Competition and choice have already commoditized the consumer banking relationship, with most customers seeing little justification for consolidating their products at one FI anymore — even if that FI is deemed the primary. There are signs that small business banking is next. As the effects of technology and the rise of nonbank providers facilitate fragmentation of financial relationships, FIs will begin to see the same trend among small business customers. Though small business banking has typically been a “relationship business,” the essence of that relationship is changing. Touchpoints are more convenient and more frequent but also more distant. At the same time, rival FIs and nonbanks are able to specialize and use a range of digital tools to poach profitable pieces of the primary banking relationship. The motivations behind bank switching and shifting of accounts and products between institutions are multi-faceted. The ongoing challenge for banks and credit unions looking to retain customers and maximize share of wallet will be to evolve digital and branch offerings so they are more personalized and encourage customers to hold their accounts and products at their primary institution.

Key questions addressed in this report:

  • How have digital and the rise of fintech players changed how small business owners and decision makers make banking decisions?
  • What does it mean to have status as a customer’s “primary” FI?
  • What motivates small business customers to leave their bank or credit union outright?
  • What is attractive to small businesses about FIs with which they do not currently have an account?
  • What features are most important in retaining small business customers?
  • How have the roles of the branch and online banking channels evolved in the mind of the small business customer?

The small business data in this report is based primarily on information collected in a random-sample panel consisting of 1,000 small and micro businesses in a February 2016 online survey. Javelin defines micro businesses as those with annual revenue between $100,000 and $1 million and small businesses as those with revenue between $1 million and $10 million.

The consumer data in this report is based primarily on information collected in a random-sample panel of 8,525 consumers in an April/May 2015 online survey. 

When measuring potential switching to a new FI, shifting of products to an FI that is not the primary relationship, or increasing usage of third-party services, Javelin asked small business respondents to gauge their likelihood on a five-point scale, with the following labels:

1 – Extremely unlikely
2 – Very unlikely
3 – Somewhat likely
4 – Very likely
5 – Extremely likely

In this report, we have denoted “switchers” as only those respondents who marked “5 – Extremely likely.” This stems from the recognition that survey respondents do not always accurately follow through on their intentions. However, Javelin found on the consumer side that actual churn rates matched very closely with “extremely likely” churn rates.