owners within your consumer base and market

    2.       Facilitate contact with a human at the bank
    3.       Begin a credit relationship with the business
    4.       Bank the personal business of the business owner
    5.       Provide value-added services for a fee

    Source: Online Banking Report, 5/04


    The purpose of this report is to help financial institutions use online delivery to increase sales, profits, and market share in the small business market. Although, much of the report is applicable to large and small businesses, our main focus is on the smallest segment, the self-employed and so-called microbusiness, businesses with less than $1 million in annual sales. For the sake of clarity, we’ll use the term “small business” throughout this report. 


    We’ll look at the market through the eyes of a financial institution product manager, the background of both authors. Hundreds of ideas and tactics are presented, some with more emphasis than others. All support five key strategic imperatives for approaching this market (see Table 1 above).

    While small businesses have lagged consumers in adopting online banking, recent research by
    James Van Dyke’s Javelin Strategy & Research  shows that the gap has been eliminated. Javelin’s April 2004 study shows that 56% of all online households used online banking during the past 30 days, compared to 58% of households where the primary financial manager is self-employed (a good proxy of microbusiness ownership). About the only significant difference in behavior was in the usage of Quicken or Money software, where 28% of business owners used it during the past 30 days compared to 17% of non-self-employed (see Table 2 below). Small business owners also tended to visit the branch more often, especially for deposits with 80% having made a branch deposit in the past 30 days compared to 66% of all online households.

    Table 2


    Online Banking Usage: Self-Employed Online Households vs. All Online Households


    Source: Javelin Strategy, May 2004 survey of 2,196 U.S. online households fielded April 2004; screened to be primary household financial manager
    SELF = self-employed only (n = 163); NOT = all others (n = 2033); ALL = entire sample (N = 2196)    

    Major strategic imperatives

    1. Identify small business owners within your consumer base and market

    Since it’s time-consuming and expensive to attract small businesses from your competitors, your first priority is to mine your own consumer base for them. Customer surveys, website usage, and deposit activity are good indicators of small business ownership.

    2. Facilitate contact with a human at the bank

    To maximize your share of wallet, it’s essential that each business owner have a human point of contact at the bank. And it needs to be someone high enough in the organization that they are not turning over every nine months, one of the biggest complaints small businesses have about their banking relationships. To maximize efficiency, this human interaction should be supported with online tools such as email and instant messaging.

    3. Begin a credit relationship

    More often that not, small businesses use lending relationships to determine who they consider to be their primary financial institution. If you are serious about growing your small business share, you must be aggressive in granting credit to small business owners. And it needn’t be a commercial loan. More often it will be a consumer product, especially tied to home equity. The business owner doesn’t care how you classify the credit internally, they care that you are lending cash to grow their business.

    4. Bank the personal business of the business owner

    Some small business owners insist on banking their personal business at a different bank,
    either because of personal relationships or privacy/security fears of mixing personal and business accounts. 

    5. Provide value-added services for a fee

    After decades of being beaten up by consumers over every fee on the schedule, financial institutions are wary of charging fees to their retail-like small business customers. But, despite what they may say in a focus group, once they have established an account, small businesses are loathe moving and are relatively insensitive to pricing. If a business owner values their time at $100 per hour and it takes 10 to 15 hours to switch accounts, that’s a $1000 to $1500 soft-dollar cost to moving. However, startup businesses are another matter. When shopping for their initial banking relationship, a new business could be swayed by a couple dollars per month. That’s why Barclays’ strategy of offering new businesses a host of initial free banking and professional consultations is so brilliant.


    Unique attributes of the small business segment

    ·         Small businesses crave stability in their financial relationships; they want to deal with a company they are sure will be there in the future. More importantly, they want a relationship with a real human who knows their business and won’t let anything fall through the cracks during management or business upheaval. What they look for in a provider is expertise, a long track record, fair pricing, and easy-to-use reliable products.

    ·         Their sourcing of transactional banking services does not provide competitive advantage to businesses large or small. It’s a relatively minor infrastructure expense. However, credit services can make or break a business, so that’s often the key to the relationship.

    ·         Online banking, while gaining in importance, is a relatively low priority for most business customers who care more about the relationship with their loan/biz banking officer, branch convenience, credit lines, loans, rates/fees, and customer service.

    ·         It’s vitally important for most microbusinesses to connect with a human during the initial sales process – someone the business owner believes will have a positive impact on credit decisions.
    In fact, business owners may value the bond with their banking officer more than the relationship with the bank.

    ·         Businesses don’t have the time or inclination to adjust their systems and procedures for relatively marginal convenience improvements. That’s why, until recently, they’ve lagged consumers in online banking adoption. But, once started they will often become fiercely loyal online banking customers.

    ·         Given the combined value of their personal and business financial services expenditures, and the owners’ optimistic perception of future growth in both, small businesses want to be treated like the important customers they are.


    ·         Smaller businesses have long been dismissed as lacking sufficient revenue potential to justify the labor required to serve them; however, that assumption is dead wrong. The combined net interest margin from business and personal financial products is $35 billion per year with good prospects for growth

    ·         The smaller the business, the better the opportunity. Larger small businesses already have established banking relationships and are on the radar screen of every big-bank officer in the area. Each of those wins will be hard-fought and expensive. The better opportunities are in the nearly invisible microbusiness category, especially among self-employed professionals and businesses in formation. However, non-banks such as Intuit, First Data, and PayPal have made in-roads in certain product categories and will attempt to leverage those relationships to up-sell other services.

    ·         Credit integration, overall financial counseling, and positive representation to the inevitable loan committee are a must. Clients often have good knowledge of the availability and prices of available capital options. Home equity secured lending, with underwriting flexible enough to accommodate the self-employed, is especially important when serving microbusinesses

    ·         Epayment companies such as PayPal, iPay , and Fidesic)  that enable microbusinesses to easily accept credit cards and ACH payments, can be an effective means of finding new customers.

    Categories: Small Business

    Small and Microbusiness Banking 4.0

    By Jim Bruene on June 1, 2004 10:37 AM | Comments

    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

    Categories: Small Business

    NetBank Announces Remote Deposit Scanning Service

    By Jim Bruene on May 24, 2004 4:12 PM | Comments

    According to an article in the May 20 American Banker, NetBank is about to launch a remote deposit service for its business customers. Although details of the yet-to-be-launched service are sketchy, it is expected that business customers would scan paper checks into a remote device that transmitted the images to NetBank for immediate deposit.

    This service has two important benefits in addition to the obvious: freeing small business owners from a trek to the branch:
    1. Improves cash flow since checks can be deposited immediately rather than on periodic trips to the branch
    2. Streamlines record keeping in two ways:
    (a) the original check can be filed as a paper receipt
    (b) an electronic image is stored at the bank and is available if questions arrive

    The service is not expected until August at the earliest. The technology provider is Alogent.

    Speaking as both as a small business owner and an industry analyst, this is a great service and a strong candidate for an Online Banking Report Best of the Web award once the service becomes operational.


    Small and Microbusiness Strategy Matrix

    By Jim Bruene on September 7, 2003 11:08 AM | Comments

    In theory, small and micro businesses represent one of the most lucrative, and relatively untapped, sources of incremental business. The reality is that businesses are difficult to reach unless you are competing for their loan business. A product offering optimized for business will differ somewhat from one built for consumers. The following excerpt from our Microbusiness 2001 Special Report* is a checklist to assist you in planning your service offering. The features are divided into nine categories:

    1.       Statement data: viewing and organizing balance

    2.       Customer service: customer care delivered over the Internet

    3.       Accounting services: financial management tools

    4.       Payments and billing: e-checks, bill pay, email payments, ACH, wires, invoicing, card processing

    5.       Security/privacy: privacy, security, permissions, guarantees

    6.       Lending: business tools, news, information

    7.       Website content/features: non-financial tools and information

    8.       Alerts: email, fax, telephone, and mail activity- and balance-level alerts

    9.       Marketing: getting the word out to the difficult-to-find segment


    *Available to subscribers for an additional fee at
    Online Services for Microbusinesses

    checkmark = must have feature; R = recommended feature; O = optional feature

    Source: Online Banking Report, 8/03       checkmark = must have feature; R = recommended feature; O = optional feature


    Small and Microbusiness Strategy Matrix

    By Jim Bruene on November 2, 2002 7:05 PM | Comments

    In theory, small- and micro-businesses represent one of the most lucrative, and relatively untapped, sources of incremental business. The reality is that businesses are difficult to reach unless you are competing for their loan business. As we outlined in previous posts, a product offering optimized for business will differ somewhat from one built for consumers. The following excerpt from our Microbusiness 2001 Special Report (available to subscribers for an additional fee at  is a checklist to assist you in planning your service offering. The features are divided into 10 categories:

    1.       Statement data: viewing and organizing balance

    2.       Reporting: building financial reports from statement data

    3.       Customer service: customer care delivered over the Internet

    4.       Products: bank and non-bank financial products

    5.       Accounting: financial management tools

    6.       Payments: billing, e-checks, bill pay, email payments, ACH, wires, invoicing, card processing, credit cards

    7.       Security/access: privacy, security, permissions, guarantees

    8.       Other Web-based services: business tools, news, information

    9.       Alerts: email, fax, telephone, and mail activity- and balance-level alerts

    10.    Marketing: getting the word out to the difficult-to-find segment


    Online Services for Microbusinesses

    check = must have feature; R = recommended feature; O = optional feature

    Source: Online Banking Report, 10/02       check = must have feature; R = recommended feature; O = optional feature

    Categories: Small Business, Strategies

    Building a Small Business Zone on Your Site

    By Jim Bruene on March 6, 2002 12:59 PM | Comments

    Many of the services outlined in the previous sections can be marketed to small and microbusinesses with cosmetic changes in product names and descriptions. Prices should be adjusted upwards, significantly in some cases, to reflect their greater value to the more complicated financial activities of businesses.

    The primary small business functions that should be offered are as follows:

    1.      Epayments – Accounts Payable: The area would include advice on how to automate accounts payable through online bill payment and financial messaging, what we have called Virtual Accounting Services.

    2.      Ebilling – Accounts Receivable: This is the area where innovative bank programs could save business owners substantial sums, thus allowing banks to charge substantial fees. Small and microbusinesses would be encouraged to establish online billing services using bank programs, such as:

    •          online billing statement presentment with integrated payment options
    •          credit card payment option with email receipts
    •          ACH payment option with email receipts
    •          credit extension for the biller’s customers (see #3, below)
    •          payment smoothing (averaging) services
    •          turnkey paper and electronic billing services

    3.      Buyer Credit Programs: As an adjunct to accounts receivable services, banks could offer credit programs for the biller’s customers. Customers needing additional credit to pay their bill could be referred to the bank for an instant credit application. This is a triple win. The customer wins because they can pay their bill, the bank wins because it picks up new customers and/or new loan balances, and the biller wins because they receive the funds with no collection expense. Depending on program pricing, billers could receive a share of the credit revenue stream as well.                                                  

    HSBC’s  business product and services menu includes a section on “Making & Receiving Payments,” an excellent way to grab small business user’s attention.


    Hibernia’s “Small Business Services” area includes links to “Online Business Assistants” including: finance manager, technology manager, office manager, sales & marketing manager, and human resources manager. It’s a great way to organize and promote a wide-range of banking services and resources.


    Small and Microbusiness accounts Receivables and Accounts Payable Solutions

    By Jim Bruene on February 7, 2002 8:21 AM | Comments


    Eventually, it won’t be enough to simply offer robust cash management and online balance reporting to your business clients. With the Web providing the ideal platform to build industry- and customer-specific service offerings, and with QuickBooks opening its code to developers , we expect a proliferation of specialized small business banking and financial management sites to hit the market during the next few years.

    As the economy continues to improve, the big banks will again aggressively court small and mid-size businesses with creative financial management via Web-based services, often licensed from outside developers. The innovative services will be offered in part to make up for perceived service shortcomings in the small business market.

    In turn, community banks will need to fight back with online offerings that enhance their level of personal service delivered to local businesses. Luckily, vendor offerings will make even the most complicated Web-based service affordable to the smaller financial institution.

    Whether you are small or large, we think you must pay attention to the accounting and billing needs of your business clients. Intuit has made tremendous strides in serving that need, and as they move into offering more and more financial products to their accounting software customers, banks will feel the pinch. Banks should consider teaming with Web developers to build small business financial and customer-management systems that could be deployed in the next 18 to 24 months. By then, account aggregation will be widely used and should also be incorporated into your Web-based solutions.

    Looking at the big picture, we see strong synergies between banking and accounting. Prior to the Web, there was no cost-effective way to bridge the gap between financial data housed in your mainframes with that housed in the PCs of your small business clients. Today, the Web is the ideal medium for tightly integrating your banking services with your clients’ accounting activities.

    Intuit has already built impressive software-to-bank linkages for QuickBooks and Quicken customers. To some extent, the shrink-wrapped software is a Trojan Horse, positioning Intuit-controlled links to its partner banks right on the desktops of your best clients. You can fight back by incorporating billing, accounting, and financial management functions on your Web. And there are now off-the-shelf solutions, such as Fidesic that allow banks to provide payment services to Quicken/QuickBooks users.


    We think businesses would be very receptive to Web-based financial management services running on encrypted, secure and trusted servers controlled by the bank, so called Virtual Accounting Services1 (see table below).                                                         

    1Virtual Accountant is a trademarked name from Virtual Growth

    Virtual Accounting Services

    *Approximate monthly subscription price; additional transaction fees would apply for certain services.



    Each of the virtual products outlined in this section could provide the following benefits to your bank:

    •          Profitable, incremental fee income.
    •          Publicity and image enhancement from being the first in your market to integrate banking functionality into an overall Web-based small business management site.
    •          Differentiation of your banking services.
    •          Good word of mouth around your local business community.
    •          Virtual accounting products could be licensed to other banks.
    •         You can head off further inroads into your revenue base from Intuit partner banks.

    •          Weak/uncertain demand: Small and micro businesses have been relatively slow adopters of new banking technology (see OBR 70/71).
    •          Development costs: Building a robust, highly secure new system will be pricey; you will probably to partner with an accounting software developer which already has code for the basic functionality.
    •          Uncertain ongoing servicing costs: Being on the bleeding edge has its risks; it will be difficult to predict ongoing costs for system maintenance, software development, and customer support.


    Virtual Checkbook

    Description: An electronic checkbook is the foundation of any small business banking Web offering. It’s fundamental to the stability of your Web services, but there isn’t much you can do to differentiate it from other banks. It’s what’s on top of the foundation that will attract buyers.

    Basic Functionality: A good virtual checkbook must include the following functions:

    •          Balance inquiry across all business and personal accounts maintained at your bank.
    •          Transaction history including basic look-up/search capabilities to find all transactions by date range, by type, by check number range, and by transaction amount.
    •          Bill/invoice payment
    •          Email to and from the bank

    Advanced Functionality:

    •          Transaction account aggregation (checking and credit cards)
    •          Different authority/access levels for each account
    •          Templates for common reports, such as transactions by quarter, transactions by check number, etc.
    •          Email integrated with bill pay including:
    •           Forms for creating payee communications quickly
    •           Filing system that stores all previous communications with the payee
    •           Search function for finding text strings in previous messages to payees
    •          Fax/email statements
    •          Balance notifications
    •          Transaction confirmations
    •          Wire transfer and ACH initiation
    •          Download data directly into personal finance, spreadsheet, or accounting software programs
    •          Email reminders (input by user)
    •          Email forms for communicating different matters to the bank quickly
    •          Permanent searchable archive of all communications with the bank

    Virtual Office/Desk


    HotOffice, now owned by Thruport Technologies has been providing virtual officer services since 1997.

    Description: Create a place within your Web for small businesses to set up a home base for work and collaboration on the Web. These services are commonly called virtual offices or intranets (see HotOffice screenshot above). Other possible names: virtual desk, virtual briefcase, or intranet. It could also be marketed to the estimated 39 million U.S. households with a home office.

    Functionality: We think banks could create their own simple and easy-to-use virtual offices integrated with banking and financial matters. A further emphasis on local content/links could keep you ahead of the competition. Here are the features we recommend:

    •          Financial calendar/datebook/reminder service integrated with bill payment.
    •          Virtual safe deposit service that automatically stores financial and other files in secure, encrypted, off-site back-up files not accessible by anyone but the owner (not even bank personnel); can be retrieved on CD for disaster recovery.
    •          Free email with emphasis on secure communications with bank.
    •          Email notification services
    •          Virtual receptionist that tells visitors how to get in touch with someone at your business.
    •          Company message boards
    •          Ability to post documents to the Web, which can be shared with everyone or just authorized employees and/or customers.
    •           Unified messaging service that provides a single Web page where users can send and retrieve email, faxes, and voice messages. For more information see J2 (formerly Jfax)  and MessagePoint )

    Side Note: You also might consider setting up virtual offices for your own loan officers and other customer-contact personnel.

    Fidesic offers a solution that could be used by small business customers to send electronic invoices and receive electronic payments. Interfaces to major accounting packages make it especially useful.

    Virtual Bookkeeperr

    Description: As its name implies, the Virtual Bookkeeper provides extensive accounts receivable and accounts payable services from a Web interface.

    Functionality: The Virtual Bookkeeper expands on the Virtual Checkbook and Virtual Office with the following additional features (for more ideas, see also, )

    •          Billing statements and invoicing via email, fax, or snail mail; includes reminders, and confirmations.
    •          Online, cash-based accounting functions including data entry, categorizing, and basic report generation.
    •          Bill payment/accounts payable monitoring functions, such as email notification when payment transactions are awaiting authorization by business owner; email flags when payment transactions don’t clear in a reasonable time.
    •          Autopay function that pays certain bills automatically each month when preauthorized by the client.
    •          Full interbank transfer capability to and from any financial institution.
    •          Virtual credit card terminal with integrated email and hooks to accounting systems.
    •          Lock-box service for paper check processing with full integration to client’s accounting system.
    •          Option to share selected information with outside advisors such as a CPA.

    Virtual CFO

    Description: Just like the real world, the Virtual CFO takes the data entered by the bookkeeper and puts it into a broader perspective that allows a business to be more profitable.

    Functionality: The following features could be added to those already offered in the Virtual Bookkeeper, Virtual Office, and Virtual Checkbook modules:

    •          Online payroll with paper or direct deposit paychecks, and electronic payroll tax payments.
    •          Online federal and state tax return preparation and filing.
    •          Full-fledged double-entry online accounting
    •          Complete disaster recovery services including a redundant data center. Here’s an area in which banks’ inherent in-house expertise could be turned into a profit center.
    •          Complete Web-based customer file management and communications including:

    -          invoicing/billing with Web integration
    (e.g., bill presentment)

    -          payment services/inquiry via the Web

    -          email/fax/voice messages automatically confirming payment

    •          Access to a CPA-on-call to handle questions. The CPA could deliver advice publicly on your Web, privately through confidential conversations with your business clients, or both.

    •          Automatic excess funds allocation to minimize interest expense and/or maximize interest income. For added value, the funds “sweep” could go to investment and loan accounts at any financial institution (not just yours).
    •          ECommerce services for hosting secure transactions.
    •          Accounts receivable management that automatically notifies the business owner and/or customers when accounts are past due; includes linkages to a virtual payment window (below).
    •          Virtual payment window, carrying bank security messages, that clients can display on their Web site to accept credit card or check/ACH payments online; includes integrated messaging confirming orders.
    •          Extensive management reporting easily customizable using drop-down menus; for example, revenue reports by customer, accounts receivable aging, quarterly P&L; and so on.
    •          Mail merge capabilities that work across any medium, email, fax, page, voice message, or snail mail; option to outsource snail mail services to a mail house; label-printing utility.
    •          Retirement plan administration including Web views for participants; includes email statements.
    •          Project tracking module integrated with reminders and other Virtual Office services.
    •          Employee expense reporting, cash advances, and reimbursement services.
    •          Issuing prepaid Visa cards to customer rebates, expense account cash advances, and so on.


    Numbers News

    2/15/02 Bank of America reported that 4.4 million of its 27 million customers now bank online.

    3/5/02   DiscoverCard reported that 8 million of its 50
    million cardholders have registered at its Web.

    Categories: Small Business

    Online Banking Remains Key to Achieving our Business Objectives

    By Jim Bruene on October 2, 2001 10:11 AM | Comments


    October 2001

    To: Your CEO

    From: You

    Subject: Why Internet Banking Still Matters


    With the media focused on the downturn of the economy and the Internet, I know you’ve been questioned about our level of investment in the Internet channel. To help respond, we’ve prepared this brief analysis of the competitive situation and why we need to maintain a superior online presence.


    With the closing of more than 600 Internet companies, including well-financed banking ventures  CompuBank and Wingspan Bank, it may seem like the future of online banking is cloudy. However, looking at actual consumer behavior, it’s clear that online banking is becoming as important to the consumer banking experience as previous electronic innovations, such as ATMs and call centers. Already online banking is used by a third of all online households, and industry analysts expect 50% usage within four to five years. With many of our competitors putting projects on hold, we believe this is an ideal time to expand our services, so that when the business cycle turns, we will be well positioned to increase market share.

    Why Online Banking Remains Key to Achieving our Business Objectives

    1.       Our customers expect it: Already, more than 20% of our country’s households are active users of online banking and/or bill payment. In recent months, more than twice as many adults banked online than made online purchases.1 Five times more people banked online than traded stocks online.2 When it comes to ecommerce activities, banking is a clear winner.

    2.       The competition has it: Most large banks have offered online banking for a number of years. An OCC study in Sept. 1999 found that online banking was already available from 114 of 160, or 71%, of banks with assets greater than $1 billion. In total, online banking was available from financial institutions that controlled 89% of the country’s asset base and 84% of deposit accounts less than $100,000. And that was projected to grow to 95% and 93% respectively by year-end 2001.

    3.       We can use it to humanize the banking experience: Only a small percentage of our customers are recognized in the branch by name. For the majority, branch banking is a semi-automated experience. Online, we greet everyone by name, and in the future will provide highly personalized recommendations and service that could never be duplicated by a teller.

    4.       It’s more secure and private: Most articles about online banking security focus on problems, real or imagined. In reality, electronic banking can be far more secure, and private, than the paper-based world it replaces. How much privacy do you have when you write a paper check, exposing your name, address, and bank account numbers to everyone who handles it during its long route through the banking and postal system? Authenticated and encrypted electronic data transmissions are far more secure overall.

    5.       It’s the best way to get a loan: Applying for a loan is dreaded by most consumers, that’s one of the reasons why people pay 18% for credit card debt when they could cut their rate in half with a bank loan. Although Web lending is not yet a mainstream activity, consumer trepidation can be alleviated with pre-approvals, excellent email service, guarantees, and fast processing.

    6.       It’s the ultimate self-service channel: According to Tower Group, 60% of the country’s 19 million affluent households are already “remote-oriented” in the way they do their banking.3 Once customers are successful in finding answers to their account-related questions online, they will be more inclined to go back and use it for future problems.

    7.       It’s more efficient: By automating transactions and customer service responses, both the user and the bank can spend less time on routine matters, leaving more time and money for more interesting endeavors. Even though many of our customers still enjoy face-to-face interactions in-branch, their numbers are falling. When it comes to conducting routine transactions, such as balance monitoring and bill payments, Web banking has the potential of reducing the time spent on these chores to just a few minutes each month.

    8.       It’s easier: ATMs took off once people understood that it really was a much easier way to get cash. Likewise, online banking will be equally popular as banks institute services that are clearly better than off-line alternatives (e.g., email statement, interbank funds transfer, balance-level alerts, automated bill payment, and so on).

    9.       It reinforces and supplements off-line media: The 60% of households now online have an easy way to act on radio, TV, and print advertisements. We no longer have to rely on consumers remembering to look up our telephone number and call for more information.

    10.    It will be profitable: The latest Tower Group research found the following4:


    Household Type

    Annual HH Income








    Online banking





    Online households have annual incomes almost twice as high as offline households. This simple fact cannot be ignored. Even though our online initiatives have thus far not paid their way in bottom-line results, we are confident that is about to change. Going forward, a high quality Web presence, managed and operated like a branch, with a line manager and good online sales reps, will turn a profit. Look at NetBank, which has turned a profit almost since inception by keeping focused on the bottom line, even during the high-flying-high-spending 1998/1999 period.


    Internet banking isn’t for everyone. Most customers still desire a physical presence for reassurance and services such as deposits and safe deposit. But for an increasing number of consumers, many of whom are heavy borrowers for shelter and education, the Internet is fast becoming the preferred channel for most transactions. Complacency now puts us at risk of losing our best customers to more aggressive online competitors.

    1Gartner Group estimate of online banking users, 9/01, see Table 9,; NRF/Forrester estimate of online buyers, 8/01

    2Jupiter Media Metrix, 5/01;

    3Affluent households have income greater than $100,000 or assets greater than $500,000; remote oriented customers use ATMs, call centers, point-of-sale debit, and the Internet

    4“Internet Banking in North America: Moving to Where the Action Will Be,” by Frank Caruana, Tower Group, Sept. 2001


    14 Ways to Boost Revenues Next Quarter without Breaking the Budget

    By Jim Bruene on August 7, 2001 8:38 AM | Comments

    Many of the ideas in this issue require executive approval, capital budgeting, I/S negotiations, and so on. If you are looking for ways to boost traffic in 2000, within your existing budgets, here are some low-cost ideas we’ve dubbed “50/50 projects,” ones that can be completed within 50 days for less than $50,000 and usually without any extensive internal systems work.





    Who Can Build It


    1.   Automatic savings plan Provide a simple way for users to initiate and change automatic savings plans; email messaging could confirm each transfer and keep the user apprised of their progress towards saving goals.   deposits, account retention
    2.   Spruce up your refi area If you haven’t looked at your refi area for a while, take a fresh look, then compare it to the top mortgage companies profiled in OBR. You’ll likely find a number of simple improvements that can be made to drive profitable refi and home equity loan volume. Hire outsiders (consultants, interns, and/or customers) to review the area and provide fresh perspectives. mortgage refinance and home equity loans/lines
    3.   Launch a home equity lending center Build more interest in the product by building a Web area with ideas on how to put home equity to use, such as home improvement, vehicle purchase, business opportunities, etc. Build from scratch with interns or contractors; or license from Web providers mortgage refinance and home equity loans/lines
    4.   Preapproved overdraft protection offer Add an area on your Web that tells customers how easy it is to sign up for and use overdraft protection.    
    5.   Small/micro business center Create an area that caters to the very small business crowd. Build from scratch with interns or contractors; or license from Web providers  
    6.   Drive traffic with Google and Yahoo self-service keyword placements While banner ads on major search engines can be pricey, most offer self-service placement opportunities. We especially like the Google program, which is extremely easy to use, and provides valuable data on what works and what doesn’t. Interns, online marketing consultants all
    7.   Rich media email cross-sell blitz Email marketing messages are getting more sophisticated, even spam usually boasts HTML these days. You can still stand out from the crowd by sending well-written, attractive messages. To further differentiate yourselves, consider a “rich-media” message that can include sound and/or animation and can be highly personalized. Numerous email providers; two we’ve recently talked to are MetaMail and DynamicsDirect, who’s done work for E*Trade and others. all

    8.   Financial datebook with bill pay reminders User enters billing due dates to trigger reminders; this service generates Web traffic and positions you well for bill presentment. Off-the-shelf, e.g.,
    or a Web programmer
    bill payment, traffic building
    9.   Searchable merchant directory List all local merchants, especially those sending billing statements; include customer service telephone numbers, hours, email addresses, Web links, and payment options; a good first step for electronic bill presentment. Web programmer with research support from intern/contractor bill payment, small business banking
    10.       Security center Build an educational area where users can read about safeguarding their privacy and avoid identity theft, include credit bureau links and info (see PayPal). QSpace (for credit bureau purchase); intern or contractor traffic building
    11.       Personal VIP ebankers As an experiment, assign an e-rep to your top
    50-100 online customers; equip the rep with email, after-hours capability from home, personal Web pages, and so on. Over the next year, measure account balances and customer satisfaction, with a before and after survey.
    in-house retention, cross sales
    12.       Email information alerts Create a free email subscription service that delivers SHORT periodic alerts with valuable personal finance info. (e.g., “the tax extension deadline is tomorrow”) and rates. Web developer; in-house; intern brand; traffic building
    13.       Rate comparisons If you pay rates higher than national averages, let users see how much they can earn/save with graphical comparisons to national averages. Bank Rate Monitor; BanxQuote; in-house deposit products
    14.       Community calendar/database Develop a template that branch staff can use to post branch-based “neighborhood events” calendars. Custom from a Web programmer or a turnkey system PR, Web traffic
    Source: Online Banking Report, 8/01     

    Categories: Small Business

    Small and Microbusiness Strategy Matrix

    By Jim Bruene on August 5, 2001 8:46 AM | Comments

    Small and microbusinesses represent one of the most lucrative, and relatively untapped sources of incremental business. A product offering optimized for business will differ somewhat from a consumer offering. More information can be obtained in OBR’s Microbusiness 2001 Special Report available to subscribers for $995 at . The following excerpt from the Special Report is a checklist to assist you in planning your service offering. The features are divided into 10 categories:

    1.       Statement data: viewing and organizing balance

    2.       Reporting: building financial reports from statement data

    3.       Customer service: customer care delivered over the Internet

    4.       Products: bank and non-bank financial products

    5.       Accounting: financial management tools

    6.       Payments: billing, electronic checks, bill payment, email payments, ACH, wires, invoicing, payment processing, credit cards

    7.       Security/access: privacy, security, permissions, guarantees

    8.       Other Web-based services: business tools, news, information

    9.       Alerts: email, fax, telephone, and mail activity- and balance-level alerts

    10.    Marketing: getting the word out to the difficult-to-find segment


    Online Services for Microbusinesses
    Checkmark = must have feature; R = recommended feature; O = optional feature

    Source: Online Banking Report, 8/01        ü = must have feature; R = recommended feature; O = optional feature

    Categories: Small Business

    Action Items For all Banks, Regardless of Strategy

    By Jim Bruene on March 6, 2001 1:01 PM | Comments

    No two banks will approach the microbusiness market in exactly the same way. Each has its own unique strengths, weaknesses, and business objectives. However, there are several universal tasks that every bank should accomplish in order to address the microbusiness segment:For all banks, regardless of strategy

    • Make sure line staffers understand that microbusinesses are a profitable segment to be actively courted, not avoided. Typically, bankers roll their eyes and trot out horror stories about past “nightmares” with flaky microbusinesses. Staff must be educated to the facts: Microbusinesses can be risky, but with proper pricing and risk management, the segment provides an excellent source of incremental profits.
    • Leverage the cachet of the “branch manager” in sales efforts to microbusinesses, a telephone call or visit with the local branch manager could be enough to land an entire microbusiness account; after the initial sale, the continued relationship could be fostered via email communications from the branch manager or a designated business banking officer.
    • Use email to foster relationships, keep in touch, deliver information, and cross sell.
    • Uncover microbusinesses within your own retail customer base by looking for random and fluctuating deposit activity.
    • Develop a credit line package consisting of overdraft protection, home equity and business lines of credit (see Table 4).
    For those wanting a state-of-the-art solution
    • Develop a robust payment processing service that allows small businesses to accept email payments from checking accounts or credit cards
    • Build transactive services that complement the small business’ current processes, e.g., downloading data in popular formats to import into accounting packages.
    • Provide a universal interbank funds transfer mechanism.
    • Provide tools to make annual financial updates simpler.
    • Develop email and Web-based methods for enhancing the relationships between microbusiness clients and their banking officer contact.
    • Develop Web areas that cater directly to the small business segments you are targeting:
      •  part-time businesses;
      •  self-employed (including full-time sales) or 1-person business;
      •  micro employers with fewer than 5 employees.
    • Provide flexible financing vehicles that include an integrated line of credit and the ability to take out fixed loans when needed from the overall credit line (e.g., BofA Equity Maximizer).
    • Offer flexible pricing. For those willing to keep significant non-interest balances, waive or reduce fees; for those desiring the maximum rate of return on their funds, develop fee-based package accounts.
    • Boost email customer service so response times are similar to phone calls.
    • Consider OneCore’s turnkey solution as the basis for your offering.
    For those wanting to expand into broader “financial management” solutions
    • Look to private banking for inspiration; the bank and its branch managers and/or business officers should treat microbusiness owners as VIPs.
    • Develop financial “wrap” accounts that handle all the businesses financial needs for an annual fee, calculated as a percent of revenues under management; the wrap accounts could come in various levels depending on what functions the business wished to outsource. Users could also move up the scale over time.
      •  VirtualCFO: 1% of revenues, $2,500 minimum;
      •  VirtualCPA: 0.5% of revenues, $1,500 minimum;
      •  VirtualBookkeeper: 0.25% of revenues, $500 minimum.
    • Provide access to other credit providers via a small business marketplace such as that facilitated by LiveCapital and PrimeStreet, prior to its bankruptcy (for a complete description of the pros and cons of PrimeStreet’s online application process, see the full report for details).
    Categories: Small Business

    Vendor Platform Options for Small Business Banking

    By Jim Bruene on March 5, 2001 12:57 PM | Comments

    Up until mid-1998, there weren’t many options for banks looking to license a small business banking platform. Today, there are more than a dozen to choose from. Refer to Celent’s mid-2000 rankings below.

    Table 1 Functionality of Internet Solution Key:  A= currently available,  P= Planned for 2001, U= Under consideration


    Source:  Celent Communications, Ranking the Vendors of Small Business Internet Solutions, June 2000, updated 3/01

    Table 2 Ranking of Small Business Banking Solutions Key:  5= Very strong,  4= Good,  3= Acceptable,  2= Workable but not optimal,  1= Area of Weakness


    Source: Celent Communications, Ranking the Vendors of Small Business Internet Solutions, June 2000,

    Categories: Small Business

    Recommended Financial Products and Services for Microbusinesses

    By Jim Bruene on March 4, 2001 12:49 PM | Comments

    Microbusinesses typically purchase a hodge-podge of services culled from both retail and commercial banking product lines. For example, at our company, on the higher end of the microbusiness segment, we purchase 16 financial products to operate and finance our business; eight are consumer products, and eight are business products (see Table 1, below). Of the 16, nine are sourced from banks or thrifts, six come from non-banks, and one, bill payment, is the combined effort of a bank (U.S. Bancorp), a non-bank service provider (Checkfree), and a software company (Microsoft). Overall, these products cost us about $8,000 annually in fees and interest paid (for loans) and interest foregone (for checking).

    But the internal costs for managing our billings, payments, and banking, are nearly three times as much, an estimated $23,000 per year. These are things we would gladly outsource to a high quality and VERY trustworthy third party, preferably someone with a regulatory and fiduciary responsibility to safeguard our information and assets, such as a bank. For more information on our “dream” financial management program).

    Table 1

    Financial Products & Services Used by OBR


    Source: Online Banking Report, 4/01     1Fees and net interest foregone (deposits) or paid (loans) assuming 5% cost of funds


    The 16 products listed on the previous page (Table 2) are the most common banking products used by microbusinesses; the core of your online offering. But to differentiate yourself from the competition, you need to add spice to product line with other business products and services. Table 3 below provides an online services feature checklist to assist you in planning your microbusiness service offering. The features are divided into 10 categories:

    1.      Statement data: viewing and organizing balance

    2.      Reporting: building financial reports from statement data

    3.      Customer service: customer care delivered over the Internet

    4.      Products: bank and non-bank financial products

    5.      Accounting: financial management tools

    6.      Payments: billing, electronic checks, bill payment, email payments, ACH, wires, invoicing, payment processing, credit cards

    7.      Security/access: privacy, security, permissions, guarantees

    8.      Other Web-based services: business tools, news, information

    9.      Alerts: email, fax, telephone, and mail activity- and balance-level alerts

    10.  Marketing: getting the word out to the difficult-to-find segment


    Table 2

    Online Services for Microbusinesses


    checkmark = must have feature; R = recommended feature; O = optional feature
    Source: Online Banking Report, 4/01


    Credit Products

    Every microbusiness account should include a credit component. It’s the lifeblood of business, and a large revenue driver for most financial institutions. Past history has shown considerable reluctance to make loans to the microbusiness market. Average loan sizes, which are dwarfed by typical commercial loans, make the effort seem fruitless. But if you look at the potential profit margin of the loans, the microbusiness segment looks better (see Tables 8 & 9, below):


    Table 3

    Example: Potential Annual Credit Product Revenue from a Microbusiness1



    Credit Line








    Overdraft line of credit





    Credit card





    Home equity line of credit





    Business line of credit





    Total business credit










    Interest income





    Cost of funds





    Net interest margin





    Loan loss





    Net interest income (after loan loss)





    Other fees





    Total revenue per account






    Source: Online Banking Report, 4/01

    1Example for illustration purposes only, not based on actual research results


    Table 4

    Example: Potential Annual Credit Product Revenue from a Larger Small Business1



    Credit Line



    Total Outstanding






    Credit card





    Commercial loan or line of credit





    Total business credit





    Interest income





    Cost of funds





    Net interest margin





    Loan loss





    Net interest income (after loan loss)





    Other fees (1% of line)





    Total revenue per account






    Source: Online Banking Report, 4/01

    1Example for illustration purposes only, not based on actual research results

    Categories: Small Business

    Sizing the Market and The Big Picture for Small Business

    By Jim Bruene on March 3, 2001 12:41 PM | Comments

    The Big Picture

    Depending on how you define small business, there are as many as 30 million business entities in the United States, including self-employed or part-time sideline businesses such as selling collectibles on eBay,1 or as few as 2.4 million if you only look at companies with at least $500,000 in annual revenues, but no more than $10 million.2

    For the purposes of this report, we are defining the total small business market as 9.4 million; 2.4 million of that is the larger small business with revenues of $500,000 to $10 million (see Table 1, below) and 7.0 million microbusinesses with annual revenues of $50,000 to $500,000. While microbusinesses are the primary focus in this report, much of what we discuss would also be effective with larger small businesses, as well as self-employed or part-time businesses that fall under the $50,000 threshold.

    In your business planning, it’s important to look more at the financial needs and attitudes of the end user and less on annual revenues. George in New Haven may only bring in $25,000 annually from his office equipment resale business; but combined with the $175,000 his wife brings in from her law practice, that’s a household you should be banking. A robust microbusiness offering could be the bait that lands all the business from George’s household.

    1Celent Communications, 7/00

    2PSI Global, 4/00

    Table 1

    Description of Small Business Types


    Number April ’01 (U.S.)

    Annual Revenues

    Typical Profile

    Financial Needs/Usage


    7.0 million

    $50,000 to $500,000 Sole proprieter, self employed, with no payroll, using a mix of retail and business products Quicken, home equity secured credit, separate business and personal credit cards and checking accounts
    Small business

    2.2 million

    $500,000 to
    $5 million
    Corporation with less than 100 employees, may have a spouse or contractor handle bookkeeping Quicken/QuickBooks, business loans/leases, business checking, business credit card for owner and certain employees
    Larger small business


    $5 million to
    $10 million
    Corporation with less than 500 employees using specialized accounting packages with a full-time financial manager and/or bookkeeper, using scaled down corporate products Cash management, commercial loans/lines, online integration with company accounting program, online banking with various levels of access

    9.4 million

    $50,000 to $10 million    

    Source: PSI-Global 4/01; Online Banking Report, 4/01


    The Real Opportunity for You

    Unless you run a national franchise, the 7.0 million universe of microbusinesses is meaningless. You need to know what the opportunity is in your market. One way to look at it is through percentages. Assuming there are a total of 85 million U.S. households with bank accounts, then as many as 35% (30/85) identify themselves as business owners. More than 11% (9.4/85) own businesses that are relatively easy to find, they have identifiable business phone lines and at least $50,000 in annual revenues. Looking at just the $50k to $500k microbusiness segment, more than 8% (7.0/85) of all banking households also run microbusinesses.

    Assuming 25% of microbusiness owners are current candidates for online services, and 50% will be users within 5 years, there are 1.75 million (25% x 7.0) prospects today, and 4 million by 2006 (50% x 8). For more details. To get a rough idea of the microbusiness opportunity in your market, multiply the total number of banking households by 8%.

    Worksheet 1

    Estimating the Number of Microbusinesses in Your Market

    Number of banking households in your market                                               _____

    Multiply by the percentage of all households that are microbusinesses      x      8 %

    Approximate number of microbusinesses in your market                             = _____

    Multiply by the percentage using the Internet (pxxx)                                   x     70%

    Approximate number of Internet-using microbusinesses in your market      =            


    The market may be large, but how much of it is truly up for grabs? Business banking relationships have traditionally revolved around the credit relationship. In cases of larger small businesses, a trustworthy bank officer is perceived as both an ally to the “loan committee” and someone who helps find solutions for business credit needs.

    Unless you make the commercial loan, is there any hope of gaining a meaningful transaction or deposit business? OneCore, the premier Internet-only small business banking provider on the, has only attracted “a few thousand accounts” in more than 2 years. In fact, late last year, the company recrafted itself as a turnkey solutions provider for large bank business banking programs. Though the mid-six-figure price tag is high, it’s far less than it would take to build a similar platform from scratch. We think OneCore has a good chance of succeeding, if they can attract a marquee reference account before their investors back out. The company says it has adequate capital through 2002, so it appears they have a good shot at making it.

    It’s possible to attract microbusinesses without providing credit, but why would you want to? The credit account is what drives profits to the bottom line for you and your customer. Every creditworthy microbusiness customer should have an overdraft line of credit, a home equity line of credit (assuming the business owner has home equity), and a business line of credit. These three credit facilities, even if they total no more than $10,000 initially, will make the business owner feel like a valued customer; and each line can grow larger over time as you grow more comfortable with the business owner’s financial track record. 



    Table 2

    U.S. Businesses by Annual Revenues

    Type Annual Revenue


    % of Total Chief Banking Officer1
    Commercial banking customers
    Large corporate
    $250 million +



    treasury department
    Low-end corporate $100 to $249 million



    treasury department
    Middle Market $10 to $99 million



        Total commercial



    Small business banking customers (retail)
    Mid-sized business2
    $5 to $9.9 million



    Small business $500,000 to $4.9 million



    Micro business3 $50,000 to $499,000



        Total retail  



    Grand Total  




    Source:  PSI-Global, Small Business Market Study 2001, 4/01 (commercial banking numbers from 4/00)

    1The person at the company that handles the majority of banking activities

    2Could be serviced by commercial banking department depending on circumstances

    3Also known as SOHO, small-office-home-office, a term used less frequently today


    The small business sector spends a considerable amount of time and money on financial matters. In 1997 the McKinsey/BAI study found that the average annual financial services purchases from banks and non-banks combined, across 5.6 million U.S. small businesses, was $14,000; removing insurance, the average fell $7,700.

    More recently, PSI found the total market size of balance-driven products (assets and liabilities) was $2 trillion; $870 billion (43%) was from microbusinesses, and $1.15 trillion was from small businesses (57%), Assuming a 200 basis point (2.0%) spread on the balances, the sector is generating $40 billion in net interest revenues, an average of $4,300 per business. In addition, PSI estimates that business owners have another $2.4 trillion of deposit and loan balances in their personal accounts. At a 200 basis point spread, the owners are generating another $48 billion in net interest income on the consumer side (see Table 4).

    But, this only counts the money paid to financial services companies. It ignores the significant internal costs associated with financial management: accounting, bookkeeping, payroll, treasury, and so on. With the Web, banks have an opportunity to compete not just for the traditional financial products, but also for the entire financial operations of the business.



    Table 3

    Financial Products Purchased by Small and Microbusinesses—Business Usage Only1

    Source: Balances from PSI Global’s 2000 Small Business and SOHO Studies, 4/00; number of small and microbusinesses from PSI’s 2001 Study, 4/01

    Total population (N) = 7.0 million U.S. microbusinesses plus 2.4 million U.S. small businesses = 9.4 million

    11Includes only products used exclusively in running and operating the business

    2Includes short-term investments

    3Average balance of businesses using the particular product

    4Average balance across the entire population (N)




    Table 4

    Financial Products Purchased for Personal Use by Owners
    of U.S. Small and Microbusinesses1

    Source: Balances from PSI Global’s 2000 Small Business and SOHO Studies, 4/00; number of small and microbusinesses from PSI’s 2001 Study, 4/01

    Total population (N) = 9.4 million U.S. small and microbusinesses

    1Products used personally, not for the business

    2Total market = (% using) x (average balance) x (9.4 million micro and small business owners)

    3Total balances only, does not include auto leases or insurance


    Online Banking Usage

    Until last year, small business usage of online banking had been disappointing. Just a year ago (April, 2000), less than 7% of small and microbusinesses said they used online banking. But during the past 12 months, usage has spiked, climbing 56% to 10% overall. Growth in the larger end of the small business segment was even higher, with the $500,000 to $4.9 million segment with online penetration of 16%, 68% year-over-year gain. In the largest segment, businesses between $5 and $10 million, usage climbed to 29%, a 71% gain.

    Table 5

    Small and Micro Business Use of Online Banking

    Sources:  (1) 1998 to Q2 2001 estimates, PSI Global 2000 Small Business Market Track with update in April ‘01; (2) 2001 YE to 2010 YE forecast, Online Banking Report, plus or minus 33%; assumes 3% annual growth in the number of businesses in each category

    Categories: Small Business

    Research Conclusions for Profitable Online Services

    By Jim Bruene on March 2, 2001 12:36 PM | Comments

    Large banks and other financial providers have long coveted the small business market, but have found it difficult to provide the high-touch services demanded by business owners at a price smaller businesses can afford. We believe online delivery is the answer to this dilemma as it allows banks to customize powerful financial management products for sole proprietors, partnerships, and S-corporations.

    The Opportunity

    • Banks are missing an enormous opportunity to serve the lucrative microbusiness (see definition, right) portion of the small business market.
    • Although this group has long been dismissed as not having enough revenue potential to justify the labor required to serve it, we believe the combined value of business and personal financial product usage, and the potential for growth in both, makes them a highly desirable segment.
    • The best opportunities are among self-employed professionals and business service providers who do not require constant depositing of cash and paper checks.
    • There is less competition for this segment because it is difficult to reach and undervalued by mainstream financial services providers; however, non-banks such as Intuit, GE, and American Express have made in-roads in certain product categories, and will attempt to leverage those strong relationships to upsell additional services.
    • Credit services are still a likely determinate of which bank is deemed the “primary” financial provider; home equity secured lending, with underwriting flexible enough to accommodate the self-employed, is especially important when serving microbusinesses.
    • New payment processing services, such as CheckSpace  that allow microbusinesses to easily accept credit card and ACH payment, are a great lure for finding new customers.

    Microbusiness Attitude and Behavior

    • Online banking is a low priority among business customers who care more about the relationship with their loan/biz banking officer, branch convenience, credit lines (especially home equity), loans, rates/fees, and customer service.
    • Small businesses want stability in their financial relationships; they want to deal with a company that will be there in the future; and, most important, they want a relationshipp with a real human who knows the business and won’t let anything fall through the cracks during management or business upheaval.
    • Therefore, it’s vitally important for most microbusinesses to connect with a human during the initial sales process; someone the business owner believes will have a positive impact on credit decisions.
    • This all-important relationship with a human must be nurtured after the initial sale; email and other electronic tools can be effective in fostering the relationship.
    • Business owners may value the bond with their bankingg officer more than the relationship with the bank.
    • Businesses don’t have the time or inclination to adjust their systems and procedures to use things that  “sound good on paper.” But, if you can get them started, small businesses will often become loyal online banking customers, more likely to stay with their bank.
    • Given the combined value of their personal and business usage, and the owner’s optimistic perception of future growth in both, small businesses want to be treated with respect.
    • The importance of each customer service interaction grows in importance as business owners move to self-service options, relying less on interactions with branch staff.
    • Over time this segment is likely to move to self-service over the Internet (primarily email) and relatively brief telephone conversations.                                                                                             


    Primary Data Sourcee

    Many of our conclusions are based on data provided by NFO WorldGroup-Financial Services (formerly PSI Global). We owe a debt of gratitude to Maria Erickson, EVP, for her patience in answering our questions and for making data from their Small Business and SOHO studies available for this report. Contact Maria at (813) 371-3800 x 294, for more information on purchasing financial services research from NFO.

    Categories: Small Business

    A Blueprint for Profitable Online Services

    By Jim Bruene on March 1, 2001 5:56 PM | Comments

    Special Report: The Hidden Segment

    A blueprint for profitable online services for sole proprietors, partnerships, and S-corps

    Bank of America recently told analysts that its online businesses were in the black.1 No one outside BofA knows exactly what accounting gyrations were used to come up with those results, but apparently the revenues were boosted substantially by gains in technology investments the bank made in ecommerce partners such as Checkfree.

    If you weren’t playing VC in 1999, you may have found it a bit more difficult to show a profit from your online efforts. If you are looking for a new strategy to improve your online P&L, we think you should consider a segment that is large, profitable, underserved, and practically invisible - microbusinesses. Microbusinesses include part-time entrepreneurs, startups in formation, self-employed, and very small corporate entities.

    While there is no universal definition of a microbusiness compared to a small business; for the sake of this report we’ll use 5 employees as the cut-off. Typically, once a company has more than a handful of employees, it uses specialized accounting systems that make its banking needs different from microbusinesses running Quicken or QuickBooks.

    In this month's entries we’ll help you analyze, justify, design, and launch an online service geared towards microbusinesses. This month contains the executive summary of the special report, along with an analysis of two promising microbusiness solution providers, OneCore and CheckSpace. The full 100+ page report is available in PDF or hardcover format for an additional fee.  email us at .

    Categories: Small Business

    Reviews of The Class of 2000: First Wave

    By Jim Bruene on March 1, 2000 12:39 PM | Comments

    The below companies launched in second-half 1999 or first half-2000 in alphabetic order.


    1stwebbankdirect is soliciting affinity partners
    directly from its Web site.

    Type: Division of Sovereign Bank ($24.6 billion)

    HQ: Wyomissing, PA

    President: Cliff Lavin

    Status: In formation; the most talked about unlaunched startup, garnering press attention since announcing Internet initiatives in March 1999; no announced launch date, parent may be occupied with acquisition of 268 branches and 532 ATMs from Fleet.

    Strategy: To offer co-branded Net banking through affinity groups such as universities, community groups, employers, and retailers.

    Service Providers/Software Platforms: Net banking platform from S1; bill payment from Checkfree; account approval algorithms from Equifax; core processing from Fiserv; call center and account servicing platforms from Unisys.

    Mini-Analysis: We trust the bank has more up its sleeve than just affinity marketing, which has some serious weaknesses:

    •  most affinity groups already have credit card partners, one of the major retail banking profit drivers; for example, MBNA alone has more than 4,000 affinity partnerships
    •  for banking services, many affinity groups are well-served by credit unions delivering a compelling package of local convenience, personal service, low prices, and online banking
    •  major e-tailers will demand an equity kicker as part of any deal; for example, received warrants for 4.4 million NextCard shares as part of its co-branded credit card deal

    A final observation: The name is too hard to remember and type. It strings together four generic concepts: 1st, Web, Bank, and Direct; that’s at least two too many.


    201 Penn Street

    Reading, PA 19601-4038

    (610) 520-7000


    AccessNational touts 24-hour commercial real estate loan approval on its home page.

    Type: Start-up clicks and mortar

    HQ: Vienna, VA

    Founder: Michael Clarke, CEO, ex-Patriot Bank associate of Millennium Bank’s Carroll Markley.

    Status: Application for a national bank charter filed with the OCC Feb. 16, 1999; preliminary approval received June 8, 1999; doors opened in early 2000.

    Target Market: Small business with revenues of $15 million or less in the greater Washington Metropolitan market with a special emphasis on the high technology community of Northern Virginia.

    Strategy: Blend of Internet delivery with a minimal brick-and-mortar presence; a single full-service branch will operate in Chantilly, VA. Access National will merge with residential lender Mortgage Investment Corporation, headquartered in Vienna, VA, concurrent with the opening.

    Funding: An IPO is planned


    14006 Lee Jackson Memorial Hwy.

    Chantilly, VA 20151

    (703) 871-2100



    Type: Division of non-bank financial services company, Aerofund Financial, a San Jose, CA factoring company

    HQ: San Jose, CA

    CEO: Scott Racusin, previously with Security Pacific Bank (13 years) and Union Bank (12 years)

    Status: Launch planned for Q2 2000; AeroBank is just the fourth national bank to be approved by the OCC for national electronic delivery; the first was CompuBank in Oct. 98, the others are NextBank, a limited purpose bank accepting jumbo (<$100,000) deposits only, and CIBC National Bank of Maitland, FL, a division of CIBC (Toronto, Canada)

    Target Market: Small business

    Strategy: Integrating Net delivery with human loan officers

    Funding: In the process of raising $18 million

    Goals: 10,000 accounts by 12/31/2000; profitable within 3 years

    Mini-Analysis: With the experience and client base of Aerofund Financial, this bank has a real chance to reach a critical mass of customers.


    2787 Moorpark Avenue

    San Jose, California 95128

    (408) 241-2462


    BankDirect’s excellent home page includes links to both ABAecom and VeriSign’s site certification programs.

    Type: Wholly owned subsidiary of Texas Capital Bank ($297 million) which launched its brick and mortar bank concurrently with BankDirect

    HQ: Dallas, TX

    Size: 7,000 total accounts 2/15/00, more than double the 3,000 accounts as of 10/27/99

    Top Execs: Rose Hultgren is President,
    Joseph Grant is CEO

    Status: Launched in March, 1999, but have not committed major marketing dollars; planning an IPO spinoff in 2000.

    Strategy: Affinity-based co-branded marketing programs such as the one with Excel Communications <>.

    Mini-Analysis: First impressions are good: catchy name/logo; excellent graphical layout; good, concise copy; and so on. But they need to work on navigation. The biggest deficiencies: no links to the online demo except on the login page; Learn is a confusing name for company information; it’s unclear what the difference is between “manage” and “access,” which are both password protected but apparently not integrated.

    The bank also needs to work on the loan side, currently delivered on a co-branded basis via Lending Tree. While that is a good approach for low-margin installment loans (mortgages, auto loans), the company needs revolving credit products, especially an overdraft line of credit. Overdraft credit lines are a must-have feature for serious transaction accounts and they can be big moneymakers for the bank.

    Some other interesting features:

    •  rate comparisons
    •  email signup on home page
    •  customer service contact forms
    •  small animations on Apply and Login draw users attention to these important functions
    •  Coming Soon says they are working with to develop Palm banking
    •  InsWeb for insurance

    · pop-up customer service forms in five categories:
    - Have a CSR call me
    - Ask a question
    - Make a comment
    - Report a problem
    - Refer a Friend


    4230 LBJ Freeway

    Dallas , TX 75240

    (214) 890-5835



    BankZip, “The World’s First Internet Banking Alliance” is worth a look.

    Type: Spinoff from Patriot Bank ($1.1 billion); alliance of community banks; see funding right.

    HQ: Pottstown, PA

    Top Exec: Richard A. Elko, President

    Status: In formation with early 2000 launch planned; beside founder Patriot, three other banks have signed on, Madison Bank (Blue Bell, PA; $158 million), First Penn Bank (Philadelphia, PA; $81 million), and IGA Federal Savings Bank Feasterville, PA; $190 million) all based in eastern Pennsylvania.

    Target Market: Through community bank franchisees and equity owners, the banking consortium hopes to reach a nationwide audience.

    How it Works: BankZip’s unique business calls for creating a co-branded “portal” licensed to community banks throughout the nation. Users attracted to through national advertising enter their zip code (hence the name) and are directed to the participating community bank licensing that zip code. If no bank has locked up a particular zip code, revenue from the user is shared by all affiliates.

    One drawback: New users, even those coming into the system from a participating community bank, must transfer their accounts into the BankZip system. Affiliates handle customer service only.

    Funding: BankZip was a wholly owned division of Patriot Bank, which invested $5 million in the venture. On Dec. 14, 1999, BankZip completed a private placement of $5.44 million of common stock and convertible debentures bringing total capitalization to $10.44 million. Through Dec. 14, BankZip has incurred $4.85 million in pre-tax cash and noncash charges that were expensed in Patriot’s fourth quarter results.

    Patriot’s ongoing relationship with BankZip is limited to ownership of convertible debentures to acquire 5 million shares of at no further cost. An initial public offering is expected in the year 2000.

    Marketing: Last fall, the company talked about raising enough capital in an IPO to fund a $70 million marketing campaign to build the brand and attract users. The strategy has been scaled back a bit, but the bank still plans an aggressive marketing campaign.

    Other Domain Names Owned (America’s E-bank)

    Source: Network Solutions, 11/99

    Mini-Analysis: Talk about thinking outside the box —and with $5 million on the table! This concept is so unique and unprecedented, we don’t quite know how to react. It could be a huge winner. Or not. Originally, we were skeptical, but after a long discussion with Elko and Joe Major, CEO of Patriot, at BAI’s Retail Delivery we came away impressed with their knowledge, drive, and enthusiasm. They might just be able to pull it off. But they definitely need to spruce up the Web site, it’s outdated and doesn’t inspire confidence in the venture’s ability to create a compelling Web bank.


    High and Hanover Street

    Pottstown, PA 19464

    (610) 970-4650


    Clarity Bank

    Clarity’s Web site placeholder has a modern look.

    Type: Start-up, acquiring existing bank

    HQ: Purchase, NY (home of MasterCard)

    CEO: David Arzi

    Status: Formed in June 1999; launching in March 2000, following the completion of its acquisition of First National Bank (Uvalde, TX; $28 million).

    Target Market: Small business initially, then consumer

    Business Model: More focused on loans than transaction fees

    Strategy: Will offer a full line-up of business and consumer services with bilingual (English and Spanish) delivery; an ecommerce mall will feature offerings from its small business clients and other Web sites that refer users to Clarity Bank; mall usage will be boosted with a cash-back credit card good at mall merchants.

    Marketing Plan: A $1 million launch effort is planned, including a 750,000-piece direct mail, on- and off-line media; also soliciting associates who will earn $20 per customer sign-up.

    Funding: $14 million in venture funding raised to date; planning an IPO this year.

    Goals: 50,000 accounts “in the near future”

    Mini-Analysis: Sounds great on paper; but will have to be careful not to overextend trying to be all things to all people all at once.


    2975 Westchester Avenue

    Purchase, NY10577

    (914) 701-2000

    Clarity Bank Management Team

    Name Position Email
    David Arzi CEO
    Michael Szwajkowski President
    Scott C. Schwartz EVP
    William F. Weaver* EVP
    Dr. Aviv Orani CIO
    Jon Walker Dir., Alliances
    Peter Quinlan VP, Controller
    Michael Watkins VP, Technology

    Source: company, 12/99

    *formerly President of Bank CEO of Hartford-based Advest Bank and Trust Co., a subsidiary of the Advest Group Inc. which in May 1999, sold its retail and commercial banking businesses

    Direct Banking

    Type: Wholly owned subsidiary of Salem Five Cent Savings ($1.1 billion), one of the first banks with a Web site in 1995

    HQ: Salem, MA

    Top Exec: William H. Mitchelson is CEO of Salem Five; former head Mike Fitzgerald was hired in January to be President of Net.B@nk

    Status: Launched in Nov. 1999

    Funding: Wholly-owned subsidiary of Salem Five

    Mini-Analysis: Salem Five has been an innovative pioneer, winning our First Best of the Web in 1997; if they can harness this innovation in a Net-only subsidiary, it could be very successful; a wild card is the loss of its top exec to Net.B@nk


    210 Essex Street
    Salem, Ma 01970

    (978) 720-5325



    Ebank has the best domain name in the business, now they need to build a company that can leverage it.

    Type: Public (EBDC), clicks and mortar

    HQ: Atlanta, GA

    Size: $55 million in assets, $43 million in deposits, 1,078 deposit accounts (9/30/99)

    CEO: Richard A. Parlontieri

    Status: Southeast Commerce Holding Company was organized Aug. 1997 to serve a holding company for Commerce Bank; completed IPO July 1998; began operations Aug. 1998; in May 1999 acquired domain name, changed its name to, and announced Internet strategy; shortly thereafter the OTS found that the bank violated its charter by materially altering its business plan without prior approval of the OTS; the bank paid a $100,000 fine in Sept. 1999 and subsequently had its Internet business plan approved.

    Target Market: Small business

    Strategy: Originally the company planned to open a nationwide network of centers in high-potential markets. Those plans have been scaled back to just three ebank centers in 2000, Atlanta, Charlotte and Tampa. To achieve the personal service the company believes is essential to successful commercial lending, the bank plans to partner with community banks around the country. The bank recently announced (1/31/00) an alliance with Talisman Technologies to deploy a network of Internet-enabled ATMs that would connect to the bank. Pending OTS approval, the network would be initially available in fourth quarter 2000.

    Mini-Analysis: Now we understand why eBank execs kept avoiding our questions about last summer. They were in the midst of receiving a major slap on the wrist from the OTS, to the tune of $100,000, for announcing their Internet strategy prior to OTS approval. But that appears to be all behind them now, and the bank has reeled off an impressive list of strategic alliances.

    They certainly have the right name, although investors have been skittish given the bank’s troubles with regulators. The stock trades about 15% under its $10 IPO price (7/98) and the company’s $12.5 million market cap (2/10/00) isn’t all that much higher than what the domain name alone might bring, based on Bank of America’s purchase of for $3 million in January.


    2410 Paces Ferry Road, Suite 190

    Atlanta, GA 30339

    (770) 801-0355

    Millennium Bank

    Millennium Bank offers a full range of services including a brokerage.

    : Start-up, privately held

    HQ: Reston, VA

    CEO: Carroll Markley, previously with Patriot Bank, parent of

    Status: Announced Dec. 1998, raised $8.3 million and opened April 1, 1999, under a national charter

    Mini-Analysis: Millennium Bank put a “the” in front of the URL we’ve been using since Nov. 1995, In general, “the” domain names are second-tier, it kind of makes you wonder why they couldn’t afford a real domain name. It’s also confusing to customers and vendors who tend to forget “the” and type instead. We know, we get interesting email destined for “,” resumes, gossip, and so on.

    Also, we question how Web-savvy the company is. They have never approached us about forwarding misdirected email. We weren’t even aware there was a “” until researching this report.


    1601 Washington Plaza

    Reston, VA 20190

    (703) 464-0100

    National Interbank

    National Interbank, a division of First National Bank of Mitchell, Indiana, launched at year-end.

    Type: wholly-owned subsidiary of First National Bank of Mitchell (IN), a $48 million bank owned by Waterfield Bank Corp.

    HQ: Mitchell, IN

    CEO: Randy Waterfield

    Status: Launched Dec. 1999; the bank was founded by the Waterfield brothers, Randy and Richard, formerly of Goldman, Sachs. Banking has been in the family since their grandfather founded Waterfield Mortgage Company in 1928. Later their father ran the mortgage company and acquired Union Federal Savings Bank of Indianapolis.

    Target Market: Consumers

    Strategy: Use best-of-class technology to provide superior services; E-Loan provides mortgage and home equity lending services

    Mini-Analysis: The bank has done a good job of getting their name around the Web and on various rate comparison sites. But so far, its service offering is sparse and undifferentiated. They have their work cut out for them, as do all new Net-only banks.


    P. O. Box 1245

    Indianapolis, IN 46206-1245

    (877) 468-7265


    Type: Affiliate of NextCard, the first Net-only credit card company launched in Dec. 1997; parent is public (NXCD) with market cap = $1.1 billion (2/29/00); IPO May 1999; Amazon holds a warrant to purchase 4.4 million shares for $39

    HQ: San Francisco, CA

    CEO: Jeremy Lent

    Size: NextCard has more than $500 million in assets from 275,000 credit card accounts (2/28/00); NextBank has $314 million in deposits (9/30/99).

    Target Market: Consumers using credit cards and the Internet.


    Status: NextCard purchased Textron National Bank in 1999; it is expected to eventually provide the base for a full line of retail banking products; but currently NextBank’s Web offering is limited to jumbo CDs (<$100,000) and a link to NextCard credit cards.

    Strategy: Credit card product and infrastructure optimized for the Internet; consistently one of ten largest Net advertisers; adding value around Internet transactions which is expected to lead them into debit transactions/checking; statement aggregation and so on; co-branding with and others

    Mini-Analysis: We have been impressed with NextCard ever since we first talked to them in early 1996; lately, they have been downplaying their interest in “traditional” Net banking, claiming to be more interested in Internet transactions than retail deposits; time will tell if that’s merely a head-fake. The relationship with could be used to develop interesting statement aggregation and person-to-person payment schemes leveraging’s 16 million customers and patented one-click payment mechanism.


    595 Market St, Suite 950

    San Francisco, CA, 94105

    (415) 284-9217

    Pennsylvania Business Bank

    The three circular graphics on the home page reveal product menus when a mouse travels over them.

    Type: Start-up, private

    HQ: Philadelphia, PA

    Top Exec: Alan Fellheimer

    Status: Bank founded, Mar. 1999; Net banking launched Oct. 1999; commercial loans added, Dec. 1999; operates under Pennsylvania Bank Charter with FDIC insurance

    Target Market: Business

    Strategy: Offers a full line of commercial, small business, and personal products, but clearly is targeting the business customer; Web site from Digital Insight; also uses


    7 Penn Center, 1635 Market Street

    Philadelphia, PA 19103-2217

    (215) 587-2200 Bank

    domain name not registered

    Type: Start-up, private

    HQ: Wilmington, DE

    Top Exec: Frank Mastrangelo, President/COO, formerly Jefferson Bank CTO

    Status: In formation

    Strategy: Bank is expected to be an all-Internet operation with a private-label banking relationship targeted to affinity groups such as universities and trade associations.

    Funding: The Cohen family is creating a new Internet bank to add to its financial dynasty which included JeffBanks Inc., sold Dec. 1, 1999 to Hudson United, and Resource America. is the holding company for Bank, which is being organized in Delaware, with Edward E. Cohen as Chairman and his son, Daniel G. Cohen as CEO; applied for a state charter Sept. 13. Edward Cohen is CEO and Daniel Cohen is COO of Resource America, a Philadelphia-based specialty finance company.



    Type: Wholly-owned subsidiary of Cole Taylor Bank ($2.0 billion)

    HQ: Chicago, IL

    Top Execs: Craig S. Dean, CEO; Dan Bleil, EVP, Relationship Management

    Target Market: Small business

    Status: Building a state-of-the-art product line


    1333 Butterfield Rd., Suite 555

    Downers Grove, IL 60515

    (630) 493-1531

    Ubiquity Financial

    Type: Division of Fraser Valley Credit Union ($500 million; 47,000 members)

    HQ: Abbotsford, British Columbia, Canada

    Top Management: Larry Davey, President

    Status: Launched in Jan. 4, 2000; has attracted 400 accounts in its first month; uses Prologic platform

    Target Market: The CU expects 10 to 15% of the parent’s members to join, representing 5,000 to 7,000 members; also eyeing the 150,000 Canadian customers of ING Direct.

    Strategy: Paying higher rates than its brick-and-mortar parent; plans to advertise on, a Canadian financial portal.

    Comments: The name is a bit cumbersome.


    32071 South Fraser Way

    Abbotsford, B.C., V2T 1W3

    (604) 850-0999

    Virtual Bank

    Virtual Bank is adding statement aggregation
    from VerticalOne.

    Type: Click-and-mortar start-up, VC funded

    HQ: Palm Beach Gardens, FL

    Founders: Rory Brown, CEO; Bill Decker, President

    Status: Launching April 3, 2000; looks to be a major player after landing a first round investment in Feb. of $37.5 million from venture capital firms J.H. Whitney, Palisade Capital Management, and Wyndcrest Partners; General Electric, DaimlerChrysler, DLJ, MCI Worldcom CEO Bernie Ebbers, Starwood Hotels CEO Barry Sternlicht, and Miami Dolphins quarterback Dan Marino; uses Prologic platform.

    Strategy: Targeting employees in the high-tech industry; plans to open offices in 12 high-tech areas in the next 18 months, including Silicon Valley, Austin, New York, and Boston; could very well be the first retail bank with statement aggregation (VerticalOne).


    2000 PGA Blvd., Suite 3110

    Palm Beach Gardens, FL 33408

    Virtual Bank Domain Name Holdings

    Source: Network Solutions, 11/99

 ’s Web site is typical Silicon Valley, full of selling messages and devoid of pictures.

    Type: Start-up; VC funded; banking services provided through partnership with First Western National Bank (La Jara, CO, $48 million), a subsidiary of Community Bankshares, Inc. (Colorado)

    HQ: Palo Alto, CA

    Top Execs: Bill Harris, CEO (formerly Intuit CEO); Elon Musk, Founder

    Status: Soft-launch Nov. 30, 1999; P2P payments launched Dec. 15; during Feb. became largest Net-only bank as measured by number of accounts, 50,000+ on Mar. 1; announced merger with PayPal on Mar. 2; became most-visited bank in the USA in Feb. with 1.8 million unique visitors; first public bank victim of cyberthieves

    Target market: Consumers

    Goal: 500,000 accounts by mid-year

    Strategy: viral marketing with $20 sign-up bonus (promotion ended Feb. 18); Internet person-to-person payments including co-branded auction payment product with no minimum S&P index fund with no management fees and a 1 basis point contribution by the company

    Funding: Sequoia Capital led the first round of
    $25 million; a second round is expected in March; followed by an IPO in 2000, which Elon Musk said will be the biggest Internet IPO this year (see The Industry Standard, March 6, 2000, 86-87,,1151,12192,00.html

    Mini-Analysis : Although, it’s very early in the game, appears to be the first company, other than Palo Alto neighbor and merger partner PayPal, following the strategy we’ve been expecting for some time, that of a truly virtual bank working in tandem with the customer’s local bank and checking account (for more on this strategy, see Building the of Financial Services, and Virtual Checking.

    They are also the first retail banking entrant to go after eyeballs rather than selling single products such as high-rate deposit accounts (Net.B@nk, Telebank); credit cards (NextCard, Wingspan, Providian); or mortgage loans (E-Loan, Cranking up the registered user base and Web traffic has been the formula for dot com success on Wall Street, so it will be interesting to see how it plays out in the banking sector.


    Categories: Small Business

    Jump-Start Online Usage

    By Jim Bruene on March 3, 1999 1:55 PM | Comments

    It’s human nature to seek out activities with a payback less than the two to three years typical for the bill pay systems of today. So we’ve come up with a list of “instant gratification” features to offer online banking users to get them hooked on your service. The ideas can be used in the following three-step process of effective account activation:

    Getting to the First Use

    1. Create a good first impression

    2. Provide immediate gratification

    3. Make it simple and trust inspiring

    If you do a good job with the first three steps above, you are well on your way to an active user base. But you still need to provide help and incentives to turn first-time users into regular active users, and hopefully life-long customers:

    Turning One-Time Users
    into Regulars

    1. Provide Web and email feedback after each use, especially the first (see example upper right).

    2. Provide ongoing excitement and a reason to email your customer, such as a sweepstakes with an automatic entry each time someone pays a bill is paid
    (see chart right).

    3. Migrate users into automated payment routines. For example, encourage recurring payments with TWO sweepstakes entries for each autopay. Each merchant set up on autopay increases customer lock-in making it that much more difficult to switch to banks.

    Bonus strategy for extra credit:

    • Provide incentives at various usage milestones, for example, a mousepad for everyone that paid more than $5,000 worth of bills from your Web.



    Example: Email after first bill payment
    increases confidence and encourages use

    Pat Jones,

    Thank you for using eBillPay.
    You have joined nearly 12,000 other forward-
    looking customers using
    electronic bill payment.

    Your payment to xyz Corp. was mailed today
    and should be credited to your xyz Corp. account within five days.

    Your questions on eBillPay or any of our
    other services are welcome from 6 a.m. to midnight
    at 1-800-YourBank. Or visit our 24-hour self-service center on the Web <click here>.


    Alex Reynolds, Online Service Manager

    P.S. With each bill payment you make, your name is automatically entered into a drawing for a new Sony VAIO laptop.


    Activation Tactics in Use Today




    Bank of America sweeps BofA ran a bill-pay sweeps where the winner received a free mortgage or rent payment (OBR 12/96)
    BankBoston raffle Users are entered in a raffle each time they pay a bill online; prizes include laptop computers
    Citibank cash $25 bonus after first two bills paid
    CyberBills, NextCard premium CyberBills offers 1,000 ClickReward points for signup; NextCard offers BonusMail Rewards for card usage
    Discover; AmEx email Periodic emails keep users informed
    DLJ Direct
    VIP services E*Trade and DLJ Direct allow high-balance users to enter a lottery to get IPO shares; DLJ Direct provides an investment research service to users with balances higher than $100,000
    Fleet cash $5 bonus for first email to bank, $5 for first bill payment
    SFNB sweeps SFNB ran a low-budget sweeps in 1997 (OBR 5/97)
    Sanwa penalty $5.95/mo fee after two months of non-use

    Source: Online Banking Report, 3/99; Financial Services Online, 2/99


    Creating a Good First Impression

     Make start-up simple

    Your goal is to engage newcomers within the first 30 to 60 seconds, some techniques:

    •  Make the top layer of copy concise and easy to understand; but with detailed explanations a click away; hire professional writers/editors; and TEST it all with real users.
    •  Divide applications and forms into bite-sized chunks; let users come back later to finish if needed.
    Provide instant gratification

    Provide something useful and worth remembering on the first visit. Preferably, something that allows you to at least capture the email address of good prospects. For example:

    •  Allow new Web banking registrants to pay their first bill, or a trial payment to themselves or a friend, during the initial session (see Net Banking Playground).
    •  Provide a free email-based “New Biller Notification Service” (OBR 1/99).
    •  Let users easily sign up for balance alerts, transaction confirmations, and other emails triggered by activity in transaction accounts.
    •  Pay cash bonuses for opening a new account (see TeleBank, OBR 2/99) or for conducting desired transactions, for example: first bill payment; 100th bill payment; first recurring payment; first time paying 10 or more bills in one month; first mortgage payment, first online funds transfer to savings; first in-bound ACH; first email to customer service; any tip posted to an online FAQ; or referring a customer, etc.
    •  Provide rate comparison forms with email updates.
    •  Post a refi analysis with email updates.
    •  Provide a “Certified Merchants Program” where users can inquire about the track record of various online merchants; you could even guarantee fraud-free transactions at any merchant in your database; provide email updates of new merchants.
    •  Allow small businesses and merchants to apply for a “Certified by Yourbank” logo to post on order-entry screens.
    Inspire trust

    Make sure new users have no lingering doubts about the quality and integrity of your services. Some requirements:

    •  Responsive help options via phone, email, Web chat, and even in person.
    •  Service guarantees perhaps backed with monetary rewards. For example, an email-based voucher for $5 at if your email goes unanswered within 60 minutes, or 30, or 15, or 5 (how low can you go?)
    •  Post third-party endorsements prominently, especially VeriSign (see feature in next OBR, 4/99), TRUSTe, FDIC-insured, and Online Better Business Bureau (see OBR 1/99)
    •  Incorporate a simple, high-quality look and feel such, for example, .

    Provide “creeping personalization” that gradually personalizes the Net banking experience without delving too far too fast into private details (see sidebar below)

    Building Anonymous Personalization

    Start the customization process the first time someone visits your Web. Update buttons strategically located around your Web can be used to make it less threatening than requiring users to fill out yet another form. For banks operating in multiple geographic markets, the first data point to capture is zip code. Users enter their zip code in a small box and press enter. The info is captured in a cookie, and from then on, as long as the user comes in through the same computer (without altering their cookie file), you will know where they live/work and can deliver personalized info, such as local time/temp/traffic, etc.

    On each subsequent visit, ask a new update question. Over time, a powerful user profile will be built enabling you to pinpoint more closely what an individual user wants to see, even if the user chooses to remain anonymous. One company specializing in this concept is GuestTrack, run by Cliff Allen, co-author of Internet World’s Guide to One-to-One Marketing.
    (Source: ClickZ

    Categories: Small Business

    Vendors Release Small Business Web Banking Platforms

    By Jim Bruene on October 4, 1998 10:43 AM | Comments

    Home banking vendors are beginning to release business modules for their Net banking platforms. Four are currently available or about to ship. Many more are in the wings.


    Digital Insight

    26025 Mureau Road
    Calabasas, CA 91302
    Phone: (818) 871-0000
    Fax: (818) 878-7555

    Key Execs:
    Paul Fiore, EVP & Co-Founder
    John Dorman, President & CEO

    The Company: The privately held company was founded in July 1995 by Paul Fiore and Daniel Jacoby. The company employs 76 and had 1997 revenues of $5 million. Historic strength in building turnkey Web sites for credit unions. Launched Web banking services in March, 1996. Of 243 live clients, 235 (97%) use Digital Insight to host their Web sites, 187 (77%) used the company to build their Webs, and 125 offer transactional Web banking through the company. Total Web banking enrollment is 236,000 for an average of 1,900 members per financial institution.

    Business Banking Program: Prizm Internet Cash Management was launched in April, 1998, with Community Credit Union (Plano, TX; $500 million; 125,000 members) as its first client.



    2840 San Tomas Expressway
    Santa Clara, CA 95051
    phone: (408) 982-2000
    Fax: (408) 982-0777

    Key Execs:
    Jeffrey Crowe is President and Co-founder
    Bill Soward is VP Product Marketing

    The Company: Edify is a public company (EDFY) founded in 1990. For the 12 months ended Sept. 30, sales were $67 million, profits were $655,000, and total employment stood at 349. The company has 1,100 clients worldwide, 150 in financial services. It’s Electronic Banking System is a full-featured online banking platform priced at $150,000+ and used by pioneers Net.B@nk, CompuBank, Harris Bank and others.

    Business Banking Program: Edify announced the Business Banking Suite on Sept. 23. It runs on top of the company’s Electronic Banking System and is scheduled to ship in Q4 1998.

    Home Financial Network

    55 Green Farms Road
    Westport, CT 06880
    Phone: (203) 341-7000
    Fax: (203) 341-7442

    Key Execs:
    Daniel Schley, CEO; Eric Jacobsen, President & COO
    Tom Dittrich, VP Marketing

    The Company: The privately held 52-person company was founded in Sept. 1995 by two MECA Software executives, Daniel Schley and Eric Jacobson. According to the company, its clients have achieved 9% penetration (percentage of customers using online banking) with 87% activation rates, and support costs under $0.30 per customer per month. The company’s first product, HomeATM, a direct-dial program, was launched in March, 1997. Six months later the product was ported to the Web and dubbed HomeATM-Internet Version. The company offers flexible pricing options including a pay-as-you-go model and has seven clients live, six in beta, and others in various stages of development.

    Business Banking Program: The company is in the launching a business version of its software called, what else, BusinessATM. It is expected to ship in fourth quarter.


    Q-UP Systems

    8303 N. Mopac, Suite B450
    Austin, TX 78759
    Phone: (512) 342-9910
    Fax: (512) 342-9921

    Key Execs:
    Dan Martin is President
    Wade Sanders is Director of Sales

    The Company: The privately held company was founded in 1995 and employs just 30. Its total client base stands at 97, with 78 licensing its Internet Banking System launched in Nov. 1996. See the demo at Besides the usual online banking functions, Q-UP includes a number of value-adds such as stock quotes, weather forecast, radar and time of day.

    Business Banking Program: Q-UP was an early entrant in business banking, launching the Cash Management module in Sept. 1997. It features wire transfers, ACH origination, direct deposit, tax payments, and more. So far, 52 banks have licensed Cash Management, making it the leading seller in the category.


    Four Reasons for a Community Bank to Launch

    By Jim Bruene on October 3, 1998 10:42 AM | Comments

    As more community banks head online, some may be wondering why. Isn’t the advantage of a small bank the personal service it can offer customers? For example, our president knows just about every business customer personally; sees them at Rotary Club; has kids in the same soccer league. Conventional wisdom says you can’t make money on the Web, so why would a community bank spend its valuable resources on that sort of endeavor?

    Reason 1: Differentiation

    Cascade Bank (Everett, WA; $444 million) had been a traditional thrift institution with expertise in originating home loans and gathering high-cost deposits. Then the bank decided to change its orientation, along with many similar institutions, and become a full-service community bank. A major step towards that redirection was to purchase another local bank that catered exclusively to business customers. Cascade now had the expertise and the resources to answer the needs of most small businesses with annual revenues less than $5 million. But in a market where several community banks were already touting the “locally owned” label to capture the disgruntled business clients of larger banks, what could differentiate Cascade?

    We decided one answer was Internet banking specifically designed for business customers. They’re the ones that really have their hands full running their business. They need to make every minute count and already use PCs. They want financial control. Most importantly, when we asked them, 30% of our customers said they would use online banking.

    Reason 2: Innovation

    New technology is dropping in cost and becoming easier to install. We knew we needed to be first in the market to gain attention, so we went with a turnkey solution from Q-UP Systems. For our business customers, being able to view transaction data at their convenience is a big innovation. And the other functions in Q-UP’s Cash Manager help our clients run their businesses more efficiently:
    managing cash, paying bills, paying employees, and paying taxes.



    Reason 3: Extending Delivery

    With 11 branches spread throughout the Puget Sound region, Cascade Bank can’t match the branch-based convenience offered by Bank of America or Wells Fargo. So we want to do everything we can to help our business clients do their jobs without coming to a branch. It’s the opposite approach from the large bank strategy of lowering costs by servicing small businesses via the Web. We’re trying to get in touch with them more often and more conveniently.

    This philosophy extends well beyond Internet banking. Our business bankers make a point of visiting their customers in person at least three times a year. We also offer a deposit courier service with flexible scheduling to pick up customer deposits.

    Reason 4: Tool for Business Bankers

    We’re training our business bankers to understand online banking inside and out, to be able to troubleshoot problems. Customers will be encouraged to call their banker with questions, not an anonymous central service line. We’re also planning seminars where we’ll show customers how to maximize their use of our service.

    The more access and control of account information we give our customers, the better able we are to help them with the really important part of their financial picture. The less time a Cascade business banker spends transferring funds between checking and savings, the more he or she can spend helping customers fine-tune their financial picture. It gives business bankers the chance to talk to their customers about employee retirement programs, financing their building, or buying another widget-maker. That’s where we’ll make money from online banking.

    Would we lose business if we didn’t implement online banking for a few years? Probably not. Will we win more business by offering this? Yes, but only in tandem with the personalized service we already offer business owners. But, there is no doubt that it does give us something to talk about at the next Rotary meeting.


    Categories: Small Business

    The Case for Digital Business Banking

    By Jim Bruene on October 2, 1998 10:31 AM | Comments

    Ever wonder why you can never get a straight answer to how big the small business market is? It’s because there are so many ways to slice and dice it. We like the SBA’s estimate of 13 million to 16 million. This includes both employer firms and the full-time self-employed. Table 1 provides some other choices for the top line of your spreadsheet.

    What’s this business worth for your bank? That depends on how you price and market small business services. Last year, McKinsey/BAI concluded that the small business market was worth $78 billion (OBR 9/97) across 5.6 million employer businesses, or $14,000/yr for each business. But as we pointed out last month (OBR 9/98), this figure doesn’t include the internal and external costs for accounting, financial management, and billing that can now be outsourced to Web-based service providers. We expect both financial and non-financial companies to compete for this growing market.

    Table 1: Small business market size (U.S.)




    Home offices

    39 million

    IDC/Link, 1995
    Business tax filers

    24 million

    IRS, 1997

    5.4 million

    Bureau of the Census
    Businesses with more than $500 in sales

    17.3 million

    Bureau of the Census, 1992
    Employed + FT Self

    13-16 million*

    Small businesses

    12 million

    Mentis, 8/98
    Quicken users

    10 million

    Number of business loans <$100,000 outstanding

    6.7 million

    SBA, 6/97
    Businesses that use computers to do their books

    6 million

    QuickBooks users

    2 million

    Businesses using the Net by number of employees (% of total)
    1 to 99 2.1 million (40%) ZD InfoBeads
    100 to 499 56,000 (75%) ZD InfoBeads
    500 or more 14,000 (95%) ZD InfoBeads
    Percent of 7 million small businesses that: (% of total)
    -- have access to the Net 3 million (43%) Mainspring, 6/98
    -- use online banking
    (PC or Web)
    550,000 (8%) Mainspring, 6/98
    Memo: consumer HHs 100 million  


    Small Business Banks

    Nearly all U.S. commercial banks serve the small business market. Yet, relatively few banks are using the Internet to build share. A search for “small business” plus “bank” on Yahoo! only turned up eight banks worldwide. Surprising, considering the number of small businesses using the Net for research and commerce. In fact, Ziff-Davis recently found that more than 40% of small businesses (<100 employees) are using the Internet. Furthermore, the Software Publishers Association reported that 23% of PC households claim to be operating a small business of some type from their home.


    Table 2: U.S. Banks serving small business



    % of Total


    Number of banks listing small business loans in
    Q2 97 call reports



    Number of U.S. banks offering online account access for small businesses



    Ernst & Young, 10/98
    Number of U.S. banks listed on Yahoo as offering small business banking services*



    Yahoo, 9/98

    * Searching on “small business” + bank resulted in 8 unique banks, 1 in Australia and 7 in the United States.


    Table 3: Prices for online small business banking at the top 18 small business banks

    Pricing model








    Free access + BP fee*


    $4.95 to $9.95


    Flat monthly fee*


    $3.50 to $35.00




    $0 to $35.00


    Surcharge for Quicken


    $1.50 to 8.95


    No account access




    Source: Mainspring, 6/98,

    *Pricing generally includes a limited number of bill payments with extra payments available for $0.21 to $0.50 per payment.


    Table 4: U.S. Banks who say they will offer online account access to small businesses


    OBR Estimates*



    % of Total


    % of Total
















    Source: Ernst & Young, 10/98; Online Banking Report, 10/98

    *Online Banking Report estimate plus or minus 33%; includes consumer or business online banking programs that includ access (Web or direct-dial) to business checking accounts.


    Table 5a: Micro-business friendly (MBF) banks*

    Bank Asset Size

    MBF Banks**

    All Business Banks***

    % MBF

    <$100 million




    $250-$500 million




    $500 million - $1 billion




    $1 - 10 billion




    >$10 billion




    Total Number




    Total Assets (billions)




    Table 5b: Total micro-business loans (<$100,000) outstanding at commercial banks


    MBF Banks**

    All Business Banks***

    % MBF

    $ billions





    2.2 million

    6.7 million



    Source: SBA, 1997

    *Micro-business friendly banks, according to the U.S. Small Business Administration (SBA), have significant business lending activity in loan amounts less than $100,000.

    **The 449 MBF banks make up 3.4% of total bank assets, but 13.2% ($14.8 billion) of the dollar value of micro business loans outstanding.

    ***Banks reporting small business lending data in June 1997 call reports.

    Table 6: U.S. Commercial bank business loans by loan size
    $ billions




    $1 million or more














    % Change






    Source: SBA, 1997




    Credit Usage


    Not surprising, more than three-quarters of all small businesses report usage of some type of credit. With more than 40% of small businesses now using the Internet (Table 1), the Web will increasingly become an important venue for selling and servicing business finance products.

    Source: Federal Reserve Board, National Survey of Small Business Finances, 1995; data compiled during 1994 and 1995 for fiscal year 1993

    * Suppliers not shown include family members, unrelated individuals, other businesses, and government (see table 8a and 8b below)



    Table 8a: Sources of traditional credit, 1993
    loans, lines and leases

    Credit Source

    % of Total Small Businesses

    Any financial institution


    Any non-financial institution


    - Family or other individuals


    - Government


    - Other businesses


    Source: Federal Reserve Board, 1995 (using 1993 data, see above)

    Table 8b: Distribution of total dollar amount of credit lines and loans outstanding, 1993
    Credit Source

    % of Total Dollars



    Thrifts and credit unions


    Nondepositor financial institutions


    Nonfinancial suppliers




    Source: Federal Reserve Board, 1995 (using 1993 data, see above)



    Table 9: Percent of small businesses using various types of credit

    Type of Credit Used

    % Using

    % of Total Dollars Outstanding (traditional credit only)

    Any use of traditional or non-traditional credit



    Traditional Credit
    Any usage



    Credit lines



    Mortgage loans



    Equipment loans



    Vehicle loans



    Capital leases



    Other loans



    Non-Traditional Credit
    Owner loans



    Personal credit card



    Business credit card



    Trade credit



    Source: Federal Reserve Board, National Survey of Small Business Finances, 1995; data compiled during 1994 and 1995 for fiscal year 1993

    Market Size/Demographics

    If you are looking to sub-segment the small business market, you may want to consider characteristics of the business itself, such as age, size, growth rate, industry, and so on. Another approach is to segment by characteristics of the business owner. For a wealth of data to support either approach, look at the SBA report Characteristics of Employees and Owners, 1997, available online at


    Table 10: Number of employees (all employers)


    Total Businesses

    Total Employees

























    7-yr Change (CAGR)

    0.42 (1.2%)

    12.5 (1.9%)

    CAGR = compounded annual growth rate

    *In 1995, 5.35 businesses with less then 500 employees employed a total of 52.7 million people; the 15,000 businesses with more than 500 employees employed a total of 47.6 million.

    Source: Bureau of the Census

    Table 11: Distribution of employer firms by number of employees

    Number of Employees

    % of Total















    Source: SBA from Bureau of Census Data


    Table 12: Self-employed as primary employer*





















    Source: Bureau of Labor Statistics

    *Does not include approximately 1 million reporting self-employment as second job; unknown how many reporting self-employment are also included in the employer counts in Table 10.


    Table 13: Self-employed by annual earnings, 1996

    Annual Earnings


    % of Total


    4.57 million


    $5k - $25k

    3.95 million


    $25k - 50k

    1.54 million


    $50k or more

    1.25 million



    11.30 million


    % of workforce



    Source: Bureau of Labor Statistics


    Table 14: Self-employed by age, 1996

    Age Range


    % of Total


    0.65 million



    2.16 million



    3.41 million



    2.75 million



    1.57 million



    0.77 million



    11.30 million


    Source: Bureau of Labor Statistics


    Table 15: Self-employed by gender, 1996



    % of Total


    7.08 million



    4.23 million



    11.30 million


    Source: Bureau of Labor Statistics

    Table 16: Non-farm business tax returns*




    Sole Props.


    1997 (P)




















    7-yr Change






    Source: IRS, 1998 P= Projected

    *Overstates number of business entities due to multiple tax returns being filed by some businesses.


    Table 17: New employer firms*











    Change: ’97 vs. ‘90


    Source: U.S. Department of Labor

    *State-by-state count of new business registrations. Includes approximately 200,000 businesses already operating in another state at the time of registration in the new state.


    Table 18: Business closures*
















    Chg ’97 vs ’90



    Sources: U.S. Department of Labor (terminations); Administrative Office of the U.S. Courts (bankruptcies)

    * State-by-state count of all business closing, overstated by an estimated 200,000 businesses who close in one state but remain in business in another.

    ** Bankruptcies included in termination total

    Note: In another study of closures between 1992 and 1996, the Bureau of the Census found that 57% of firms with employees and 36% of firms without employees were successful at the time of their closure.


    Table 19: Dissolution rates for businesses started between 1976 - 1978

    Length of Time

    % Dissolved During Period

    % Dissolved Cumulative

    After 2 years



    After 4 years



    After 6 years



    After 8 years



    Source: SBA from Dun and Bradstreet database which includes mostly employer firms

    Table 20: Percent of businesses operating in 1992 that close in subsequent years


    Without Employees

    With Employees


















    Cum (4 yrs)




    Source: Bureau of the Census

    Note: 57% of firms with employees and 36% of firms without employees were successful at the time of their closure.


    Table 21: Age of businesses, 1992
    businesses with receipts of more than $500

    Launch Year

    % of Total













    Before 1980


    Source: SBA from Census Bureau data

    Note: Excludes non-S corps (mostly large companies)


    Table 22: Home office usage, 1995



    % of Total

    Full time Self-employed individuals

    11 million


    Part time self employed

    12 million



    6 million


    Employees doing some work at home

    10 million



    39 million


    Source: IDC/Link, 1995


    Table 23: Small business segments to target



    Employees of small businesses

    57 million


    11 million

    Businesses less than 2 years old

    1.5 million


    6 million

    Online auction buyers and sellers

    several million

    Businesses closing but not bankrupt

    800,000 per year

    Businesses in your geographic market


    Businesses in any vertical segment (coffee shops, attorneys, etc.)


    Online merchants


    Source: Online Banking Report, 10/98

    *estimated plus or minus 25%


    Virtual Offices for Small Businesses

    By Jim Bruene on September 5, 1998 11:10 AM | Comments

    HotOffice provides the most full-featured and easily customizable virtual offices.

    Here’s the customized “start” page for Online Banking Report. You can easily add Web links by pressing a button and typing in the link and description.


    The Company: HotOffice Technologies, Inc. is a privately held company founded Feb. 1, 1995; Intel is an investor along with two venture capital firms; headquartered in Boca Raton, Florida.

    The Product: Provides Web-based intranets, aka virtual offices, for small businesses on a per-user subscription basis; emphasis on collaboration, team communication, and document sharing for businesses with multiple offices, mobile workers, and telecommuters.

    Accolades: PC Magazine Editor’s Choice (Feb. 10, 1998); PC Computing 4-star; Group Computing A rating; CTI Magazine’s Editor’s Choice Platinum Award, Small Business Computing and Communications 4 stars.

    Co-Branding Partners (announcement date): GST Telecommunications (Jul 15, 1998); GTE (Jul 8, 1998); 3Com (Apr 23, 1998); Boca Research (Apr 20, 1998); Mindspring (ISP) (Feb 3, 1998).

    Contact: Phone: 561-995-0005; Fax: 561-995-5990; Email:

    End-User Cost: $12.95 per month per user ($11.95 each for more than 20) includes 20 MB of storage per user with extra capacity available for $5 per month per 10 MB; additional usage fees for optional third-party services such as D & B reports.


    •  Consolidated email: All email, including mail sent to any POP3 server, can be consolidated into one Web-based service accessible anywhere without being subject to advertising messages.
    •  Web calendar: Emphasis on scheduling and prioritizing tasks.
    •  Web links: Allows work groups to share bookmarks with each other.
    •  Reminders: Send messages now or schedule for future delivery to yourself and/or select members of the work group.
    •  Alert bar: Instant notification of new email, phone messages, bulletin board postings and documents.
    •  Message of the day: Post daily or rotating messages for everyone to see when logging in. ð
    •  Virtual phone message pad: Keep track of all phone messages in one location
    •  Central document storage/access: Securely store company and/or personal files in a central location for remote access, revision control and keyword search and/or safe back up.
    •  HotOffice viewer: Allows users to view documents, spreadsheets, presentations and graphics sent by others without installing additional software.
    •  One-button publishing from Microsoft Office applications: Upload files to the HotOffice server directly from Word or Excel using a button added to the menu bar.
    •  Threaded bulletin boards: Work groups can share ideas on private company bulletin boards
    •  Online conference rooms : Private online meetings can be held in secure chat rooms.
    •  Microsoft NetMeeting support: Users can make free long-distance calls over the Internet and participate in video conferencing and whiteboard sessions using Microsoft NetMeeting.
    •  Different levels of access: The business owner controls which users have access to documents and bulletin boards.
    •  Research desk: Search third party news and business information sources. Note: It’s pretty weak now but the company promises to beef up the selection shortly.
    •  Package tracker: Jumping-off point to quickly check package status with major carriers.
    •  Travel planner: Book tickets and make travel arrangements via ITN.
    •  Credit check services: Check credit ratings of potential business partners or vendors through link to Dun & Bradstreet.
    •  Productivity tips: New ideas are posted daily.
    •  Free technical support: Includes your own HotOffice Personal Trainer, a real person that contacts you shortly after the beginning of your one-month free trial.


    •  Save time with instant access to documents, calendar, and email anytime from anywhere.
    •  Reduce unproductive time playing telephone tag and creating massive email threads by collaborating with team members in real time.
    •  Save money compared to other intranet options.
    •  Improve decision making with more efficient and thorough sharing of ideas and information with online bulletin boards, phone messages, email, and reminders.
    •  Safeguard data with documents stored in a secure, encrypted off-site location away from the hazards of computer damage or theft.

    How it works:

    1. Business sets up a virtual office (first 30 days are free) establishing corporate ID, user IDs and passwords. Most functions can be operated with a simple version 3.0 browser or above (must support Java); but to take full advantage of document sharing and one-button publishing from Microsoft Office, a software application must be downloaded and installed on the user’s hard drive.

    2. Business authorizes additional users giving them access to various levels of the virtual office. Additional users can be installed at any time and given different levels of access.

    3. Business selects the tools it wishes to use, e.g. email and chat rooms.

    4. Business customizes its office with links to other Webs, company information, and personalized greetings.

    5. Business publishes (uploads) documents into the virtual office for sharing and collaboration.

    Visto is marketing a similar concept dubbed Visto Briefcase. The idea is to have users to load all their personal information onto a Web site, aka a “virtual briefcase” so they needn’t lug a laptop when traveling. The company offers a free version and the $9.95/mo Briefcase Pro.

    PlanetAll is more consumer-oriented with calendars, reminders, and finding lost friends (through its extensive affinity group archives). It’s the best calendar and reminder service we’ve seen; but don’t take our word for it, ask who bought it for $93 million in stock August 4, 1998. If you are looking to build a consumer-orientated calendar/reminder service, study PlanetAll.

    Reseller Opportunities: The standard deal for HotOffice partners, as listed on their Web, is a 10% revenue-sharing arrangement for referrals to HotOffice. Therefore, if you were to bring 1,000 users to HotOffice your share would be $1,300 per month, or about $15,000 per year; hardly worth the trouble.

    Consider the 10% share merely the starting point in any licensing negotiation. As a start-up, HotOffice would benefit greatly by an endorsement from someone in the financial services industry, especially if you are a known financial brand.

    Given the minimal incremental costs to add an additional user on the HotOffice server, we think you could cut a deal putting your clients onto the service for a fraction of the $12.95/mo retail cost. We’d start at $1/mo per user with a minimum commitment of one thousand users, plus your authorization for the company to use your name in its marketing.

    Future Improvements: The major new enhancement on the boards for HotOffice is unified messaging services that will allow the virtual office to be used to collect voice, fax and email messages. Traveling execs could then dial into the virtual office to handle all their different messages. Emails and faxes are displayed online; voice messages are played through the computer’s sound card.


    Earthlink uses Netopia to create $30/yr consumer-oriented Internet rooms for its ISP customer. Seven different themes are available including two oriented towards businesses and five targeted to consumers including Dilbert and Peanuts shown above.


    Virtual offices and/or simpler calendars could be used in different ways:

    1. Resell to business clients on a revenue-sharing basis as outlined in Reseller Opportunities above, creating a small profit center, garnering a smidgen of publicity, and differentiating your small business services.

    2. Give away to businesses and/or consumers providing better publicity and differentiation. But, depending on the licensing deal, it could be prohibitively expensive.

    3. Bundle with other online banking services for a flat fee. This would help differentiate your online services and pay for the product.

    Any of these three options could provide a lot of bang for the buck; delivering meaningful interactivity and product differentiation with a minimal investment.


    Comments -- Build New Web-based Businesses

    By Jim Bruene on September 4, 1998 10:59 AM | Comments

    Just as non-banks are using the Web to encroach on your turf, you can build new Web-based businesses that wouldn’t have been feasible just a few years ago. One such business if automated financial management and bookkeeping services.

    Eventually, it won’t be enough to simply offer robust cash management and online balance reporting to your business clients. With the Web as the ideal platform for building industry- and customer-specific service offerings, you’ll need to be more creative to make a name for yourself in the small business banking marketplace, circa 2001.

    You can bet the big banks will be creating killer small business Web sites to make up for any perceived service disadvantages. In turn, community banks will need to fight back with online offerings that enhance their level of personal service delivered to local businesses. Luckily, vendor offerings will make even the most complicated Web-based service affordable to the smaller financial institution.

    Whether you are small or large, we think you must pay attention to the accounting and billing needs of your business clients. Intuit has made tremendous strides in serving that need, and as they move into offering more and more financial products to their accounting software customers, banks will feel the pinch. Banks should consider teaming with Web developers to build small business financial and customer management systems that could be deployed in the next 18 to 24 months. By then, bill presentment will be picking up steam and can be incorporated into your Web-based solutions. Intuit will have it. Yahoo! will have it. You should too.

    The Concept

    Looking at the big picture, we see strong synergies between banking and accounting. Prior to the Web, there wasn’t a cost-effective way to bridge the gap between financial data housed in your mainframes with that housed in the PCs of your small business clients. Today, the Web is the ideal medium for tightly integrating your banking services with your clients’ accounting activities.

    Intuit has already built impressive software-to-bank linkages for QuickBooks and Quicken customers. To some extent, the shrink-wrapped software is a Trojan Horse, positioning Intuit-controlled links to its partner banks right on the desktops of your best clients. You can fight back by incorporating billing, accounting, and financial management functions on your Web.

    We think businesses would be very receptive to Web-based financial management services running on encrypted, secure and trusted servers controlled by the bank. The services would encompass these areas:


    *Approximate. Price would depend on a number of factors, including size of company, competitive offerings, quality of service, etc.


    You may be thinking, “We’re a bank not a software company. How can we compete with Intuit or Netscape in creating a compelling virtual CFO?”

    Answer: You may not have a choice. The big Web companies are moving into your turf in partnership with large financial institutions. Witness the sweeping alliance Netscape recently inked with Citibank. And that’s just the beginning according to Edward Horowitz, the head of the bank’s advanced technology group. We expect to see Citibank integrating payment and banking functions into the Netscape’s virtual office.


    Why Now?

    Deciding when to launch a novel small business service is more difficult. All the cliches are running through your head: stick to the knitting, walk before you run, stay away from the bleeding edge, and so on. Why rush into an unproven area such as Web-based accounting?


    •  You can be the first to integrate banking functionality into small business management software. The virtual offices we’ve previewed primarily deal with team collaboration and communications functions, e.g. virtual intranets to help employees work together. And we can’t find anyone offering virtual accounting or bookkeeping services, yet.
    •  By focusing on back office banking and accounting issues you will be able to differentiate yourself and offer services highly complimentary with your core banking services.
    •  If you can successfully pioneer a robust Virtual CFO product, you could license it to other banks, recouping your investment and then some.
    •  You can head off further inroads into your revenue base from Intuit partner banks.
    Virtual Checkbook

    The electronic checkbook is the foundation of any small business banking Web offering. Like foundations in the real world, it’s fundamental to the stability of your Web services, but there isn’t much you can do to differentiate it from other banks. It’s what’s on top of the foundation that will attract buyers.

    Nevertheless, a good virtual checkbook must include the following functions:

    •  balance inquiry across all business and personal accounts maintained at your bank
    •  transaction history including basic look-up/search capabilities to find all transactions by date range, by type, by check number range, and by transaction amount
    •  bill payment
    •  email to and from the bank

    Other desirable features:

    •  different authority/access levels for each account
    •  templates for common reports such as transactions by quarter, transactions by check number, etc.
    •  email integrated with bill pay including:
      • forms for creating payee communications quickly
      • filing system that stores all previous communications with the payee
      • search function for finding text strings in previous messages to payees
    •  fax/email statement
    •  balance notifications
    •  transaction confirmations
    •  wire transfer and ACH initiation
    •  downloadable directly into personal finance, spreadsheet, and/or accounting software programs
    •  email notification when bills are presented
    •  email forms for communicating different matters to the bank quickly
    •  permanent storage of all communications with the bank with search capabilities

    An example of Netopia’s virtual office from Netscape . This particular template is for a mortgage broker who could create a 10-page Web site complete with downloadable application in a few hours. Cost? Just $20/mo, or $200 for a year. Netscape also offers templates for 14 other business types.

    Virtual Office
    (aka Virtual Desk, Virtual Banker)

    Create a place within your Web for small businesses to set-up a home base for work and collaborating on the Web. These services are commonly called virtual offices or intranets. We also like the names virtual desk, briefcase, or banker. The Web services could also be marketed to the estimated 39 million U.S. households with a home office (source: IDC/Link, 1995). ð

    There are a number of virtual office vendors on the Web. The most visible is Netopia, which provides private-branded offices for users at Netscape’s NetCenter, GeoCities, and others. Netopia’s product currently focuses primarily on communications, offering real-time chat, email, IP telephony, and so on (see screenshot on previous page).

    The most full-featured offering is HotOffice profiled in this issue . The program has many desirable features that bank customers could use, but some of the most useful are lost amidst all the fancy bells and whistles that wouldn’t be used by the average small business. For instance, HotOffice is cluttered with collaboration tools so geographically diverse teams can “meet” on the Net to discuss issues, post documents, communicate with each other via message boards or real-time chat.

    We think banks could create their own simpler and easier to use virtual offices integrated with banking and financial matters. A further emphasis on local content/links could keep you ahead of the competition. Here are the features we recommend:

    •  Calendar/datebook/reminder service integrated with bill payment (OBR 6/98).
    •  Virtual safe deposit service that automatically stores financial and other files in secure, encrypted, off-site back-up files not accessible by anyone but the owner (not even bank personnel); can be retrieved on CD for disaster recovery (OBR 3/98).
    •  Free email with emphasis on secure communications with bank (OBR 3/98).
    •  Email notification services (OBR 8/98).
    •  Virtual receptionist that tells visitors how to get in touch with someone at your business.
    •  Company message boards.
    •  Ability to post documents to the Web that can be shared with everyone or just authorized employees and/or customers.
    •  Unified messaging service which provides a single Web page where users can send and retrieve email, faxes, and voice messages (for more information visit the Web site of JFax and VirtualPlus )

    Side Note: You also might consider setting up virtual offices for your own loan officers and other customer-contact personnel.

    Time Direct is a virtual time card for employees and contractors to track project hours, submit them for review, and receive payment (if applicable).

    Virtual Bookkeeper

    The Virtual Bookkeeper expands on the functions of the Virtual Checkbook and office.

    •  Billing statements and invoicing via email, fax, or snail mail; includes reminders, and confirmations.
    •  Online cash-based accounting functions including data entry, categorizing, and basic report generation.
    •  Bill payment/accounts payable monitoring functions such as email notification when payment transactions are awaiting authorization by business owner; email flags when payment transactions don’t clear in a reasonable time.
    •  Autopay function that pays certain bills automatically each month when presented or when preauthorized by client (now supported in software from Edify ).
    •  Full interbank transfer capability to and from any financial institution supporting ACH payments.
    •  Statement integration functions across bank and non-bank accounts (see MileageMaximizer
      OBR 8/98).
    •  Virtual credit card terminal with integrated email and hooks to accounting systems.
    •  Lock-box service for paper check processing with full integration to client’s accounting system (see Accounts Receivable: Other).
    • ð

    Virtual CFO

    Just like the real world, the Virtual CFO takes the data entered by the bookkeeper and puts it into a broader perspective that allows a business to be more profitable. The following features could be added to those already offered in the Virtual Bookkeeper, Virtual Office, and Virtual Checkbook modules:

    •  Online payroll with paper or direct deposit paychecks, and electronic payroll tax payments.
    •  Online federal and state tax return preparation and filing.
    •  Full-fledged double-entry online accounting services.
    •  Complete disaster recovery services including a redundant data center. Here’s an area that banks have a great amount of in-house expertise that could be turned into a profit center.
    •  Complete Web-based customer file management and communications services including integrated:
      •  invoicing/billing with Web integration
        (e.g., bill presentment)
      •  payment services/inquiry via the Web
      •  email/fax/voice messages automatically confirming payment
    •  Access to a CPA-on-call to handle questions. The CPA could deliver advice publicly on your Web, privately through confidential conversations with your business clients, or both.
    •  Automatic excess funds allocation to minimize interest expense and/or maximize interest income. For added value, the funds “sweep” could go to investment and loan accounts at any financial institution (not just yours).
    •  ECommerce services for hosting secure transactions (more on that next month).
    •  Accounts receivable management that automatically notifies the business owner and/or customers when accounts are past due; includes linkages to Web-based payment window (below).
    •  Virtual payment window that clients can display on their Web site to accept credit card or check/ACH payments online; includes integrated messaging confirming orders.
    •  Extensive management reporting easily customizable using drop-down menus; for example, revenue reports by customer, accounts receivable aging, quarterly P&L; etc.
    •  Mail merge capabilities that works across any medium, email, fax, page, voice message, or snail mail; option to outsource snail mail services to a mail house; label printing utility.
    •  Retirement plan administration including Web views for participants; includes email statements.
    •  Project tracking module integrated with reminders and other Virtual Office services.
    •  Employee expense reporting, approval routing and reimbursement services (see Expense Reporting below for more detail).

    One Business’s Wish List -- The Ultimate Web-based Bookkeeping

    By Jim Bruene on September 3, 1998 10:43 AM | Comments

    "We’ve designed our ultimate Web-based bookkeeping, billing and
    customer management system; a blueprint for a small business financial hub."

    On the following three pages we outline the financial services and operations wish list for our small business. This functionality would allow us to run at maximum efficiency by automating many of the repetitive financial and accounting tasks. While this “focus group of one” isn’t projectable to your entire customer base, we think it speaks to the needs of small, service-based businesses. We encourage you to run focus groups and post “wish lists” on your small business Web to find out what would appeal to your current and future business clients.

    Primary Interface/Platform

    The financial hub for our business must run on a network. Why?

    •  Remote access: Multiple people must access customer files from multiple locations.
    •  Data synchronization: We don’t want to hassle with synchronizing the files across our eight desktop and laptop computers.

    The network must run on an outsourced server, preferably at a financial institution, for several reasons:

    •  Security/fraud: We know a financial institution has better security against hackers and thieves than we do.
    •  Data integrity/backup: We aren’t much good a backing up data and storing it off-site, we want someone else to do that.
    •  Peace of mind/trust: This is important. If you can’t trust your bank, whom can you trust? If we outsource the financial stewardship of our business, it must be someone who is well-capitalized, honest, ethical, and conservative.
      And it wouldn’t hurt if they had a few thousand regulators looking over their shoulders as well. This is not something we want the low bidder to handle. Financial institutions fit the bill to a tee.

    Finally, the server must be accessed via the Web using standard browsers:

    •  Travel: We need to be able to dial-in from the road using our laptop or other terminals at the hotel, airport, or another company.
    •  Ease of use: Our people already know how to navigate the Web, we don’t want to train anyone on proprietary technologies.


    Delivery Methods

    The Web should serve as the foundation of our banking and accounting activities such as:

    •  data entry
    •  changing service preferences
    •  running reports
    •  paying invoices
    •  running payroll
    •  invoicing customers
    •  processing payments
    •  looking up answers to detailed questions

    But we want to use email, fax, voice mail, and paging to handle routine matters such as:

    •  balance inquiries and reporting
    •  transaction confirmations
    •  recurring bill payment; reminders and payment authorizations
    •  exception reporting
    •  routine customer service queries

    Service Levels/Guarantees

    Once we get past the issue of trust, our next biggest concern revolves around quality control and security. We want written guarantees that you will:

    •  Protect us from fraudulent activities from your employees, our employees, and outsiders.
    •  Back up our data on an agreed upon schedule and make it available within hours if we have a systems failure (you could charge a premium for more frequent backups).
    •  Ensure that our payments and transfers are made in a timely fashion.
    •  Build logical controls into the system to protect us from our own data entry errors, omitted payments, forgetfulness, and so on.
    •  Be available to help 24 hours per day.
    •  Protect our privacy from your employees, our employees, and outsiders.

    Financial Control

    Even with the guarantees listed above, it’s still important that we don’t feel a loss of control when we turn over the financial functions to you. Therefore, ð we want to be bombarded with communications about our account, especially at first. As we grow more comfortable with the system, we can ratchet down the message frequency. Our wish list:

    •  An email each time our account is accessed telling us exactly how it was accessed (e.g., branch, phone, ATM, Web), who accessed it, and what exactly was done. Not only does this promote peace of mind, it provides a convenient record of our own activities.
    •  An email, fax, voice message, or page when something outside normal parameters occurs such as out-of-state ATM withdrawals.
    •  The ability to adjust account preferences using pull-down menus on your Web; and by all means use your expertise to suggest/install useful account “watch dogs.”

    Access Controls

    We have a number of different people that need access to various components of the customer management system. So we need a flexible system of access permissions all controlled by the business owner with oversight from the bank (e.g., if one Saturday night a request is received to allow the bookkeeper to begin authorizing payments to anyone, the bank should verify the change with the owner prior to implementation). Specifically, the system should:

    •  Allow our bookkeeper to do data entry and reconcile the accounts, but not move money without authorization of the owner.
    •  Allow our CPA to access and download all data.
    •  Allow our marketing and customer service managers to access and update customer files.
    •  Allow our Webmaster to access and update customer password files.
    •  Use multiple passwords, user names, challenges, and logic controls to guard against unauthorized movement of funds outside the account.
    •  Support consolidated personal and business financial reporting and analysis (for the owner only).

    Customer Service at the Bank

    We want our own e-rep; a single source of contact who has access not only to our bank records, but also limited access to our internal files. This person should be skilled on the nuances of online banking and be able to recommend appropriate financial services as needed.


    Banner ad for Fleet’s “AM Fax Service,” a core requirement for our dream service.

    Business Checking Account

    The checking account is the core account, so we want maximum flexibility in how data is delivered and reported. And it should be easy to change the delivery mix at a moment’s notice to accommodate changing needs or travel schedules. Here’s our ideal set-up:

    •  Fax and email each morning summarizing all account activity from the previous day along with the closing balance (see Fleet ad above). The fax is important because it’s easier to scan than an email, and we want a printed record anyway. We should be able to simply adjust the frequency, time of day, and fax number where reports are sent. We would also like to be able to choose exactly what data elements are displayed on the fax although at no time should full account numbers be displayed (the last four digits will suffice for identification purposes).
    •  Simple Web templates to run quick periodic reports of account activity (weekly, monthly, quarterly, and annually).
    •  Email whenever our accounts go above or below preset balance levels.
    •  Ability to transfer funds to and from an investment account by replying to the balance notification email.
    •  Ability to access check images (front and back).
    •  Funds transfer to and from any financial institution supporting ACH.

    Bill Payments (outgoing)

    •  Pay bills/invoices through multiple checking accounts, credit cards, wire transfer, or ACH. The system should remember exactly how the bill was paid previously. .
    •  Multiple levels of bill payment authority. For example, our bookkeeper should be able to set up every bill for payment, but he/she might only be able to pay certain types, or certain maximum amounts, without additional authorization.
    •  Optional email, pager, fax and/or voice reminders of pending payments; including an optional “snooze” button (snooze allows you to reply back to have the message sent again the next day).
    • ð

    •  Pending payments can be manually input and/or electronically scheduled (as electronic bill presentment becomes widely adopted).
    •  Integrated messaging that automatically sends an email (or fax, page, voice message) to the payee alerting them to the incoming payment (see mock-up OBR 2/986)
    •  The message should be pre-filled with all payment details including the date sent, check number, estimated arrival date, payee name, amount, our account number with the payee, and our standard personal message and signature line. We should also be able to personalize the message on the fly. The payee set-up form should look like a good contact manager (e.g. ACT!) with fields for email number, name, title, and so on.

    Payroll and Payroll Taxes

    •  Automated payroll system to process employee paychecks via direct deposit or regular mail.
    •  Electronic payment of payroll taxes.
    •  Integrated messaging so we can send each employee an automatic email “pay stub” and personal message(s).
    •  Integrated time sheet for hourly employees and contractors (see TimeDirect screenshot).

    Accounts Receivable: Billing

    We want our entire customer database running on the Web so we can do billing, payment processing, collections, and so on. Automated messaging tools should be available from every function so that we can easily communicate with clients via their preferred method (email, fax, page, voice, or snail mail). The specific functions we are looking for:

    •  Invoices presented to our customers on the Web with payment allowed by credit card or ACH.
    •  Invoices (paper and electronic) with a link to the Web page housing the customer’s billing statement.
    •  Payment reminder messages (paper and electronic) automatically generated at periodic intervals.
    •  Easy-to-prepare customer lists sorted by billing date, past due amount, name, date paid, amount paid, and so on.
    •  Mail merge capabilities so that selected customer groups can receive personalized messages by email, fax, page, voice message, or snail mail.

    Accounts Receivable: Card Processing

    As you can see by the table on page two, our biggest external financial expense each year is credit card processing. Therefore, we expect a robust Web offering in this area. Most of the following features are already supported by our current vendor, Authorize.Net a Web-based virtual terminal program resold by Humboldt Bank and others. Authorize.Net says it is being used by 9,000 merchants. Here are our requirements for credit card processing (*already supported by Authorize.Net):

    •  Credit card numbers received off-line can be entered into a Web-based form.*
    •  Credit card numbers received online are automatically authorized in real time.*
    •  Credit card charges can be submitted automatically at periodic intervals to support subscription services.
    •  Email receipt sent automatically to buyer.*
    •  Email confirmation sent automatically to business owner.*
    •  Ability to query previous batches of charges.*
    •  Ability to change/cancel charges before each batch is processed.*
    •  Standard personalized message added to beginning and end of email receipt.*
    •  Ability to change email messages on the fly.
    •  Integration with customer database/accounting modules so customer record is automatically credited once card authorization is received.
    •  Automatic reconciliation of charges processed vs. amount deposited in our checking account.

    Accounts Receivable: Other

    •  Integrated access to credit evaluation services such as D&B and NetEarnings (OBR 6/98) and general business information databases such as EDGAR, so we can easily research our clients prior to a sales, service, or collection call.
    •  Lock-box for paper check processing integrated with our online accounting system. We want paper check payments to go directly to the bank to be entered directly into our accounting system.
    •  Scanned images of incoming payments available for viewing on the Web. A link to the scanned image should be on our daily fax and email (see Business Checking).
    •  If a lockbox isn’t cost effective, then use a messenger (or Federal Express) to pick up our deposits.


    Loan Services

    Integrate loan services at every turn. When our line of credit starts to fill up, offer a mini-application for a temporary or permanent line increase. Our receivables and complete financial situation are already available on the Web for the loan officer to review, so paperwork should be minimal or nonexistent. Also, let us know before we reach a critical cash crunch if additional credit is unlikely to be granted.

    Expense Reporting/Reimbursement

    Employees should be able to submit expense reports and be reimbursed by filling out a customizable template on your Web. For more ideas and information, refer to the Web site of expense report service provider Extensity ).

    Report Writing

    A complete suite of common business reports should be available, e.g., quarterly P&L, budget monitoring, accounts receivable aging and so on. The reports should be easily customizable using drop-down menus. A good demonstration of drop-down menus at work can be seen at Yahoo! Finance <>. Set up a stock portfolio, then select “edit your personal view.”

    Tax Reporting and Filing

    Data should be downloadable in various formats to facilitate transferring to our accountant and/or importing into tax prep packages. Tax calculators should be available to help us project tax liabilities and do what-if projections.

    Categories: Small Business

    One Small Business’s Dream Financial Services Package

    By Jim Bruene on September 2, 1998 10:39 AM | Comments

    In 1997, 23.6 million nonfarm business entities filed U.S. tax returns (source: IRS). By weeding out the hobbies and tax dodges, the SBA estimates there are between 13 and 16 million businesses in the United State. All but 15,000 have fewer than 500 employees, and only about a third, 5.4 million, have employees. Even so, this group employs 53% of the private nonfarm work force and accounts for 51% of the private gross domestic product (source: SBA, 8/98).

    The small business sector spends a considerable amount of time and money on financial matters. Last year we reported on the McKinsey/BAI 1997 study that showed the average annual financial services expenditures of 5.6 million U.S. small businesses was $14,000. After removing insurance, the average was $7,700 (OBR 9/97).

    But this only counts the money paid to financial services companies. It ignores the significant internal costs associated with financial management such as accounting, bookkeeping, payroll, treasury, and so on. With the Web, banks have an opportunity to compete not just for the traditional financial products, but also for the entire financial operations of the business.

    One Business’s ROI

    Let’s take a look at the financial services costs of a very real business: ours. We have a database of several thousand past, current, and hopefully future clients. Much to the chagrin of my marketing manager, we still manage the customer database, invoicing, and accounts receivables, with Microsoft Word, Excel, and Money. It’s cobbled together, but it works (sort of). We’ve considered a move to QuickBooks and Access, but we’re holding out for something Web-based that works better with our telecommuting work force.

    As a service business, we use cash-based accounting. Incoming payments are a mix of checks and credit cards with the occasional annoying wire transfer, no cash. Not including financing costs and tax prep, our out-of-pocket banking expenses are just $4,200 per year, 85% of that going towards credit card processing (see table). That’s less than 15% of our total $28,800 annual “financial expense.” It’s the internal costs that hurt the bottom line.


    What about those internal costs? Could they really be reduced? Not entirely, but we think at least 50%, or $12,000 annually, could be eliminated through Web-based automation. The bottom line: a bank, software company, or Web-based business delivering a reliable customer and financial management program could charge us up to $1,000 per month and we’d be ahead.

    If you are a bank trying to win our business, don’t waste time demonstrating how you can lower our banking costs. They are not material. Tell us how you can streamline our routine office paperwork and bookkeeping; become our Virtual CFO. When you’ve built that, we’re buying at (206) 517-5021.

    Categories: Small Business

    Creating a Virtual Finance Department for Small Businesses

    By Jim Bruene on September 1, 1998 10:34 AM | Comments

    Few companies dominate a sector the way Intuit dominates small business accounting software. According to the company, five of the six million small businesses using computers to do their books use Intuit products. Two million use QuickBooks, which accounts for eight of every 10 retail accounting software sales (source: PC Data). But with an 80% market share, Intuit must look elsewhere for growth; and financial services are a natural fit. With Intuit aggressively integrating banking and Internet functionality into QuickBooks, bankers should be on notice. Intuit and its bank partners are after your clients.


    Timeline: Online Financial Services in QuickBooks
    Dec. 96 Online banking and online payments added to QuickBooks*
    May 98 Loan/lease application via link to Intuit’s Web site
    Sept. 98 Online payroll taxes and direct deposit directly from QuickBooks

    Source: Intuit, 9/98 * Online banking is available from 40 participating banks (9/4/98); online banking debuted in Quicken in Oct. 1995.

    After nearly four years as a small business, we are beginning to appreciate Intuit’s strategy. QuickBooks is becoming not just an accounting program, but a place where small businesses can manage their entire customer file
    . The program still suffers from the slow development cycles associated with shrink-wrapped software. But as Intuit ports the functionality to the Web, businesses will be able to log in to to manage all types of paperwork; from billing to payment processing to tax preparation; those repetitive, non-revenue producing activities that can be a continual thorn in the side (we speak from experience).

    Fortunately, there are several ways to play in this game: pay Intuit for a direct connection to QuickBooks; work with other software providers; or build your own service on the Web . We believe business owners will pay considerable sums to off-load financial operations if the service provider is 100% trustworthy, has adequate capital, and a fiduciary responsibility; like a bank for instance. And we’re not talking about raising checking fees by a
    buck or two. A business might conceivably pay hundreds or even thousands per month if it improves their bottom line and simplifies back office operations and paperwork . We’ve dubbed this service offering, The Virtual CFO, and we expect to see it on Web sites in late 1999.


    Tailor-Made Service for Small Business Banking Webs

    By Jim Bruene on July 1, 1998 7:39 AM | Comments

    Net Earnings, yet another Silicon Valley financial services start-up, has created a service tailor-made for small business banking Webs.

    CreditFYI allows users to easily evaluate the credit quality of businesses using simple Web-based forms. The entire process takes about 3 minutes and costs just $14.95.

    But the best part of the service is the concise, easy-to-read, and graphical summary of the business’s credit profile (screenshot left).



    Front page includes credibility-building logos of partners Fair, Isaac and Experian.

    CreditFYI Advice for Denying Trade Credit

    If you choose to decline credit or give less favorable terms, use the following explanations:

    •  They have had relatively little business credit experience.
    •  They have had overdue payments.
    •  They have assets pledged as collateral which financially solid companies do not ordinarily use as collateral.
    •  They have had relatively few satisfactory trade credit relationships.

    Source: Net Earnings, 6/26/98,

    Launch Date: June 1998

    Pricing (end-user): $14.95 per credit evaluation

    How it Works: Since business credit information is not subject to the privacy issues inherent with consumer data, the product requires fewer identify verifications, and consequently is easier to use. Although it’s targeted to businesses, any interested party can use it provided they have a valid credit card number. The user simply enters the target company name, verifies the entry from a list of business name(s) matching or close to matching the desired business, enters their credit card number, and presses submit.

    Market Potential: According to Net Earnings, there are currently 3 million small businesses using the Internet. The company estimates that each small business has the need to evaluate business trade credit 30-35 times per year; although most currently don’t use the solutions available from Experian, Dun & Bradstreet and others because they are too time consuming, too expensive, and/or businesses are simply unaware of their existence.

    In dollars the potential is:

    $15 per report

    x 32.5 reports per year

    x 3 million small businesses

    = $1.5 billion per year

    The market would expand as the 7 million small businesses NOT using the Internet today began doing so during the next 5 to 10 years.

    Business Model: The service will be sold directly on the CreditFYI Web site and in co-branded partnerships with financial institutions and other Web-based information companies. The company could also sell marketing sponsorships on its Web site.

    Future Products: Net Earnings is planning to develop an automatic monitoring service to be sold on a subscription basis. The monitoring service would keep the user apprised of any changes to the target companies’ financial situation so trade credit terms could be changed accordingly, and/or collection efforts could be accelerated. This would be an ideal enhancement for an online business banking program.

    The company also operates the Small Business Center , a small business site positioned as a one-stop shopping service for business related financial and other services. The company is also launching a separate loan-related offering called LoanWise that will compete with Intuit’s Business CashFinder in matching businesses looking for credit with lending organizations.

    Financial institution Cost:

    Net Earnings plans to charge a fixed license fee plus a transaction fee for each credit evaluation delivered. At the MSRP of $14.95 per report, a bank can pocket a few dollars on each transaction. The remainder of the fee compensates Net Earnings and its two partners: Fair, Isaac who provides company info and Experian who provides credit information.

    Financial institution Opportunities: Net Earnings is actively looking for banking partners to offer CreditFYI to their clients on a co-branded basis. Banks could use the service in a number of ways:

    •  Spice up small business Web offerings with a useful transaction-oriented service; a welcome departure from the rampant brochure-ware in the market today (OBR 9/97).
    •  Bundle it with other online banking services to differentiate your online package from others.
    •  Position it as the centerpiece of an image marketing campaign, or as a proof point of how your bank does a better job of taking care of business.
    •  Use it as a traffic builder to increase the flow of new prospects to the bank’s Web.
    •  Operate it as a stand-alone, fee-based profit center.

    Financial Institution Pros:

    •  You could be first on the block to offer CreditFYI.
    •  The fast, useful, and cost effective service would provide a good impression of your bank’s small business services.
    •  It would attract business prospects to your Web, especially if non-customers were allowed to use it.
    •  Helps build relationships with existing business customers.
    •  Could be a breakeven operation, or even a minor profit center.
    •  Easy to implement.
    •  Low-risk offering with little financial/operational downside and few privacy concerns.
    •  Can be integrated with bill presentment offerings, e.g., before presenting an invoice for payment electronically, the biller could check the credit status of the recipient and alter payment terms accordingly.

    Financial Institution Cons:

    •  Information presented on new and/or small businesses is often sketchy; can be mitigated by bundling more information into the service such as search engine results.
    •  Risk rating can be misleading if based on non-current or small trade credit info.
    •  Potential litigation from parties denied trade credit based on inaccurate info in the reports; could be mitigated contractually with indemnification from the information providers.
    •  Inability to differentiate service if every bank begins to offer on the same co-branded basis; could be mitigated with exclusive contract, private-branded offering, or bundling with proprietary bank services.
    •  Little upside for the service (unless you make an equity investment), especially once it’s an established service offering; you would probably get more bang for your buck by improving the loan origination functions of your Web.

    Analysis: In testing the service, we found it to work even faster than promised. It took just 1 minute and 43 seconds to find our target company and retrieve its business credit report. That includes entering and authorizing a credit card number, choosing a company to evaluate, and downloading the evaluation. We’ve spent far longer waiting for a single bank’s home page to download. This makes this product one of the few financial services “impulse purchases” on the Net. For a total investment of 103 seconds and $14.95, businesses won’t think twice before ordering credit reports on all their clients.

    In comparison, Experian’s Snapshot Report took 2 minutes and 29 seconds, but that was after spending nearly 3 minutes registering for the service (on subsequent visits registration would not be required).

    Net Earning’s report was very easy to read and could be digested in about 60 seconds. The entire report only contained about 150 words. But we were somewhat disappointed at how little information the report contained. That has more to do with the sketchy nature of trade credit files of small businesses, than anything Net Earnings can or can’t do.

    However, we found it puzzling that Net Earnings supplier, Experian provides a few more bits of data such as principal name, estimated employees, estimated annual sales, and aggregate dollar value of reported trade credits in its $14.95 Snapshot Report. According to Net Earnings, the extra info isn’t provided for “technical” reasons and will soon be added.

    Regardless, a bank offering CreditFYI would be wise to bundle additional information with the credit report, such as search engine results on the target company and/or white/yellow page info from BigBook or others. We predict Net Earnings will do the same in future releases if you prefer to wait.

    We spoke with Mr. Grossman and Mr. Belser in San Francisco a few weeks ago. They are anxious to finalize distribution deals with banks, but don’t want to give up their branding if at all possible. They wouldn’t rule out a private-branded deal, but the partner would have to make a significant investment in order to compensate the company for hiding their brand.

    If you are comfortable with a co-branded arrangement, you may be able to get in on the ground floor under favorable contract terms compared to those that come later. In addition, a major player may be able to participate in the company’s upside with an equity investment.

    Net Earnings needs help finding the three million small businesses, educating them on the benefits, and getting them to try the new service. Banks, with credibility and existing financial relationships with Net Earnings target market, are ideal distribution partners.

    No matter how you structure it, if your 1999 plans include attracting more small businesses to your bank, we recommend a trip to the Bay Area to discuss the possibilities with Mr. Grossman.


    At Fair, Isaac, Latimer Asch is VP Commercial Products, (415) 472-2211.
    At Net Earnings, Michael Grossman is CEO, Scott Belser is COO, , (650) 401-3600.


    Categories: Service, Small Business

    Use a Webmaster-in-Residence for Small Business Management Information

    By Jim Bruene on March 20, 1998 7:47 AM | Comments

    Use Non-Financial Content Areas to Support Your Online Strategies with: Small Business Information Services

    Being an emerging business ourselves, we would cherish, even pay for a good source of Web-based small business management information. Not that there isn’t a lot available online. A search on “small business” on AltaVista turns up 415,000 documents.

    But which of those hundreds of thousands of sources provides concise and accurate information? Small business magazines such as Inc. provide a wealth of general articles and case studies but lack specific regional resources needed by businesses (e.g., sources for business liability insurance in Omak). A bank, or anyone else for that matter, could make a name for themselves online by providing vital small business resources in an unbiased fashion.

    Our September report detailed 45 online programs that financial institutions could offer business clients including these five non-financial areas:

    Non-Financial Business Services

    • virtual shipping center
    • virtual research center
    • virtual professional services center
    • virtual customer network
    • virtual business concierge

    In September, we were surprised to find that only 19 banks showed up on Yahoo when searching on “small business” and “bank.” We are even more surprised to find the number remains little changed six months later.

    One reason more banks aren’t offering small business services is that they are difficult to make relevant and keep up-to-date. It can also be difficult for a bank officer to put themselves in the shoes of a small business owner. For those reasons, we recommend using either a Webmaster-in-Residence or outsourcing the area to small business experts. Corestates used the latter approach, licensing their excellent small business area from Entrepreneurial Edge Online


    Use Fee Email Forwarding to Your Advantage

    By Jim Bruene on March 4, 1998 1:14 PM | Comments

    Use Non-Financial Content Areas to Support Your Online Strategies with Free Email: Forwarding

    If free email is a bit ambitious for your budget, or you are concerned with the customer service issues, consider a much simpler program that offers many of the same benefits. An email forwarding service allows users to create an email address pointed to your server. But instead of storing the email on your site, your server automatically redirects it to any location selected by the user. Then if the user changes their Internet service provider they don’t have to change email addresses. They simply inform your server and the mail is automatically rerouted. The advantage for you is that users could be required to maintain an account in order to retain the free forwarding services.

    Technically, it doesn’t take a whole lot to implement free email forwarding. The biggest challenge is explaining the benefits to users. As in number 11 above, the domain name used to create email identities should appeal to your target market, e.g. .

    A couple other suggestions:

    • Post a privacy statement explaining that you will not be able to view emails forwarded through your servers.
    • Offer the service advertising-free to differentiate it from other forwarding services.
    • When users register for the forwarding service, offer a checklist of information they can request from you via email.

    How to Maintain Non-Financial Content on a Budget

    By Jim Bruene on March 2, 1998 10:25 AM | Comments

    Add a Webmaster-in-Residence position!

    My son’s school has an artist-in-residence program whereby accomplished artists from around the community teach their specialty for a few weeks or months. Over the course of his elementary school years, he will be exposed to dozens of artists who approach their work in many different ways. It’s cost effective for the school compared to hiring a full-time staffer, it provides a far more diverse education to the students, it puts needed revenue in the artists’ pockets, and everyone learns a lot.

    Why not copy this approach for your Web? Create a Webmaster-in-Residence (WIR) program, where bank employees, students, and/or contractors drive the development/maintenance of your non-financial Web content for short periods of time. Small business content would be especially well suited for this type of program, since you could tap MBA students or independent contractors (often small businesses themselves) to maintain the site.

    WIRs could serve a three-month term providing four different perspectives over the course of a year. For example:


    *WIR stands for Webmaster-in-Residence

    In addition to their major content-creation projects, WIRs could also be charged with day-to-day maintenance responsibilities such as:

    •  Checking every link on the site at least once per month. Software tools can automate this task.
    •  Responding to user feedback and comments regarding the Web.
    •  Editing, updating, and improving the existing body of work.
    •  Maximizing exposure of your Web in search engines, Web award sites, Internet resource directories, yellow pages, link exchanges, etc.
    •  Maintaining relationships with current and potential Web sites posting links to yours.
    •  Tracking competitive Webs.
    •  Identifying inexpensive promotional opportunities in your target markets.
    •  Seeking out comments and suggestions from employees, users, and non-users through an online suggestion box, participation in employee meetings, participating in and monitoring USENET forums and listservs.
    •  Conducting usability testing.
    •  Evangelizing the Web site at internal meetings, networking/speaking with professional groups, and engaging prospects in email discussions.


    $40,000 Webmaster-in-Residence


    1. Create an ongoing intern position paying the going rate for college students in your area. Assume the intern is familiar with the Web and able to use/learn basic HTML with minimal training. Interns would work three-month stints.

    Annual Cost = $20,000 to $30,000 (at $10-15/hr)

    2. Set them up with state-of-the-art Net access with 56k or faster access.

    Annual Cost = $2,000 to $3,000

    3. Budget a half-day per week to supervise/ review/approve their work.

    Annual Cost = $2,500 (at $50/hr)

    4. Ongoing technical support to test and implement WIR content on your Web (varies depending on technical abilities and what is being done).

    Annual Cost = $5,000 to $10,000+

    5. (Optional) Incentive bonus based on growth of hits/visitors/request for info/loan apps/etc.

    Cost = $2,000+

    Source: Online Banking Report estimates, 3/98


    CompuBank is First Independent Bank Launched Directly onto Internet

    By Jim Bruene on December 17, 1997 4:04 PM | Comments


    CompuBank (Houston, TX; in formation) will become the first independent bank launched directly onto the Internet. It will also become the first federally chartered Internet-only bank (i.e., national bank). The other two Internet-only banks, Security First Network Bank and Atlanta Internet Bank, were both spinoff divisions of traditional financial institutions (Cardinal Bancshares and Carolina First respectively) and were approved via the Office of Thrift Supervision.

    The bank received preliminary approval from the OCC on August 20, 1997 to open an Internet-only financial institution. But the bank will be on a short regulatory leash until they prove themselves. For the next three years, the bank is required to seek OCC approval for each new product introduced. This will put quite a burden on management which will need to broaden Compubank’s product line relatively quickly if they hope to become a viable company. Prologic will be providing the online banking platform: its Ovation product running on Windows NT.

    Initially, the bank plans to refrain from lending, hoping to earn enough of a spread collecting deposits online and investing in government guaranteed bonds. This is a contrarian strategy, but we won’t comment until hearing more of their business plans. They may have identified some unique transactional niche (such as online money orders) or vertical markets (ISP owners) that will allow them to turn a profit. At least it lessens their CRA burden. Given that the bank was not planning on becoming a lender, the OCC granted the bank’s request to be treated as “limited purpose.” The bank will satisfy CRA obligations by providing access to online banking services for low and moderate income individuals in the Houston area.

    Contacts: Frank S. Goldberg is CEO. Mr. Goldberg started Houston’s Security Bank in the 1980s. Jonathan H. Lack is EVP Marketing and Planning, 713.871.1422, Robert Wilband is CEO at Prologic,, in Richmond, BC, Canada, 604.278.6470.

    Categories: CompuBank, Small Business

    Business Models Concentrating on Tangible Revenues

    By Jim Bruene on December 3, 1997 2:16 PM | Comments

    Many financial institutions have gravitated towards a quasi-breakeven model for bill pay, charging $4-6 per month to cover outsourced payment processing costs. But breakeven service offerings don’t create a lot of excitement at the board meeting. Bill payment, as a core function of your Web banking services, needs to be a profit center.

    As with most products, there are tangible and intangible benefits of offering electronic bill presentment and payment. But intangible benefits are by definition difficult to quantify. If you can find a business model that relies on a measurable P&L, you’ll be in a much better position to gain approval for appropriate resources to run the profit center. With that in mind we’ll concentrate on tangible revenues.

    There are two primary revenue opportunities: service fees and interest revenue from bundled bill pay loans. Service fees for a “plain vanilla” consumer-oriented program top out at about $6/month. Anything more, and you’ll begin to send your customers to online forums complaining of price gouging. (Remember, your customers think they are saving you “hundreds” if not thousands of dollars servicing them online. And they are probably right in the long-term.)

    But, a value-added service offering may be able to command higher fees, especially from small businesses and individuals with more complicated finances. You can also sell optional ancillary services integrated with bill payment

    Revenue Opportunities

    Bill Pay Service Fees
    •  Monthly Service Fees: It’s not difficult to justify a small monthly fee. Consumers save $0.32 in postage for each electronic transaction. Last year (OBR 10/96 p. 12) we found that the mean number of bills paid by computer/modem-owning households was 11.3. If all are paid electronically, that’s an easy $3.62 in postage savings. But, 37% of those surveyed paid fewer than nine bills per month. Their postage savings would be less than $2.50/mo.
    •  Transaction Fees: Many banks have a limit to the number of payments covered by the monthly fee. For example, U.S. Bancorp, which has been offering PC banking since Jan. 1994, allows 15 payments each month for $5.95. Each payment after the first 15 costs $0.40. With 88% of PC/modem owners paying 16 of fewer bills each month, most will be unaffected by this fee. Yet, it forces business users, paying dozens of bills per month, to pay a higher fee. Though your contracts with payment processors might make this approach costly, we would keep the base monthly fee low, $3 or less per month, but charge $0.60 to $0.75 per transaction after the first 12 to 15. That way the casual user paying 2-3 bills will stick with your offering, while your heavy business users won’t care about paying a few bucks more. Transaction fees are based on the unit number of bills paid regardless of whether they are paper or electronic or whether they are for $1 or $10,000. It might make sense to levy the fee only on non-electronic payments, allowing an unlimited number of electronic transactions.
    •  Volume-Based Fees: Another approach would be to charge for the total dollar value of the payments rather than the number. The theory here is that those paying higher dollar amounts would be less price sensitive. For example:
    •  Annual Fees: Instead of a pesky monthly fees that users have to justify every month, an annual bill payment membership fee might be more palatable; especially if combined with value-added services such as e-mail confirmations and bill payment credit lines.



    Credit Line Revenues

    •  Higher Revolving Credit Balances: Become “first in line” when users need to tap additional credit reserves to pay bills and/or pay credit card balances in full.
    •  Higher Rates: Ultra convenient, preapproved bill payment credit can carry a hefty price tag; APRs of 15.9%, 16.9%, or more. As long as your rate undercuts the user’s standard credit card rate, you can capture the balances that would have been revolved on a card.
    •  Annual Fees: Again, the convenience and peace-of-mind benefits of a bill payment reserve can justify annual fees of $20, $30 or more depending on your market. Consider making the bill payment reserve a mandatory part of the bill payment account.
    •  Transaction Fees: In lieu of, or in addition to annual fees, users could be charged transaction fees each time the bill payment account was used.
    Ancillary Services

    In addition to bill pay credit reserves, we see a logical connection to other services which could be delivered via the Web, e-mail, fax, voice message, or mailed statement. Ancillary services could be priced on a per use standalone basis, through monthly/annual subscriptions, or bundled into a comprehensive checking/credit bill pay package accounts. We expect ancillary bill pay services to evolve in a similar manner as credit card enhancements. Some examples:

    •  bill pay reviews
    •  payment reports
    •  bill pay guarantees
    •  price protection
    •  customer service help
    •  bill pay audits
    •  bill pay insurance services (pays electronic bills in the event of death or disability)

    Cost vs. Price Dynamics

    Cost Center or Profit Center?

    Looking just at variable costs and revenues (ignore fixed costs such as marketing and ignore intangible benefits such as customer retention), electronic bill payment in its current half electronic, half paper state, is definitely a cost center.

    But that will change over the next five years as bills are zapped electronically to users, who zap payment back in real-time. And it appears the major presentment powerhouses, MSFDC and Checkfree, will compete with each other by offering interchange-like payments to banks of a few cents per bill who host the bills on their Web sites. So banks would get compensated indirectly from the billers for handling payment transactions and customer service queries. EBP may end up as a profit-center in its own right, or at least a break-even proposition.

    Lower Fees May Increase Total Revenue

    Call it the Laffer curve of bill payment. There is an interesting dynamic between price and cost at work here. As you increase monthly fees, average usage increases as infrequent users drop the service. So the higher the monthly fee, the higher the variable cost per subscriber. There may be a sweet spot in the $2 to $3/mo range where the fee is low enough to attract infrequent users to help offset the cost of heavy users. Heavy users can also pay transaction charges after a certain number of “free” transactions. The problem with transaction fees is they tend to bog down the sales process.

    Possible Pricing Scenarios (Alternatives to $5/month.)


    End-User Oriented Program Focused on Increasing Loan Balances

    Description: Pay-anyone bill payment with bundled bill payment overdraft line of credit.


    •  no fees for payments to electronic merchants
    •  $0.35 per transactions to non-electronic merchants
    •  $15-50 annual fee for bill pay and the credit line
    •  16.9% APR on bill payments charged to credit line

    Other Pricing Options:

    •  waive all bill payment fees for direct deposit
    •  provide the first 5 paper payments free-of-charge, then $0.50 per item thereafter





    Bill Presentment Services for Small Business Account Acquisition and/or Fee Revenues

    Description: Biller-oriented program focused on collecting fees from biller and/or acquiring new business clients.


    •  $1-3 per biller’s customer as a start-up fee
    •  $0.25 - $0.75 per transaction from merchant
    •  (optional) 2% discount fee of presented amount for immediate funds availability (with full recourse if user fails to pay within 60 days)
    •  $0.30 per transaction for non-customers (of bank)

    Other Pricing Options:

    •  transaction fee waived if biller places linkages on their billing site directing users to your site, e.g., “check my balance at XYZ Bank,” “charge to XYZ Bank line of credit,” or “pay-anyone at XYZ Bank



    Non-Transactional Bill Pay Services

    Description: Information services triggered from information extracted from your checking account database, or that are programmed on your Web server. For example, user-defined payment reminders by e-mail; user-defined bill presentment on the Web; checking account balance alerts; e-mail confirmations of high-dollar DDA transactions, and more.


    •  $0-50/year for unlimited use of Web and e-mail based services

    Other Pricing Options:

    •  services could be offered in non-Internet versions for extra fees such as $0.25/transaction for fax or voice messages



    Bill Payment as a Consumer Account Acquisition Technique

    Description: Internet billing/presentment used as a technique to gain new end-user relationships, especially if you are the bank providing presentment services to the biller.



    Offer Internet bill presentment services to area billers at a highly subsidized rate (if not entirely free) in exchange for exclusive status as the “preferred banking provider” on the payment area of the biller’s Web. Users entering the biller’s Web directly from your site would view a cobranded billing area.

    Users entering the biller’s payment area from anywhere else on the Internet would see your name when they selected a payment option:


    Other Pricing Options:

    Depending on your relationship with the biller, it could be a tough sell getting your bank listed as a preferred payment provider on the biller’s Web. Start with your best clients first, then as the momentum builds, you can approach other billers.

    You may need to be creative in gaining prominent placement on their bill payment screens, for example:

    •  offer commissions for new accounts generated from their site
    •  offer revenue sharing from new accounts
    •  bundle with discounted credit card processing
    •  bundle with collection services

    promote the biller’s presentment service through advertising, cross promotions, PR, etc.


    Toronto Dominion Bank To Build Full-Featured Business Web

    By Jim Bruene on September 12, 1997 11:49 PM | Comments

    Toronto Dominion Bank

    Toronto Dominion’s Business Banking Center.

    Toronto Dominion Bank (Toronto, Canada; US$94 billion), one of the first banks to build a full-featured business-oriented Web, divides its business banking area into small, medium and large businesses with links to each from the first page.

    TD’s long-running Business Forum.

    TD hosts a forum with the author How to Succeed in Your Home Business answering questions from Web users. The bank also gives a copy of the book away in its branches. This forum has been operating for nearly two years with new questions added every month or two. Though lightly used, the archive of questions makes for a rich FAQ, made infinitely more believable by using questions from real people and answers from a genuine expert. We like this approach, which is good for the bank, its clients and the author.

    Contact: Stephen Gesner is VP Alt. Delivery, 416.982.4088.


    CoreStates Small Business Resource Center

    By Jim Bruene on September 11, 1997 11:42 PM | Comments


    CoreStates Small Business Resource Center.

    CoreStates (Philadelphia, PA; $46.1 billion; 1.6 million ATM cards) has outsourced much of the content of its Small Business Center. We like this approach. No matter how much budget you throw at your Web, you are not going to be able to keep up with the ever-changing general, small business management needs of your clients as well as a company that specializes in this area. Though the day we visited (Sep. 16) the bank’s small biz Web was suffering from an advanced case of what Wired magazine calls link rot — outdated links that lead nowhere. This can easily be fixed by paying a college student $20 each week to verify all links.

    Contact: Susan McGinley is VP, 609.530.7277.


    The content provider for CoreState Web-based small biz info services is
    Entrepreneurial Edge Magazine  published by the Edward Lowe Foundation.

    Categories: Small Business

    Comerica Provides Two Small-Business Options

    By Jim Bruene on September 10, 1997 11:38 PM | Comments


    Comerica provides two small-business online banking options, QuickBooks or Quicken.


    Exploring Hibernia's Small Business Section

    By Jim Bruene on September 9, 1997 11:21 PM | Comments


    The first page of Hibernia’s small business Web.

    Hibernia’s (New Orleans, LA; $9.7 billion; 370,000 ATM cards) small business section starts out with an attractive and quick-loading front page. The top box includes links to key business needs, a clever “small business idea of the day,” and a feedback mechanism “what do you think.” Here are the eight links leading from the bank’s first page.

    •  Starting a Small Business?
    •  What’s New?
    •  Need A Loan?
    •  Ready To Plan For The Future
    •  Need A Checking Or Savings Account?
    •  Looking For Quicker, Easier Ways Of Doing Business?
    •  Looking For A Great Investment Opportunity?
    •  What Do You Think?

    Business Moves newsletter.

    Hibernia offers a daily faxed checking account statement for $15/mo. The fax arrives each morning before 8:00.


    We’ve always been impressed with Hibernia’s daily faxed statements for $15/mo. So we’re not surprised that its small business Web is one of the best in the country. The bank’s Business Moves Newsletter (screenshot lower left) has one of the better layouts we’ve seen for an online publication. The traditional 3-column grid is easy to read, especially on a 17” monitor with 600 x 800 resolution (standard equipment in the small business office these days).

    The Small Business Idea of the Day (bottom of upper left screenshot) is an effective way to keep users coming back to the site. It also gives the bank an opportunity to showcase a broad array of helpful advice without overwhelming the user. This section would be even more valuable with an archive of previous ideas.

    Contact: Fred Dean is VP Alt. Delivery, 504.533.3333.


    NatWest Bank Provides a Wealth of Resources

    By Jim Bruene on September 4, 1997 10:48 PM | Comments

    NatWest Bank

    NatWest (London, UK; US$317 billion) offers some of the best general business information you’ll find on the Web. And the navigation, layout, graphics and style are also top-notch. They should add more interactive elements, such as financial calculators and customer service request forms, but we’ll give them the benefit of the doubt and expect to see them shortly.

    From the start, you know NatWest is serious about business banking. Its first page gives consumer and commercial customers equal billing.

    NatWest provides a wealth of resources for the small business. One area that is sure to be popular with its business clientele is The Business Start-Up Guide at . The Guide is a downloadable software application that walks the prospective business owner through the process of setting up a business plan. At the end of the exercise an actual business plan (MS Word format) and pro forma financials (MS Excel format) are prepared. The program can be downloaded from the NatWest site by anyone, though you must identify yourself prior to the download with name, address, and telephone number.


    NatWest’s online start-up guide assists
    budding entrepreneurs.

    Within “small business” Natwest provides several choices to further differentiate your needs.

    When entering the small business area of NatWest’s Web, the business owner chooses from eight business needs/types (start-up business, growing business, small business round-up, professions, franchise, innovation & growth, business angels, agriculture) that helps them hone in on pertinent info right away.


    Boosting Your Business Banking Services

    By Jim Bruene on September 3, 1997 10:24 PM | Comments

    Business customers may be your best prospects for online services. But they may be the most difficult to please. And you’ll have to compete with everyone from American Express to the Money Store for their loyalty.


    Most banks have invested the bulk of their Web site budgets on the consumer side…and it shows. We have searched high and low and have found a surprising lack of creativity in the banking sites geared towards small businesses. Many banks would be better off removing the boilerplate brochures and simply listing the names, phone numbers, e-mail addresses, and specialties of their commercial loan officers. At least a small business prospect would feel they gained something from their visit.

    In an effort to provide inspiration for your business banking efforts, we have outlined potential online strategies and tactics to help you:

    • reinforce the overall marketing message that you care about small business customers
    • attract new business customers
    • provide better service to your existing business customers
    • book more small business loans
    Integrated Fax and E-mail Services

    Even though 60% or more of small businesses have a modem, that doesn’t mean the Internet has become the most convenient way to send and retrieve information for everyone. For many, the by-now ubiquitous fax machine is still the tool of choice for fast “online” communications.

    As you build out your online content, consider putting all the Web-based information on a fax-on-demand server for easy retrieval by the Web-challenged. The additional cost to port your forms and documents to a fax edition is minimal compared to the incremental business potential of the business market.

    Along the same lines, many business executives are daily e-mail users, but only casual Web users. Consider “e-mail versions” of appropriate documents. For example, a small business owner interested in your loans could send an e-mail to and automatically receive loan information and an applications via e-mail.

    Finally, don’t neglect e-mail/Web/fax hybrids for the mobile professional who may not always have a fax machine, printer, or Web browser nearby when needing information. For example, a traveling executive accessing your Web site from his/her hotel room might want to print a report by sending it to the hotel’s fax machine. Or a business owner using the company’s
    e-mail system might want to send you a message requesting a faxed loan application. The cost of putting these communication technologies in place could be returned in just one or two incremental business loans.


    Commercial Lending Services

    Make sure the lending portion of your Web is done right before moving on to other content areas. This is where you’ll make the money to fund the rest of it.



    Payment Services (consumer-to-business)

    After lending services, the next most likely reason a potential business client will seek you out on the Web is for payment acceptance services (e.g. Visa/MasterCard) for goods and services sold on and off-line. Again, make it easy to find this part of your Web site. Even if you don’t offer merchant services, refer users to reputable firms that do.




    Payment Services (business-to-business)

    While payment acceptance is a vital area for retailers, the automation of accounts payable (e.g. bill payment) is something that could benefit each and every one of the 22 million businesses in the United States.


    Internal Payment Services (to employees)

    The last area of payment services, business-to-employee, has received little attention from the bill payment players such as Checkfree, MSFDC, and American Express. Though medium and large business payroll needs are well met by ADP and others, we believe payroll services for very small businesses and expense account services for all size businesses (cash advance/reimbursement funds transfer and tracking) could be a profitable value-added service especially when integrated with a revolving business credit card product.



    E-Commerce Services

    Even though they may be money-losers today, providing a broad range of E-commerce (EC) services could be the best way to show potential business clients that you intend to support whatever new payment mechanisms lay ahead in the next century. There is so much fear, uncertainty and doubt (FUD) in the EC arena that anyone who can provide real-world advice and assistance could quickly gain market share among the growing number of businesses wanting to use the Net for financial transactions.




    Virtual Shipping Center

    This has nothing to do with banking, but it’s a way to add value to your Web site with little investment. Become the one-stop-shop for package shipping/ tracking information in your market. You could very well gain bookmark status on the browsers of potential clients big and small.

    whatwherecomments6.jpg ;

    Virtual Research Services

    According to FIND/SVP, the number one use of the Internet, used by 81% of small businesses, is online research (see table on next page). But with the glut of information available on the Web, even power users can become overwhelmed. Help your clients help themselves by creating a Virtual Research Center with links to the major search engines (see chart below) with brief explanations and examples of how to use.

    Be sure to “localize” your Research Center by including directories developed by companies in your area. (You may want to subcontract the entire area out to one of these companies.) Also tell users how to use the national search engines to find local information, e.g. when searching for local computer rental stores type “computer rental” (in quotes) and “yourtown.”



    Virtual Professional Services Center

    Who would be better than the local business banker to sponsor a directory of professional service firms? You could opt to include everyone in town, just your customers, or some other criteria. Just make sure you clearly disclose it up front.

    Subject Area (with name, bio/credentials, address, phone, fax, e-mail, & Web links)
    • Directory of accountants
    • Directory of tax advisors
    • Directory of commercial real estate agents
    • Directory of financial planners
    • Links to other general business resources (IRS, SBA, AMA, etc.)
    • Directory of consultants
    • Speakers bureau


    Virtual Customer Network

    Along the same lines as the Professional Services Network, provide an area where clients can place links to their businesses as Franklin Bank has done below.

    The Franklin Customer Network at .

    Franklin Bank (Southfield, MI; $486 million) developed the Franklin Customer Network listing e-mail addresses and Web sites of its customers. There were 29 entries (Sep. 17), about half listing just an e-mail address, the other half with just a Web address (no e-mail). The bank should expand the listing to allow a phone number, fax number, and both an e-mail and Web address.

    Contact: Rebecca Christian is SVP Communications and Marketing, 810.358.4710.

    Virtual Business Concierge

    The Virtual Concierge extends the Professional Services Center (left) concept to include personnel, facilities and entertainment resources. If you have positioned your financial institution as a service leader that goes the extra mile for your clients, here are some services you could offer in cyberspace to reinforce that positioning. 8


    Subject Area (with name, bio/credentials, address, phone, fax, e-mail, & Web links)
    • Directory of travel agents/providers
    • Directory of temp agencies
    • Directory of temporary office facilities
    • Directory of government agencies
    • Directory of meeting venues
    • Entertainment schedules with links to ticket brokers
    • Schedules of sporting events with links to ticket brokers
    • Directory of caterers
    • Directory of restaurants
    • Directory of business equipment rental services
    • Directory of office equipment/supply retailers and manufacturers
    • Links to area traffic reports, weather
    • Directory of volunteer opportunities/agencies



    Four Simple Improvements for Your Small Business Web

    By Jim Bruene on September 2, 1997 10:18 PM | Comments

    Sometimes it’s the little things that are most important. Here are four improvements for your small business Web that could be implemented for a couple thousand dollars.


    1. Include “small business” in your Web site description posted on Yahoo and other directories. If you could do just one thing to improve traffic at your site from small business prospects, this would be it. Amazingly, only 19 banks out of the 2,000 or so with Web sites show up on Yahoo when searching for “small business” and “bank.” Refer to the table on the right for the exact bank descriptors that allowed these banks to land in the elite 19.

    Cost = $0

    2. Give your small business Web its own address such as <> or <>. Better yet allow users to type either of these two addresses to get to your Web.

    Cost = minimal depending on how much file restructuring is necessary


    3. Post telephone, pager, e-mail, and fax numbers for each of your small business lending officers. Include a hyperlink to a short bio of each lender and a few comments from each person on their particular areas of expertise, unique qualifications, or sales buzz.

    Cost = a few hundred at most


    4. Make commercial loans the centerpiece of your Web site. The primary (only?) reason a non-customer business owner will pay a visit to your Web is to find out about your commercial lending programs. Within a few seconds of visiting your site, they should be able to identify the pertinent link(s).

    Cost = several hundred on up

    Yahoo Search Results for
    “Small Business” and “Bank”

    • Banco Sabadell (Spain) - specialized in individual clients and small, medium businesses and in overseas trade.
    • Bank of Melbourne - large regional bank in Victoria providing services for small business and personal customers.
    • Cole Taylor Bank - personal banking, small business banking, loans, mortgages.
    • Crestmark Bank - specializes in financing small business with factoring, ABL, leasing and traditional loans.
    • Enterprise Bank and Trust Company (Lowell, MA) - locally managed commercial bank providing highly responsive service to individuals, professionals and small to medium-sized businesses.
    • Franklin Bank - Metropolitan Detroit's bank for small businesses and entrepreneurs.
    • First National Bank in Pinckneyville - retail banking for individuals, small businesses and farms.
    • First Waco National Bank - An innovative community bank meeting the needs of Small Businesses and Consumers in the Central Texas area.
    • Gulf Coast Bank & Trust Company - On line commercial and small business loans, home mortgage loans, consumer loans, and Master Card and Visa.
    • Industrial Bank of Korea - bank for the small and medium enterprises
    • Lexington Savings Bank - community banking franchise for small businesses and individuals.
    • Metropolitan State Bank - Fairfield, NJ - deposit and loan products, specializing in Home Equity, Small Business loans and Mortgages.
    • MidFirst Bank - Oklahoma City, OK - offers checking, savings, and investment accounts, as well as consumer, mortgage, small business, and commercial loans.
    • NatWest - more than just a bank: news and information about personal, small business and corporate banking services.
    • Republic National Bank of Arizona - Arizona's leading small business lender and a full service commercial bank.
    • Savings Bank of Walpole - savings, loan and investment services for individuals and small businesses.
    • Valley Bank - provider of U.S. small business administration loans in Riverside and San Bernardino counties in Southern California.
    • United Bankshares, Inc. - full service community bank geared to small business needs.
    • Westamerica Bancorporation - multi-bank holding company serving communities located in northern California from 57 banking branches. mainly targets small businesses and professionals.

    Source: Yahoo! , 9/17/97; descriptions are provided by banks when submitting to Yahoo (italics ours).


    Digital Business Banking Serving the Online Entrepreneur

    By Jim Bruene on September 1, 1997 10:07 PM | Comments

    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 ). 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  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.

    Filling in the Gaps

    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.


    Identifying the Total Cost by James Van Dyke

    By Jim Bruene on June 6, 1997 9:16 AM | Comments

    Guest columnist Jim Van Dyke, a recent alumnus of UltraData, now working at Hewlett Packard, delves into the cost issues of online banking. Mr. Van Dyke is well-suited for this role. As Remote Banking Product Manager at UltraData, he was responsible for evaluating vendor proposals for various online banking services such as bill payment.

    Many financial institutions underestimate the total costs of an online banking program, in terms of dollars as well as other issues such as time and business disruption. If your initial budget estimate is too low you may get management approval to begin, but risk losing full financial support when you need it the most. After all, you will encounter unplanned expenses (of both the mission-critical and discretionary variety) when managing technology in this rapidly evolving field. The purpose of this article is to minimize the number of surprise expenditures you will face in the future, plus give you background information to do a better job estimating total project costs.

    Once you embark on building a broad-based online banking program you will soon encounter a staggering number of detailed line items. Each new access method — Internet, PFM (personal finance managers, such as Quicken and Microsoft Money), kiosk, and others — brings its own unique category of cost items. Fixed and variable costs (monthly/annual, per transaction and per customer) will apply to the major categories of software, hardware, Web access, installation, training, service, facilities, staff, marketing, and telecommunication connections, to name the more significant types. (Disclaimer: No article, consultant, or employee can identify every possible expense. But by uncovering several common major costs categories now, you’ll be sure to miss far fewer line-items later.)

    Fixed Costs

    Let’s explore the area of fixed investments, beginning with hardware. Hardware costs are generally the easiest to obtain, assuming you’ve planned for enough system capacity to handle your long-term needs. In addition to the obvious client-server CPU, be sure to consider Internet firewalls, host system upgrades, and required physical changes to your facility. And modems are a requirement for every form of access except Internet and LAN/WAN connected devices.

    Software costs can be more difficult to estimate for several reasons: capabilities can vary greatly from vendor to vendor, add-on third-party software may not be itemized in the vendor’s quote, security options vary greatly, and you may eventually require custom programming to modify the system to your unique needs.


    To make the new system(s) communicate to your host, you’ll likely need system integration programming. This can be avoided if your host vendor offers a pre-integrated, off-the-shelf product. Such solutions will greatly reduce costs, help you avoid incompatibility problems with each successive upgrade, and guarantee that all of the online banking product features can actually get to the required data on your host. But the downside is that you will be limited to the online banking product of your host vendor’s choosing.

    Another way to minimize integration costs and difficulty is to select a product that includes built-in middleware, a capability that can greatly simplify host system integration. A few major vendors now offer middleware as part of their online banking products, as a way to address the wide variety of host systems available in the financial services market. Another way to minimize the initial integration cost is to select a vendor that uses ATM-based communication to the host, but the twin downsides of this are:

    • ATM switch fees.
    • limited a set of functions recognized by the ATM transaction-code set.

    One more way to save overall cost and difficulty is to select a vendor that offers an integrated suite of access options through one single client-server product. This is beneficial if Internet access is just one of many forms of account access that you believe will be widely used in your lifetime. On the other hand, many bankers feel that Internet access is the primary wave of the future. If you tend to agree with the latter statement, then select one of the many qualified vendors that specializes in Internet banking solutions. In any case, this vendor strategy will have a great bearing not only on your cost, but system performance capabilities as well, so make sure your strategies are in synch.

    Bill Payment

    If online banking is a killer application, then bill payment is certainly the “killer app of online banking. (After all, would you or your customer really go to all this trouble just to get a balance?) We’ll explore bill payment costs in some detail for two reasons:

    1. Bill payment fees will likely be your highest variable expenditure (see also p. 7 item 7).

    2. Throughout this industry, vendor quotes often show only half the picture by listing just your per-transaction charges. In addition to payment transaction fees, these bill payment costs may also apply:

    • financial institution start-up fee, including software license, installation, and training
    • initial end-user set-up fees
    • base fee, or minimum fees, per active customer (regardless of how many bill payments are made)
    • customer service fees (per customer per month or per inquiry)
    • ATM switch fees (may also apply to basic account inquiry functions as well!)
    • stop-payment and other per-incident fees
    • integration to your host, online banking systems, and bill pay databases for other access methods (such as touch-tone bill payment)

    To estimate bill pay cost per customer, financial institutions have been known to simply take the vendor’s transaction fee per bill payment and multiply it by the industry rule-of-thumb seven to ten payments per month. (However the average number of payments per month can vary dramatically depending on your pricing, ease-of use, customer demographics, etc.). This method could result in an estimate 50% lower than reality.

    Some bill pay vendors process transactions only, and aim to provide the best pricing and quality for a narrow offering. Others provide a soup-to-nuts product offering. In any case, be sure to compare all relevant costs when building a financial projection. When you do so, you’re likely to find that your per-customer costs easily will add up to $6/mo or more.

    Other Variable Costs

    One key aspect of online banking that has been continuously underestimated right from the start is end-user customer support. The more features and access methods you offer, the more your customers will inquire. And if you treat them well, they may “virtually” stay with you longer than your customers that walk in or call in. But if your customer service standards are below expectations, then they’ll head to one of three places: back to the branch, over to the call-center, or on to another financial institution that offers electronic account access and perhaps better service.

    If specialized online banking customer service resources are out of the question right now, there are several companies offering outsourced end-user customer service. Your probably want a support vendor aligned with your online banking vendor so that the support provider’s staff isn’t being trained on a new system using your customers as guinea pigs.


    Your actual variable costs will vary significantly based on several factors: your financial institution size, current host system, desired platform and features, the quality and stability of the product, and how hungry your vendor’s children are!


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