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Study finds small business mobile banking services lacking in US

By Robin Arnfield

Contributing writer

U.S. banks need to make a greater effort to capitalize on their small business customers' appetite for mobile banking services, according to research by Aite Group. This will involve providing their clients with business-specific mobile banking offerings instead of rebranded consumer mobile banking services, the U.S. consultancy says.

In September 2013, Aite Group surveyed 1,003 U.S. companies with revenues of under $20 million for two reports: "Monetizing the Small-Business Opportunity" and "Why Banks Should Offer Mobile Banking to Small Businesses."

The survey found that about 32 percent of those businesses bank via mobile devices, according to Christine Barry, research director for Aite Group's Wholesale Banking practice.

Aite Group estimated that about 65 percent of U.S. banks with more than $10 billion in assets, 30 percent of banks with less than $10 billion in assets and 20 percent of credit unions offer mobile banking to their small business customers. These estimates include consumer offerings rebranded as business services and true business-specific mobile platforms.

The most successful U.S. banks have achieved small business mobile banking adoption rates of about 20 percent, while Aite Group estimates the industry average at 10-12 percent.

Offering advanced mobile services such as initiating and approving ACH and wire transfers would likely prompt more small businesses to use mobile banking.

Aite Group found that the top reason small businesses don't use mobile banking is because of concerns about security. "Banks are addressing these security concerns through customer education, and we are starting to see these concerns decline among end users," Barry said.

Underserved market

In Barry's view, the U.S. small business market is underserved by mobile banking services. "Many banks only offer their small business banking clients a rebranded version of their consumer mobile banking service, with limited capabilities," she said. "This is why the majority of small businesses (that) bank via mobile devices just use mobile banking to check balances and transfer money between their accounts."

Banks should instead consider offering advanced mobile services such as initiating and approving ACH (automated clearing house) and wire transfers, she said. Adding those sort of features, which aren't included in consumer banking apps, would likely prompt more small businesses to use mobile banking, Barry said.

"It's critical that banks offer business-specific mobile services with facilities such as ACH and wire transfer payments to small business clients," Barry said. "Small businesses aren't knocking at banks' doors for business-specific mobile banking services, but demand is definitely increasing."

Nearly a third (31 percent) of survey respondents told Aite Group that they are likely to adopt mobile banking in the next year.

A bank's mobile capabilities are an "important" or "very important" consideration when selecting a new banking relationship for 51 percent of U.S. businesses with under $20 million in annual revenue, Aite Group found.

Value

Aite Group's survey found that only 15 percent of all U.S. small business respondents are currently able to initiate ACH transfers via mobile. However, a further 30 percent say being able to initiate ACH payments via mobile would be "nice to have" and 7 percent see this facility as "critical."

"Being able to set up and approve ACH payments from a mobile device offers real value to small businesses," Barry said. "Because small business owners are on the road a lot, it would be very helpful for them to use their mobile device to approve ACH payments set up by the accounts department."

And the need to initiate ACH transactions via mobile increases with the size of a business, Barry said. Twenty-five percent of small businesses with revenues of $10 million to $20 million already initiate ACH transfers using mobile devices, while 37 percent see this feature as "nice to have" and 11 percent as "critical."

Only 14 percent of all U.S. small business respondents are able to set up wire transfers via mobile, Aite Group found. But 24 percent would like to be able to initiate wire transfers using a mobile device and 8 percent see this facility as critical.

Mobile remote deposit capture is used by 15 percent of survey respondents. "We see high levels of interest in mobile RDC among survey respondents," Barry said. "Just over a third (35 percent) said they would like to have mobile RDC, and 9 percent said this facility would be critical."

Other services that small businesses would like to use via mobile banking are locking in foreign exchange FX rates and resetting passwords, Aite Group found. "The number one reason for calling bank call centers is because people need to reset their passwords," Barry said. "The ability to reset passwords using mobile devices would save banks a lot of money."

Profitable

Banks that offer mobile banking services to small businesses find that the customers using these services are among their most profitable and loyal clients. Aite Group's survey found that 45 percent of small businesses with annual revenues of under $20 million that use mobile banking, spend more than $50 each month on banking products or services.

"Small business mobile banking users represent an extremely attractive customer segment for financial institutions," Barry and co-author Laura Hajj wrote in "Why Banks Should Offer Mobile Banking to Small Businesses." "While they may not pay fees for mobile access itself, they tend to use multiple bank products for which they do pay. This is a revenue stream that financial institutions can't afford to lose."

Because small business owners are short of time, they are willing to pay for services that save them time, increase convenience and help them operate more cost-effectively, Aite Group said. Its small business survey found that 11 percent of respondents are paying for mobile payment services such as Square, and 8 percent are paying for RDC. However, 23 percent said they would be willing to pay for mobile payments and 20 percent would be willing to pay for RDC.

Tablets

Aite Group said tablet usage by U.S. small businesses with revenues of under $10 million almost doubled between 2011 and 2013. When Aite Group surveyed U.S. small businesses in August 2011, only 7 percent of businesses with revenues of under $10 million used tablets; that figure rose to 13 percent in the most recent survey.

However, Aite Group said that as U.S. banks look to develop tablet-based mobile banking services, it is unlikely, at least in the short term, that tablets will cannibalize usage of smartphone-based mobile banking access.

"The largest percentage of small businesses surveyed stated they would be interested in performing banking transactions from both device types, regardless of the transaction type," Barry and Hajj wrote in "Why Banks Should Offer Mobile Banking to Small Businesses." "Both smartphone and tablet offerings should therefore be a part of any institution's mobile strategy."

Learn more about mobile banking and trends/statistics.

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User Comments – Give us your opinion!
  • james cage
    5620172
    Interesting points on growing importance of mobile banking for small business owners, banks need to constantly update their mobile offerings and innovate on secure payment channel to capitalize on small business customers. I work for McGladrey and there's a newsletter on our website with great information for banks on optimizing existing technology and other valuable insight into boosting overall performance.@ ”Eight ways for your financial institution to boost performance now “ http://bit.ly/1fBWe9u
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