Small Business Web Banking Continues Its Rapid Expansion

After examining the small business offerings of the nation's largest financial institutions, it is clear that this segment remains a focal point for the industry. In fact, many of the 21 banks on our Q4 2003 Gomez SOHO/Micro Bank Scorecard are vigorously enhancing their already robust Web offerings with more intuitive and feature-rich services that help small business customers more effectively manage their key financial assets.

For example, Bank of America retained its number-one status on the SOHO/Micro Bank Scorecard for the third consecutive ranking by doing what it does best: excelling at customer self-service. Its entry-level Online Banking offering delivers check and statement images and enables online stop payment requests, among other facilities. Moreover, the offering provides customers with the ability to apply for new accounts online and to immediately enroll in Online Banking.

The Scorecard also saw the continue ascension of National City Bank, which moved up four places to second from sixth in our Q2 2003 ranking. The bank continues to differentiate itself with a plethora of useful self-service features for small business customers, such as the ability to change an address, request a new check card, and stop payment on a single check or a series of checks. Its Small Business Online Banking offering also permits multiple users to view the same account with differing levels of functionality, which is a useful feature for small businesses that may distribute finance and accounting workflow among multiple employees.

Moreover, the Q4 Scorecard also witnessed the entry of four new banks, including HSBC America, which was the only bank to break into our top-ten -- finishing ninth overall. Interestingly those banks which scored within the top eight of our previous Q2 2003 Scorecard retained their standing within the top eight this time around.

Since the top banks continue to upgrade their offerings for small business, it would stand to reason that those offerings and institutions standing still would begin to see their rankings fall. This notion was borne out by the descent of a few banks by more than four positions. With the Q4 2003 edition of the SOHO/Micro Banker Scorecard, Gomez continued to focus on online offerings aimed at the sub-$1 million revenue banker, but this is a rough guide. One theme that echoed throughout our research and discussions with all of the Scorecard banks is that small business customers come in many shapes and sizes, and their service and feature needs can vary tremendously. As a result, many of the upgrades implemented over the last six months, or planned for this year, are aimed at increasing the flexibility with which small businesses big and small can manage their ever-changing needs online.

What follows is a review of the top performances in the current Scorecard, some of the new entrants and major movers, and trends evident from our analysis of the results.

Top-Tier Tussle

While Bank of America held off a furious charge by National City to retain its SOHO/Micro Banker Scorecard crown, there was significant movement within the group of six banks that followed. While, National City followed its five-spot-jump with a leap of four places in the current Scorecard, Wells Fargo and Chase also climbed the ladder, while Key, Fleet, and Wachovia slipped. Moreover, National City managed to wrest away Bank of America's crown in the Growing Business profile, while Bank of America retained the top spot in the Home Office profile.

Other Major Movers, Shakers Emerge

HSBC made a splash into the Scorecard with an intuitive small business offering that is very strong in credit and deposit account linkage and also provides a fully integrated domestic and international wire transfer feature in its base-level offering. Other new entrants included Citizens Bank and Bank of New York, which entered the Scorecard at numbers seventeen and twenty, respectively.

Among other major movers in the Scorecard was SunTrust, on the strength of the addition of check and deposit slip imaging to an already capable small business offering. The bank moved up several positions from sixteenth to thirteenth in the Q4 Scorecard. Those sliding the other way were Washington Mutual and LaSalle, which fell from tenth to fourteenth and eleventh to eighteenth, respectively. Both banks continue to provide very functional offerings, but did not add any major online features or functionality for their small business customers during the final two quarters of 2003. Moreover, both continue to lack some in-demand features such as alerts and online images of checks or statements.

Scorecard Criteria's Impact

Additions to the criteria for the Q4 2003 SOHO/Micro Banker Scorecard were intended to capture new trends in the small business online marketplace or to further define existing trends. The ability for small business customers to receive alerts on account-related information such as balance changes or upper/lower limits and bill payments were among the major trends targeted. We also added criteria to further define a small business customer's ability to link accounts that were not under the same tax-identification number. These linkages would include personal and business accounts where the business was not a sole-proprietorship or linking multiple business accounts.

Another area examined with additional granularity is tiered authority. While the SOHO/Micro Banker Scorecard remains true to its focus on the sub-$1 million small business that typically encompasses a single financial manager, Gomez tracks tiered authority within this Scorecard to try and capture the ability of the customer to grow into tiered-authority without having to switch offerings and the ability for businesses to allow limited access to other outside parties. As the availability and robustness of this feature grows, Gomez now tracks it in greater detail to ensure that credit is awarded not simply for having tiered authority but also for how this feature is implemented.

What is clear from the Q4 2003 SOHO/Micro Banker Scorecard is that most small business customers continue to benefit from improved online offerings at their respective institutions. As of the November 24, 2003 functionality deadline for this Scorecard, nearly 50% of ranked banks offer online check images, a substantial increase from the 30% recorded in the Q2 2003 Scorecard. Also, time-saving self-service tasks such as online check re-orders or the ability to change address information on an account through an online form are becoming nearly ubiquitous among Scorecard banks.

Many institutions are also beginning to think about the next generation of features and services for small business customers. For many banks, this means integrating more complex cash management-type features into their entry-level offerings; for others it involves deploying entirely distinct mid-tier small business offerings to capture the customer who continues to grow in size and online requirements. Either way, our research indicates that Scorecard banks continue to focus on meeting the ever-changing online needs of the small business owner.

Matt Lehman is a senior online banking analyst at Gomez, Inc, a Waltham, MA. Internet benchmarking and improvement strategies firm. He can be reached at [email protected].