Small business owners navigating rising inflation, supply chain issues, and labor market tightness are keen to receive advice from their bank partners, according to the J.D. Power 2022 U.S. Small Business Banking Satisfaction Study.
While around 76% of small business owners said they would like to receive financial advice from their financial institution, only 15% said they are receiving comprehensive guidance from their bank, the study found.
“They are looking to their banks for guidance on things like available credit, tips to reduce fees, and technology that can benefit their businesses,” said Paul McAdam, senior director of banking and payments intelligence at J.D. Power. “This scenario presents an enormous opportunity for banks to deliver comprehensive advice that takes into account a full understanding of the company’s business goals and shows real, committed partnership.”
According to McAdam, small business owners are seeking practical advice beyond product-oriented ones and want a point of contact at the bank with whom they can communicate. They are fine with the digital model, but being able to communicate with the bank is key.
“Anybody competing in this space needs to be good with people. Small businesses use the phone, they use digital, but they do like receiving good service from staff, so that is really going to be the challenge that any new entrants will face as they try to penetrate small business relationships,” McAdam said.
McAdam said fintechs like Square have an opportunity to step into the space and provide effective services that banks lack.
Plus, he said, fintechs are good at giving small businesses the advice they want digitally.
PayPal’s phone-based virtual relationship manager model for their small business clients is also an example of how fintechs are meeting a need. But fintechs need to work on their phone service experience since banks are better at it, he said.
Though fintechs have no branch, their advanced technology can offer a practical solution to small business owners to help them weather the tough economic conditions many find themselves in at present. The study says that around 25% of small businesses are in the cash-or-capital-constrained category while another 25% are in the financially vulnerable section.
At present, only 58% of small business owners receive transactional advice while 27% receive constructive advice from the banks, according to the study. But those customers who receive comprehensive advice are more satisfied compared to those who get constructive or transactional advice.
McAdam thinks that during this conservative credit environment, small businesses would benefit if they received credit.
“If banks could help small businesses with credit during this challenging time, that will pay handsome dividends in terms of overall satisfaction and loyalty,” he said.