Rethinking Small Business Payments: The Future Is Now

December 14, 2007

Abstract

San Francisco, CA, USA December 14, 2007

Competitive advantage and above-average returns from serving small businesses can be found by increasing the bank's value. This value can be found as banks expand their focus and look at small businesses' payment needs as the foundation of the banking relationship.

Following the banking industry's strategic shift in providing services to small businesses in the 1990s into the early 2000s, significant progress and success have been achieved. Banks now face new challenges and opportunities. They will need to provide continued investment in the small business segment in order to maintain their progress. In addition to stepping up investments, banks once again need to shift their understanding of how to serve this unique customer segment.

In a new report, , Celent provides insights into the market that highlight changing payment needs, the behavior of small businesses, and how important it will be to support expanded payment offerings. The first section of the report looks at the implicit needs of small businesses based on a changing marketplace. The second section looks at how banks can profit from these changes and creates a framework for evaluating the bank's current and future small business offerings. The last section of the report provides several examples of how banks and nonbanks alike are finding new ways to better serve and expand their banking relationships.

  • Market Trends Shape Behavior. Changes in the payment environment are defining how small business customers are looking at financial services needs and providers.
  • Rethinking the Payments Offering. As small business attitudes and behaviors change, banks need to look at their offerings in a new way.
  • Beacons of the New Order. Banks, nonbanks, and vendors are innovating their payment-related product and services offerings (particularly online), filling the gap between small business needs and banks' legacy product and service delivery (see Table 1).
Table 1: Beacons of the New Order
Provider Services
Bank of America End-to-end payroll services; electronic invoicing
Cardinal Bank Small business mobile banking
Commerce Bancorp Tiered authority
Intuit Enhanced user experience
Prosper Person to person lending
Wells Fargo Tax payments; cross-border payments
Wesabe Online personal financial management
Source: Celent

"Banks cannot rely on the quality of their checking and credit services to attract and retain small business customers, let alone see the full potential of the small businesses' contribution to the bank's bottom line," says Edward Woods, author of the report and senior analyst in Celent's banking group. "To find competitive advantage and achieve above-average returns, banks will be required to increase their value in the eyes of the small business."

The 31-page report contains 2 tables and 16 figures. A table of contents is available online.

Members of Celent's Wholesale Banking research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

San Francisco, CA, USA December 14, 2007

 

Executive Summary 03
Market Trends Shape Behavior 05
  Find Opportunity by Reading the Market 05
  The Change Agents 06
  Market Constants 11
Rethinking the Payments Offering 15
  Use the Relationship as Offense and Defense 16
  Increase Adoption and Utilization with Tailored Access 17
  Leverage the Relationship to Drive Value 18
Beacons of the New Order 20
  Help the Business Bring Money in the Door 20
  Living the Web 2.0 Mindset 21
  Web 2.0 Fuels the Nonbank Players and Innovators 22
  Increase Online Usage by Understanding Needs 25
  Support the Globalizing Economy 26
  Be There When You're Needed 27
  Address Business Pain Point with Payroll Service 28
  Taxes Are Inevitable -- Be Part of the Solution 29
Conclusions 31

 

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