1. business and industrial

Point of View
Winning the Business: How to Attract
and Retain Business Customers
Capturing a greater share of the business market is a smart strategy, considering that businesses
typically generate more revenue and profit than retail banking customers. While consumers have
come to expect free banking, business customers are still willing to pay for services as long as the
value is clear and the price is right. Financial institutions of all sizes can compete effectively in this
market if they take time to understand their opportunities and identify new ways to deliver value
through every channel.
U.S. financial institutions have seen consumer-based
profits shrink as the revenue-generating potential of
the demand deposit account has eroded, through a
combination of growing regulation, evolving economic
conditions and changing consumer expectations. To
help replace lost revenue, many bankers are turning to
relationships with business customers – ranging from
small businesses to those in the commercial segment –
as a source of additional loan assets and new fee income
from value-added services.
These customers are open to paying for services
that generate value, and the breadth of their financial
needs can also lead to higher retention rates. Moreover,
with the return of loan demand, greater investment in
business banking relationships helps position financial
institutions for long-term growth. Findings from the
“Business Internet Banking 2012 Report” from Barlow
Research indicate that, on average, an additional
$1 million in annual revenue is generated through the
acquisition of 165 small business customers. As a
bonus, increased business services activity often leads
to closer ties with high-net-worth individuals, opening
the door to new wealth management relationships.
Where to Start
Financial institutions sometimes struggle to serve smaller
business customers, in part because this diverse market
can be difficult to define and understand. It’s easy to
overlook the special attention and unique services required
to meet their needs. The financial institutions that succeed
in the business banking space have done their homework
and zeroed in on specific targets.
As a first step, financial institutions need to be aware of
the differences that exist among small, mid-size and large
business (or “commercial”) customers. No clear consensus
exists on these business category metrics, but most sources
utilize number of employees and/or annual revenue. Based
on a review of various government and industry standards,
especially on U.S. Census Bureau guidance, we classify
businesses by the following definitions:
Size Classification
Employees
Annual Revenue
Micro Business
1–4
Under $500K
Small Business
5 – 19
$500K – $2.5M
Mid-Size Business
20 – 99
$2.5M – $10M
Mid-Market Business
100 – 499
$10M – $500M
Large Business
500+
Over $500M
Employee counts rather than revenue may be a more
reliable indication of the complexity and sophistication
of businesses, and the ways in which they operate and
interact with their financial institution. For example,
micro and small businesses often “make do” with
consumer products. Even modest levels of special
attention can strengthen relationships with businesses
in these categories, especially since many institutions
will probably be less likely to spend much time advising
them about services to meet their needs. On the other
hand, larger businesses require a broader range of
services that are tailored to their needs. For banks able
to offer the sophisticated tools and support needed to
win their business, mid-size and larger businesses also
offer potential for additional profit.
Digging Deeper by Segmenting the Market
After differentiating between small and larger
businesses, more in-depth discovery of customer
segments can provide financial institutions with a
better understanding of the diversity and complexity
of their business markets. It’s important that financial
institutions discover as much as possible about the
businesses they serve and hope to attract, including
industry type, complexity and risk level of the business
model, operational maturity and strategic goals.
Gathering this kind of information requires a greater
investment in staff development, but the payoff can be
tremendous for those who get it right. With detailed
intelligence at their fingertips, financial institutions
can anticipate their business customers’ changing
needs and offer the right solutions at the right time.
This advanced level of service strengthens a valued
partnership, increasing the customer’s trust and
improving financial results for both companies.
industry and business to business, financial institutions
can bundle the products that will be of most value to each
customer segment, adjusting prices to reflect relative
demand. This enables banks to maximize fee income while
charging prices that customers see as reasonable.
Bundled pricing also stabilizes prices and minimizes
negotiation since customers are offered a product set
assembled to fit their particular needs, rather than
being sold individual products that can be more easily
compared to and replaced by competitive offerings.
Addressing Small Business Concerns
Before product bundles can be created, financial
institutions should evaluate their business offerings to
determine whether to strengthen their portfolio with
additional technology or services. When making this
assessment, bankers need to think like the customers
they serve. Small business owners are concerned with
three things when it comes to financial services: taking
money in, paying money out and managing cash flow.
Packaging and Pricing to Win
Market segmentation gives financial institutions a
clearer picture of what businesses need and how
to effectively target them. This knowledge creates
new possibilities, especially for packaging and pricing
services in ways that will make them more appealing.
Today, depending on the products and strategies of the
individual financial institution, business banking products
are typically offered for an established fee, sometimes
discounted, or at no cost to the customer. Unlike this
traditional approach, where each product begins at a
specific, defined price, the concept of product bundling
offers a way to establish more consistent and higher levels
of pricing by defining attractive packages of services for
different types of customers.
Using the product bundling method, price becomes an
indicator of value to the customer. Since the perceived
value of any given service will differ from industry to
2
These customers expect easy access to funds through
credit, and they benefit from services like remote
deposit capture, which can help them get paid more
quickly – often a high priority. They also need to
manage invoices, and pay suppliers and employees in
a predictable, efficient manner. Direct deposit, payroll,
online bill payment, person-to-person payments and
mobile banking are typically seen as important parts of
a competitive small business product portfolio.
Taking steps to better understand small business
customers and invest in their success is a win for both
parties. As the success of a small business grows, its
banking needs often expand to create a more profitable
relationship for the financial institution.
Bigger Companies, More Sophisticated Needs
Attracting medium and larger businesses calls for a
different approach and additional solutions. These upper
Fiserv
market segments prefer more online self-service and
control, with the ability to manage all of their accounts
and transactions efficiently and securely. They’re also
likely to require more online visibility into their finances,
including both high-level overviews and in-depth analytics.
By making the online channel the primary location where
business customers can view their total cash position and
manage cash flow, financial institutions can strengthen
commercial relationships and increase online banking
usage. This leads to lower-cost transactions and more
effective cross-selling efforts through the online channel.
A major focus of medium-to-large businesses is
maximizing the return on every dollar. These customers
value zero balance account services, sub-account funding
and sweep capabilities that automatically funnel deposits
above a target balance into investments. These automated
transfer capabilities can also be used to help pay down
loans. Tablet usage is on the rise among businesses of this
size, and both mobile payments and mobile card readers
for anytime, anywhere card payments are of interest,
particularly for retail-oriented businesses.
Meeting the complex financial needs of this segment
requires a sophisticated means of controlling risk in
order to maintain compliance and better protect both the
financial institution and its customers from fraud. Stronger
multifactor authentication and positive pay capabilities are
in heavy demand, and financial institutions expanding their
commercial loan assets need to invest in improved loan
portfolio management and risk monitoring solutions.
Every Channel Is Important
Digital channels and new devices such as smartphones and
tablets continue to grow in popularity among businesses
of every size, but it’s important to remember that all the
other channels are still in the picture. The introduction of
these new technologies has simply expanded the customer
experience by making more options available.
Point of View
Strong customer relationships require an excellent
experience across every channel, including the branch,
call center, ATM, online, mobile and tablet. A predictable,
multichannel approach will help financial institutions
prevent the inconsistent service and channel access
issues that cause most customers to leave their banks,
according to research conducted by Finextra. Many
business customers are also willing to switch banks if it
will help them gain access to better payment capabilities,
including making payments through multiple channels.
Providing outstanding service through every touchpoint
is also important for attracting new customers.
According to a recent Aite report, businesses selecting
a new banking partner consider all of the channels,
looking closely at the service quality at branches and
support centers, convenience of branches and ATM
locations, and sophistication of the digital channels.
Relationships Matter
Keeping up-to-date with rapidly changing technology
can make it easy to lose sight of the bigger picture –
excellent service begins with a strong and growing
business relationship. Every customer wants to feel
certain that their financial institution is on their side,
working hard for them. An accessible, engaged partner
that understands the customer’s business will provide
the kind of added value and satisfaction that leads to
long and profitable banking relationships.
Small business owners – many still using personal
checking accounts and credit cards for business
purposes – are likely to appreciate financial advice and
guidance from knowledgeable experts. Assigning a
dedicated relationship manager to these customers
has shown to improve service and build lasting
relationships. In fact, according to a J.D. Power and
Associates study, satisfaction ratings are significantly
higher when a small business is assigned an account
manager who understands their business than when no
account manager is assigned.
3
Financial institutions should help businesses save time,
become better organized and enjoy the benefits of
automation, while also continuing to provide a personal
touch. Through this connection of banker and customer,
financial institutions will be viewed in a service-oriented
advisory role, which can strengthen relationships.
Tracking Success
One of the most important steps in implementing any
new strategy is to establish mechanisms that help manage
sales efforts and measure success. By studying the
quantity and quality of calls, tracking sales success and
monitoring implementation efforts, financial institutions
can more easily identify opportunities for improvement.
Making changes to enhance training, lead generation,
sales follow-up and product setup leads to a more
satisfying experience for the customer and, ultimately,
a more profitable relationship for the bank.
A Solid Foundation for the Future
Providing more business services to more customers
can help financial institutions combat declining revenues,
increasing costs and reduced profitability. Those that
develop a greater understanding of the businesses they
serve and offer consistently excellent service tailored to
the needs of these customers will also discover a wealth
of opportunities to grow their own business.
About the Author
Sonya Crites is vice president of product management
and planning in the Bank Solutions division at Fiserv.
She leads a team responsible for coordinating product
strategy and long-range product planning, with a focus
on business banking products and services. Crites
joined the Fiserv team in 2010, bringing nearly 20 years
of consulting, strategic and product management
experience in the financial services industry to her
current role. She has been awarded the Certified
Treasury Professional (CTP) credential.
Crites’ prior experience includes working at SunTrust as
group vice president managing online banking solutions
designed to meet the needs of small business, middle
market and corporate customer segments. Prior to
joining SunTrust in 2003, she managed the business
banking product line for S1 Corporation, a financial
services software provider. She was previously employed
in product management at Bank of America as vice
president, managing online treasury management
products and services.
Connect With Us
For more information about solutions from Fiserv that
can support your organization’s success in the business
banking market, contact us at 800-872-7882 or visit
www.fiserv.com.
Fiserv is driving innovation in Payments, Processing Services, Risk & Compliance,
Customer & Channel Management and Insights & Optimization, and leading the
transformation of financial services technology to help our clients change the
way financial services are delivered. Visit www.fiserv.com for a look at what’s
next, right now.
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412-13-17842 POV 08/13