According to a survey from the National Federation of Independent Business Research Foundation, banks are beating the bushes trying to figure out who can be the best and offer the most benefit to small business owners. That’s good news for you. And bad news too. Changing banks is no walk in the park especially if you have automatic deposit of affiliate commissions, client payments and merchant fees. But that doesn’t mean you shouldn’t shop around. Now is a good time to consider whether your bank is serving you the way they should.
Take a look at these survey results.
Slightly more than 40 percent of the owners surveyed said they have seen an increase in banks courting their business. Nearly three-fourths of those owners cited a noticeable increase in mail solicitations and advertising and an almost similar share were aware of the appearance of more places to bank. Nearly two-thirds of those with fewer than 10 employees got phone calls from bank telemarketers, 65 percent were made aware of financial products and services targeted to their sector and 57 percent reported in-person contacts.
Twenty-one percent of owners shopped for a new principal financial institution in the past three years, the research determined. The most common reasons causing owners to look around for a new financial institution were hopes for better deals and dissatisfaction with their current bank. However, those who went shopping didn’t necessarily change banks; only one-third of owners who shopped for a new bank actually switched.
Happy customers stay put. The primary reason small-business owners remained loyal to their current institution was that they were satisfied with it, cited by 70 percent of owners. Nearly one in five, or 18 percent, kept their accounts in place just to avoid the hassle of switching. Only 5 percent said there were too few alternatives to attract their business.
Among those who did find a new principal bank, service and credit issues were the key motivators driving them. Sixty-four percent changed to obtain better service quality; 47 percent pointed to the number and type of services available elsewhere. Half noted the expectation that they could more easily satisfy their credit needs at a new bank and slightly more, 53 percent, said they believed the new institution being considered would give them better loan terms and rates.
In the past, owners have expressed consternation about the considerable merger and acquisition activity in the banking industry, but less than one-fourth of those who switched banks cited that as a reason for the change.
Easier access to banks in recent years was also noticeable among owners of small firms, who said they perceived a median of seven different banks, not just branches, in their local market areas. Nearly 70 percent said their choices were improved over the past three years, acknowledging that the number of nearby locations had grown. Only 7 percent report having access to just one or two banks.
Slightly more than 41 percent said they use a small bank, one with assets of $1 billion or less, while the share reporting banking at very large institutions — those with more than $10 billion in assets — was just a few points less, 38 percent. Only 15 percent had their accounts handled by very small banks holding less than $100 million in assets. Nearly half, 47 percent, said they still use only one financial institution exclusively.
What do you think? Have you changed banks lately? Why? Leave me a comment.