Does Online Banking Engender Loyalty?

A new study by NFO WorldGroup had some not-so-good news for financial institutions hoping that getting their small business customers wired and providing top notch Web services will build loyalty and provide cross-selling opportunities.

The study of 10,000 small businesses revealed that entrepreneurs sophisticated enough to bank online are only a click away from the competition, and the more money savvy among them shop around for the best rates.

The study showed that 81 percent of small businesses currently hold all deposits and investments in one financial institution. However, that number plunges to 60 percent for those who bank online and actively manage their cash. Additionally, only 22 percent of small businesses reported that they were actively solicited to use excess deposit and investment dollars. The rest may well be searching out the best deals elsewhere - including from online bank competitors.

NFO says twice as many small business owners shop for financial services now compared to two years ago and that 78 percent of these owners are shopping for competitive offerings even if they are happy with their current financial institutions.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 11, 2/03