Bank switching levels among small businesses and mid-sized companies remained at historically elevated levels for the second consecutive year, according to the results of the latest Greenwich Market Pulse.
Nearly a quarter of U.S. small businesses moved banking business from one provider to another over the last 12 months—a share that is virtually unchanged from 2014. Among mid-sized companies, the share moving business jumped to 23% in 2015 from 18% the prior year. Among companies that shifted business among bank providers, two-thirds moved more than a quarter of their overall banking business and approximately one in three moved more than half.
Small Businesses: Among small businesses, the most common reason for moving banking business was dissatisfaction with their bank’s representative or relationship manager. Specific frustrations include excessive fees, cumbersome paperwork associated with maintaining loans, the consistency of relationship coverage, and difficulty using online banking.
Mid-sized Businesses: Pricing of loans or banking products was mid-sized companies’ primary reason for moving business. Mid-sized businesses share many of the same frustrations as small businesses, and also note that slow response times, customer service, and industry understanding are big concerns.
“It’s clear that many small businesses and mid-sized companies are not satisfied with the service they are getting from their banks,” says Greenwich Associates consultant Dana Schwaeber. “For banks, the risk today is not just that unhappy companies might shift business to rival banks. Companies now have the option of switching to non-bank providers that are leveraging regulatory and technology advantages to deliver high quality service and competitive pricing.”
Banks: Beware of the Non-Bank Providers
Greenwich Associates found that one in four U.S. small businesses and mid-sized companies obtained credit from non-bank providers, and that nearly all say the experience was so positive that they would borrow from non-bank lenders again. When asked what banks could have done to retain their business, better pricing and improved service was cited the most. Small and mid-sized companies also say banks can provide help with fraud/risk management and cash flow issues. “This is a critical opportunity for bankers to engage in meaningful, relationship-building dialogues with their customers,” says Dana Schwaeber.