Mobile banking is underserving one key demographic: small and medium businesses. Here’s why SMBs are an untapped opportunity.
Small and medium-sized businesses are often called the backbone of the economy, and for good reason: They represent 99% of all businesses in the EU, equally in the U.S. In the past five years, they have created around 85% of new jobs in Europe and provided two-thirds of the total private sector employment in the EU. The European Commission considers SMEs and entrepreneurship as key to ensuring economic growth, innovation, job creation, and social integration in the EU.
Suffice to say, when a major business trend occurs, SMBs are usually at the heart of it. So why, when it comes to mobile banking, are so many small businesses still underserved?
Current mobile banking options don’t meet needs
A report by the Aite Group has the answer: most banks today are simply repackaging their mobile consumer offerings as an SMB solution, rather than providing true business-specific functionality. So for example even though an estimated one third of American small businesses currently use mobile banking, there’s still a huge demand for more powerful, on the go banking services.
Even Visa Europe recognizes this problem and quotes a study from RateWatch, a banking data and analytics service. This study shows that most small businesses would prefer to pay a monthly fee for unlimited transactions for informational, transactional, and interactive services. The median amount that companies were willing to pay as a monthly for certain unlimited transactions ranged from EUR 1 to EUR 10.
SMBs would like to receive alerts and transfer money via mobile
Three of the informational mobile banking services are: accessing account information, receiving alerts and receiving service guarantees and knowing how they are protected.
And the three transactional mobile banking services are: depositing a check, reporting/blocking lost/stolen cards and transferring money between accounts to optimize savings portfolio or to pay off a loan.
Among the three major interactive mobile banking services count: receiving transaction verification and warning, capturing and storing receipts and requesting for payment flexibility for loans, mortgages, or credit cards
Being able to perform these tasks via mobile is especially crucial for small businesses. Not only are their supplier networks and customers increasingly mobile, but SMBs also count on their ability to operate quickly and nimbly in order to stay competitive with larger enterprises.
Banks see incentive to improve mobile apps for SMBs
Up to now, many banks have been disinclined to offer SMBs more powerful mobile services, because they usually provide the apps for free. But in doing so, banks fail to recognize that small business customers can be very profitable in the long run.
Over half of small businesses rank mobile capabilities as “important” or “very important” when selecting a new banking relationship. When they do choose a financial institution, mobile banking users spend more money with their bank and hold more accounts than non-users. They show a higher-than-average willingness to pay for other products. And mobile banking users are also more likely to recommend their bank to other businesses in their field than non-users, the Aite Group report found.
For too long, small businesses have had to choose between basic, consumer mobile banking services and expensive, corporate-level functionality. But it’s only a matter time before banks begin to offer SMBs more relevant and robust mobile banking solutions – it simply makes good economic sense to do so.