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    Topline Growth Strategy: Digital Innovation for Small Businesses

    Mobile banking for small business customers is a huge hidden revenue opportunity for community Financial Institutions. Nonetheless, most community banks' and credit unions' digitalization efforts fall short of achieving topline growth. One reason for this is because - despite the willingness to pay for digital products - banks often give small businesses free digital banking services.  

    On a yearly basis, Simon-Kucher & Partners conducts a study on the design and pricing of mobile banking services for small business accountholders. The 2017 Study also included information on the actual selling process. 

    Six types of customers are identified based on behavioral segmentation: Not Tech-Savvy, Consumer Type, Relationship-Driven, Unmet Needs-Willing to Pay, High Perceived Value-Willing to Pay and No Potential. These categories help determine strategies related to product use, pricing, and positioning.

    Based on the answers of small business respondents, the key findings of the report include:

    • 34% have never used mobile banking, even though their financial institution offers it
    • 69% do not have a positive perception of mobile banking services offered by their institutions
    • Certain small business clusters have significantly higher willingness to pay for digital services than others
    • Customer satisfaction is directly correlated with the rate at which digital innovations or new digital features are introduced
    • There is a lack of ‘leader’ features and high variance across all digital banking services, suggesting a bundling approach that is logically coherent but still allows for customization

    “We need a systematic and structured approach to designing, pricing and selling mobile banking solutions,” said David Chung, a director at Simon-Kucher & Partners and an iTod Expert Speaker. “When these steps are managed separately, we find sub-optimal products that fail to meet revenue and profit goals and fall short of addressing customer needs.”

    GAP BETWEEN SMALL BUSINESS SATISFACTION & SPEED OF DIGITAL FEATURE INTRODUCTION

     

    The study found a gap between what small businesses want from mobile banking and what banks currently deliver. This gap impacts potential revenue, as well as the general use of digital products. A correlation was found between small business owners' satisfcation with mobile banking and the introduction rate of new digital products. 

    Chung explains, “If they don’t see the value of the services offered through mobile, they will opt to use those channels less.” 

    BEHAVIOR OF SMALL BUSINESS MOBILE BANKING USAGE

    To ensure small businesses make use of digital products, you most prioritize the customer experience. “A consumer’s continuous utilization of a digital application is largely driven by its intrinsic value,” says Chung. “That simply means the institution must create the right experience within the application with the right features at a fair price will guarantee the increase in usage.” 

    The survey shows that small business customers are not satisfied with current digital products. “This indicates that current services are not delivering the desired value,” Chung said. “Banking providers need to rethink their product offering and design approaches to define how to better serve their customers.”

    USAGE OF ONLINE BANKING BY SMALL BUSINESSES

    To make mobile and online banking more appealing and valuable to small businesses, community FIs need to add additional features and services that enable small business customers to more conveniently manage cash flow. 

    “This will increase the value perception of online and mobile,” Chung said. “Look at the top ten most valuable features. They don’t shift much from year to year, which suggests that the existing offering is not quite meeting expectations — neither in value perceptions, value delivered, or price perceptions.”

    According to Simon-Kucher research, features that have tested well include improved digital payments solutions and monitoring for fraudulent activity.

    FEATURES WITH POSITIVE VALUES

    They want the ability to pay their vendors and suppliers via bill pay, ACH, wire, or mobile wallet, and receive payments from customers the same way,” Chung said. “Both types of payments would add to the convenience of cash management and monitoring for small businesses.”

    Community banks and credit unions have a huge opportunity to improve how they monetize digital banking solutions for small businesses.

    “They need to do a better job onboarding small businesses onto their mobile services, whether it be through better value communication or enhanced training,” said Chung. “They need to understand customer needs, design and package products targeted at those needs, price them fairly based on willingness to pay, and communicate value effectively through sales and engagement channels.”

    Attend David's "Small Business Mobile Banking Solutions: Monetizing Digital Products" Webinar on Thursday, the 8th of March at 11AM ET to discover how to implement a systematic and structured approach to designing, pricing, and selling mobile banking solutions.

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