Big banks add more online services to attract small business, survey finds

American banks are paying more attention to small businesses to grow revenue and are finding the Internet a useful tool to do so, according to a study released last week by Boston-based Aite Group.

“Large U.S. banks have made a tremendous effort over the last year to better understand the needs of small-business customers and are leveraging their newfound knowledge to significantly enhance their online banking strategies and offerings,” said Christine Barry, research director at Aite Group and author of the report, The Online Small-Business Banking Strategies of Large U.S. Banks.

“Perhaps the most obvious change is the addition of Quicken-like capabilities ”“ such as spending categories, cash flow forecasting and graphical capabilities ”“ to online banking sites. In addition, several of the largest banks also have plans in place to offer electronic invoice presentment and payment, online account opening and tighter security at the transaction level.”

The survey of 16 of the 30 largest U.S. banks was conducted during June and July. All banks participating in the survey had more than $35 billion in assets.

Small businesses have traditionally been an expensive customer segment to serve as a result of their need for one-on-one attention and their preference for more expensive channels, like the bank”™s branch. But the growth and user-friendliness of the Internet changed that.

Forty-five percent of small businesses bank online, while 60 percent are expected to be active online bankers ”“ accessing the online site at least once a month ”“ by the end of 2008, according to Aite Group estimates.

The survey found 69 percent of the 30 banks believe that winning the business of small businesses is “extremely important” to their overall performance. The banks view the Internet as a vital sales channel as well as a tool for improving customer service.

Community banks have had the greatest success with online banking adoption by their small-business customers, according to the survey, “due in part to their smaller client-base and ability to provide one-on-one training when necessary.”

Twenty-two percent of community banks have achieved an online adoption rate of more than 40 percent, compared with 11 percent of the 30 largest U.S. banks.