Mobile banking and small businesses: 5 key insights

Mobile banking and small businesses: 5 key insights

Mobile banking can help CUs nurture relationships with small businesses.

July 25, 2016

From a thought-leadership perspective, mobile banking is an underappreciated value enabler for small businesses and credit unions.

In fact, according to Raddon Research Insights, 52% of small businesses (those with up to $10 million in annual revenue) rely on mobile banking for day-to-day account access. For millennial business owners, the percentage is even higher, with 68% using mobile banking.

While these adoption rates are promising, there are broader perspectives your credit union must consider. Let’s explore them through five findings from Raddon Research Insights on small business mobile banking.

1. CUs need strong mobile banking platforms to grow small business membership

Large banks have won the business of small business owners by offering mobile banking platforms that meet their everyday needs.

Raddon has found that mega banks are currently dominating the small business market share, with 68% of small businesses using one of the largest six banks as their primary financial institution.

By contrast, only 6% of small businesses leverage a credit union as their primary financial institution. As the awareness of credit unions among small business owners grows, it is vital for your credit union to be up to par with an innovative mobile banking solution.

2. Mobile banking can help nurture relationships with small businesses

Nearly half (46%) of small businesses that use mobile banking have expressed an increase in satisfaction with their primary institution since they started using the service.

Furthermore, 50% of small business mobile bankers say mobile banking has made them more likely to remain with their primary institution.

Raddon has documented the direct link between mobile banking use and overall member relationships in terms of product use, transaction volumes, retention, and revenue per small business members.

It finds that small business mobile bankers average 2.56 deposit or loan business accounts at their primary institution versus 2.37 accounts for nonmobile bankers.

3. The multichannel experience is centered upon mobile banking

Small businesses say mobile banking has not disrupted their use of other vital channels, such as online banking. It may be somewhat surprising, but 46% of small businesses recently told Raddon they believe mobile banking has driven them to increase their use of online banking.

The underlying point is that small business mobile bankers are more engaged with their primary institution and want a rich multichannel experience with digital and mobile services.

Online banking is still an important channel: 58% of small business mobile bankers believe there are certain features that only online banking can offer versus mobile banking.

4. Start-up firms sharply prefer to use mobile banking

Credit unions need to consider the 360-degree evaluation on this: there is a strong opportunity to serve start-up firms that are in a growth cycle and have basic banking and lending needs.

Many of these firms are small businesses that are optimistic about their upcoming year of sales opportunities—and they are heavily in favor of using mobile banking.

Small business mobile bankers are also more optimistic about their revenue pipeline, with 75% telling Raddon they anticipate an increase in sales over the next 12 months, versus 56% of nonmobile bankers.

The best part of this scenario is the intense correlation of business optimism and the propensity for small businesses to borrow and leverage other services that are profitable to your credit union.

5. The future of mobile banking is bright

Converting nonmobile bankers to mobile bankers can be challenging. But the good news is that advances in security may help them feel more comfortable using this service.

Security is the most common concern among the 48% of small businesses not using mobile banking, cited by 46% of nonusers.

Of this group, 78% are concerned about the risk of identity theft and 70% are concerned about the risk of their small business bank account being hacked.

Raddon believes advances in security measures will help thaw these concerns over time, as 52% of nonusers with security concerns believe innovation in biometric logins—such as fingerprint authentication, voice authorization, and eye verification—may help lower their concerns and lead them to adopt mobile banking.

Mobile banking is becoming a key cornerstone of engagement for small businesses and credit unions.

As the public’s expectations continue to shift and drive an increased demand for mobile banking, credit unions have to keep pace with this demand to capture and nurture the full spectrum of potential members—particularly small businesses.

The value placed on mobile banking by small businesses is massive, and it certainly will drive their overall evaluation on whether their primary institution is meeting their overall needs.

One of the most significant takeaways from Raddon Research Insights is the reason why small businesses use mobile banking in the first place. Instinctive as it may be, 80% of small business mobile bankers believe it helps them save a significant amount of time.

The ease and convenience of mobile banking certainly adds a great deal of value to their companies while allowing owners to focus more time on driving growth and long-term prosperity.

MARCUS ROTHAAR is senior research analyst for Raddon. Connect with Raddon via The Raddon Report and on Twitter.