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New tech helping to boost small-business recovery

Web, mobile, cloud, analytics help small firms thrive

New tech helping to boost small-business recovery

A couple of recent reports highlight definite optimism among small business owners, which should be welcome to their financial institution partners. Associated with this good news—and not by accident—are indications that new technology tools, used both by banks and their business customers, are helping spur this economic rebound.

TD Bank, for one, interviewed 300 chief financial officers (or equivalents) at midsize to large corporations. It found that 60% are optimistic about U.S. economic growth this year, compared with 46% last year. Their appetite for capital expenditures this year is similarly heightened, with the No. 1 target (64%) being increased spending on new technology.

Citibank did its own survey, concentrating on small business owners, and found that half view business conditions now as good or excellent, up from just 24% in 2010. Similarly, 44% expect to grow their business in the next 12 months, up from 37% two years ago.

Pertaining to technology, of those small businesses Citi polled, 42% report having some online sales, and 18% of these generate more than a quarter of their total sales online—compared with 22% a year ago. Just over half (52%) say they plan to make use of new technologies or applications for smart phones or tablets in the next 12 months to market or expand their businesses.

There’s more: Owners are using the internet in numerous ways, including customer communication (70%), marketing and sales (57%), and professional networking (55%).

To be sure, there have been hiccups in the small business arena. Experian reports that small-business credit conditions stumbled in the first three months of 2014, mostly due to unusually harsh winter conditions which triggered a rise in delinquency rates. Citi’s poll also bears this out, with 51% of its small business owners experiencing impact due to inclement weather, such as customers staying home, stores having to close, and decreased workforce productivity.

Even so, such setbacks almost certainly are temporary, to wit:

“The improvement in small-business credit conditions paused early this year. However, this should prove temporary, as the broader economy revives from the severe winter weather,” says Mark Zandi, chief economist for Moody’s Analytics.

Citi’s respondents—a resilient group it seems—seem unfazed by the weather. Only 8% plan to adjust their operations next year because of the weather, with another 11% saying they will wait and see.

The reason for such optimism may be inferred as due—at least in part—to the increasing use of, and confidence in, new technology. Not to be too flip about it, but if a given product or service can be delivered safely, securely, and digitally, well, let it snow, let it snow, let it snow.

For example, RateWatch, a banking data and analytics service owned by TheStreet Inc., finds that two thirds of small businesses use mobile banking. To be specific, 34% use mobile banking weekly; 33% use mobile banking, but less frequently; and 33% have never used mobile banking at all. Only 18% see no need for mobile banking.

At the same time, 75% use online banking weekly and 21% use online banking, but less frequently. Just looking at these numbers, it seems there must remain some opportunity to increase the mobile banking penetration, as small businesses become increasingly digitally savvy.

Not only savvy, but willing to put their money where their companies are. A RateWatch survey found that “most” small businesses would pay a monthly fee for unlimited transactions, informational services, and advanced interactive services—to the tune of between $1 to $10 a month.

“Our survey identifies this need in the marketplace for mobile banking solutions that create value for small businesses and consequently, could generate revenue for banks,” says Jens Baumgarten, head of Banking and Financial Services North America for Simon-Kucher and Partners, which helped in the RateWatch survey.

Services identified here include: Accessing account information, receiving alerts, receiving service guarantees, check deposit, reporting/blocking lost or stolen cards, account transfers, monitoring fraudulent activities, customer service, and scheduling appointments.

It seems, though, there are other ways banks can use technology to provide even more sophisticated services to their corporate customers. A case in point: BBVA Compass just teamed up with OnDeck specifically to use advanced technology to offer loans to more small businesses. In particular, the OnDeck Score product analyzes thousands of data points—from cash flow to public records to social data—to assess the health of a small business. Qualifying business clients would be eligible for loans up to $250,000, with six- to 24-month payments terms, and funding in one day.

This adds to BBVA’s other small-business/technology initiatives, such as a service to help micro-businesses manage finances, and a service to power payroll management.

Of course, this is just one example of one bank’s efforts. Many banks have put lots of time, talent, money, and effort to boost services to small business clients. It’s instructive, though, to use such examples to imagine how other banks might expand their own tech-boosted offerings to small businesses.

In another example, Wells Fargo offers what amounts to a list of what banks could do in this area:

  • Financial management software—Track sales and expenses, monitor inventory purchases, manage cash flow, monitor payroll, track receivables, and more.
  • Online and mobile banking—Manage accounts, pay invoices and bills, transfer funds, and track when checks clear.
  • Customer relationship management—Mine customer data to discover untapped business opportunities, identify the best customers, track the most effective sales and marketing techniques, and improve customer service.
  • Website and online marketing—Put informational brochures online, allow customers to place orders, schedule appointments, ask questions, originate email campaigns, distribute newsletters, and market on third-party sites.
  • Cloud computing—Store information or applications on remote servers assessed only by authorized people to create, view, and share data, and facilitate tasks such as file sharing, virtual meetings, banking, and website hosting.

Circling back to TD Bank’s CFO survey, the situation may be summed up this way: “The increased appetite for capital investments confirms our view that businesses are finding ways to thrive in the ʻnew normal’ economy,” says Greg Braca, executive vice president.

Sources used for this article include:

BBVA Compass teams with OnDeck to bolster bank's small business offerings

New Citibank Survey Reveals U.S. Small Business Owners View Current Business Conditions As Best In At Least Four Years

Experian/Moody’s Analytics report shows declining credit balances and rising delinquencies cause setback for small-business credit conditions in first quarter of 2014

New Study: Two Thirds Of Small Businesses Use Mobile Banking

CFOs Increasingly Optimistic about Economic Growth, Spending More on Technology and Workforce: TD Bank Survey

Using technology to increase efficiency

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.

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