A recent J.D. Powers survey found that satisfaction with small business banking services declined substantially for the second year in a row. Less than one-fifth of small business owners surveyed indicated that they would “definitely reuse” their financial institutions’ banking products or services. See the following article from The Street for more on this.
Banks may be trying to woo small-business customers, but owners are increasingly dissatisfied with their relationship, according to a study from consumer satisfaction research firm J.D. Power and Associates.
According to J.D. Power’s U.S. Small Business Banking Satisfaction Study, overall satisfaction decreased to 711 on a 1,000-point scale from 718 last year, with small-business customers exhibiting the lowest satisfaction levels among banking customers.
This is the second consecutive year satisfaction and residual customer loyalty have declined among small businesses, with only 19% of customers, or owners, saying this year that they “definitely will” reuse their financial institution for additional business products, compared with 34% in 2008.
“Despite a sense of optimism in the industry among small-business owners, it appears that their financial institutions are failing to keep up with their expectations,” said Michael Beird, director of banking services at J.D. Power and Associates, in a press release. “Banks are a critical support mechanism for small businesses, so these customers may be experiencing some frustration with the lack of support.”
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J.D. Power polled more than 6,600 financial decision-makers at small businesses with revenue between $100,000 to $10 million between July and August. Now in its fifth year, the study measures small-business customer satisfaction by examining eight factors: product offerings, account management, facilities, account information, problem resolution, credit services, fees and account activities.
Incidentally, the banks that ranked the lowest in J.D. Power’s study were the nation’s three largest: Chase(JPM_), Bank of America(BAC_) and Citibank(C_).
Conversely, smaller regional banks topped the list with Atlanta’s bank, SunTrust, Columbus’ Huntington National Bank and Cleveland’s KeyCorp placing first, second and third respectively. You can view the full list of rankings on the firm’s website.
The dissatisfaction with big banks persists despite the fact many big banks have pledged to loosen stringent lending practices. Bank of America said they would increase overall lending by $5 billion this year, and Wells Fargo(WFC) also pledged to up its small-business loan program by 25% this year.
While this may bode well for small businesses down the line, owners still prefer to turn to small banks for loans because they’re easier to get. Huntington National Bank(HBAN_), for example, released $4 billion in credit specifically for small businesses. It’s easier for small banks to lend now that recently approved small-business legislation grants them access to a $30 billion government fund.
If banks want to improve their business, they don’t just need government help. Survey responses show the keys to a successful partnership includes the assignment of an account manager who understands the customer’s business, ongoing active communication and easy and convenient access to the bank through branch and online channels.
Error-free banking is also critical. Problems reported by small businesses, which contributed to a 110-point decline in satisfaction, increased to 36% this year from 34% last year. Fee-related problems, such as transfer charges, overdraft protection or minimum balance fees are particularly prevalent.
“While customers don’t expect to receive services for free, they become aggravated when blindsided by unexpected charges or by fees that aren’t appropriate to their situation,” Beird said. “Satisfaction is notably higher when customers understand their financial institution’s policies and procedures for charging fees.”
This article has been republished from The Street. You can also view this article at The Street, an investment news and analysis site.