Community Banks Can Do Better With Small Business Customers; Must Learn from Nonbank Competitors, Says Consultant

PHILADELPHIA, February 2 -- Community banks can do a better job of helping small businesses and increase their own profits at the same time. They can best do that by learning from their nonbank competitors, according to a leading consultant participating in a recent audioconference conducted by RMA, the international association of lending, credit and risk management professionals.

Peter J. Carroll, managing director of Oliver Wyman & Company of New York, pointed out that bankers have historically approached the small business market in a very straightforward way, offering primarily checking plus credit through branches.

Carroll explained that this model, although profitable, is now limiting. Nonbank competitors are offering more. As an example, he points to web-based loan sites that provide access to a host of benefits, insurance, and even cash management. Insurance companies and other financial services providers go even further by offering services small businesses need.

"There is a window of opportunity right now for banks to be more aggressive," said Carroll. "Banks should focus better on what the competitors are doing. They should also think of the small business in terms of the owner as an individual," he said. Carroll points out that often the personal account of the owner of the small business can be as profitable as the business account, but unfortunately, the owner as an individual is often overlooked.

Carroll also urges community banks to offer a value proposition to the small business. "Stress intimacy and a complete product line," he said."Customers need help with issues surrounding their business. While those issues may include checking and credit, increasingly they will include record keeping, payroll, staff contracting, and investments, 401K, insurance, charge cards and advice," he added.

"Help the owner focus on the parts of the business where he or she performs well and really enjoys. Also, learn more about the creativity and growth ambitions of owners," he said. And finally, Carroll also urges community banks to get on the Internet as soon as possible to offer this expanded product offering and value proposition.

RMA is the only financial services trade association that specializes in promoting prudent and effective credit risk management practices across the entire banking and lending spectrum for institutions of all sizes. Its membership consists of more than 3,000 financial service providers. These institutions are represented in the association by more than 18,000 commercial loan and credit personnel in 50 states, Puerto Rico, Canada and numerous foreign cities, including Hong Kong and Singapore.