Questions and Answers From the Program

Transcription

1 Questions and Answers From the Program Topic: Small Business Share of Wallet Speaker: Katy Koenig, Ph.D. - Raddon Financial Group Page 5: Are these the demographics of all US Banking Customers, the customers of the participating banks, or the customers of the participating banks that agreed to answer the survey? The 1000 respondents to the small business banking customer questionnaire are either customers of the bank which posted the survey invitation (83%), or individuals visiting the bank s small business home page for informational purposes. In either case, they were asked and agreed to take the online survey. Because of the size of most of the consortium banks and their distribution, the customer sample is nationally representative. Page 5: Can we assume that the responding customers are representative of the total customer base for this purpose? We can assume that respondents are representative of online small business banking customers only, and are as representative as anyone who self-selects to take a survey will be. We can only project the extent to which the data can be applied to the small business customer in general. We know the incidence of online banking is higher with small business customers than the general population. Our best estimate is taken from RFG s most recent national consumer research, SPSG, done in the spring of 2003, where 28% of all consumers reported they were online bankers. Small business customers come most heavily from the consumer groups that are considered key online customers (where online banking penetration is between 35% to 50%). In the 1998 Fed Small Business Study, 16% of respondents said they banked online, while for the same time period, RFG s national consumer research reflected only 2% of retail consumers banking online. Small businesses appear to have been in the early adapter group and have continued to increase at above average rates. Page 7: I don t understand this chart what is the difference between a bank and a competing bank? The survey question that initiated this chart was as follows: Listed below are some financial service providers, including this bank. Please check which providers you do business with and the most important reasons why you do business with each provider. Two of the options were: this bank (the name of the bank appeared on the questionnaire), and another bank (this represented any competing bank the customer used). Our purpose was to get an idea of the penetration or use of other financial competitors, including other banks. 701 East 22nd St., Ste. 400 Lombard, IL Phone: Fax:

2 Page 7: Are these providers for SB related products only or both business and personal? While one can t guarantee how closely respondents read or follow directions, the first statement that appeared on each questionnaire (written in bold) was: Please answer the following questions as they relate to your business banking relationship exclusively. Page 9: What is meant by the technology category? The technology category was simply stated as Technology/ Remote Access. Page 9: Although not listed, was credit specified as a reason for selecting a financial services provider? Was it offered as an option? (Slides 9-12) Credit or Availability of Credit was not provided as an option. We wanted to keep the number of options for selecting a provider to a reasonable number (6) and since some of the providers listed did not offer credit services, it was eliminated. Page 10: Did you define quality of service in the question, or did respondents select quality of service from a list? Or did you categorize based on open end responses? Respondents selected from a list of 6 possible reasons for choosing to use a provider: Convenience- Locations/Hours, Pricing/Fees/Rates, Quality of Service Provided, Specialty Products (Range & Focus), Provides Best Advice, and Technology/ Remote Access. The interpretation of Quality of Service Provided was left to the respondent. However, whatever the interpretation, it would have remained constant across providers when used by the same respondent. Page 10: Are Retirement Money Market accounts included in the Money Market totals on Page 10. Similarly are CD totals included (whether or not they included Retirement accounts as well)? The answer was "no" so I'm assuming the answer to the CD total is no as well. It was not our intention that the respondent would include them (especially as it would relate to individual funds, as mentioned above all questions pertained to business banking relationships). We did provide under Other Services used a Retirement option for them to report these business services used. CD accounts should have only been reported as they relate to the business banking relationship. Page 11: One of the primary differences between this page and page 10 is that many more selected the second bank for specialty products can you provide an example of a specialty product that would cause someone to add a second bank?

3 The highest ranked providers chosen for specialty products were mutual fund firms and full service stock brokers. Another bank may offer a wider array of mutual funds or brokerage services (or even insurance). If the firm does business internationally, they might need international letters of credit, etc., perhaps not offered by their institution. Page 13: Does this chart really mean that 16% of all small businesses do not have a checking account? How does a business exist without a checking account? The business doesn t necessarily exist without a checking account, just not a business checking account. Keep in mind that many of the respondents (46%) are under $100K in annual sales. Likely, they are using a retail checking account until such time as they feel compelled to switch to a business account. These businesses are known as in-betweeners by some banks. Page 13: Does the money market account include retirement accounts? It should not as mentioned above. Page 13: Did you ask the small business clients about their retail account needs? They were not asked, other than asking if the bank was their primary retail provider and if they would value a single contact person at the bank to handle their business and personal accounts. We would welcome attendant retail data and perhaps will work some in at a later cycle of the survey, but time and space constraints prohibited it at this time. Page 14: Small Business Association Loans are a real anomaly on this chart. It really stands out that three times as many people plan to use them than currently use them. Any idea why? This remains a mystery to us. Page 15: By definition the survey takers were all online Why do only 70% of them use online banking? Some of the respondents don t classify themselves as online bankers because they don t transfer money between accounts or pay bills online. They do, however, gather financial information online, do comparison shopping, etc., otherwise they would not have been extended an invitation to take the survey. Page 20: Any idea why the usage of business credit cards is so much higher (almost double) among the larger small businesses?

4 Smaller businesses tend to use the owner s credit card and debit cards much more frequently than their larger counterparts. In some instances, the owner is not credit-worthy enough to warrant a business credit card. As many of their purchases might be smaller ones, the debit card is used as is normal for smaller purchases, and as a means to avoid interest charges. Larger, more established firms use business credit cards and rely on the business s credit, rather than the owner s. With these cards, credit lines are larger (which might be utilized more often than with smaller businesses). Companies can also control purchasing power by employees (both by amount and type of purchases) as a feature more beneficial to larger firms. Page 27: How are the two categories different? Prefer separate business and personal provider vs. prefer using more than one provider. Admittedly, they are very similar, but there is a subtle difference between the two. Some owners specifically prefer keeping their business and personal accounts at separate providers. Other owners prefer spreading their accounts among providers, with some business and some personal at one provider and another provider having some of both types of accounts also. The basic underlying challenge for both is that one institution will not likely win both primary relationships. General: For those companies greater than $1MM in size, do you have a breakdown as to the number of respondents by size? e.g. $<$3MM, >$5MM, $5-$10MM? Below is a table with the distribution of annual sales size broken out more discretely. Without identifying the institutions that participated in the survey, is the respondent base national, regional,...? The respondent base is nationally representative. When sample size warrants, we will look at regional data to identify customer differences in areas of the country. Regarding the demographics, do we know how many employees these participants have? Below is a chart of the distribution, which follows closely the distribution of the annual sales size, followed by a chart with more discrete breakouts.

5 If you have any additional questions, please contact Katy Koenig at ext. 441 or