Small Business Portals Offer Challenges and Opportunities

The latest trend in banking and e-commerce is the small business Internet procurement portal. It seems as though many financial institutions are ready to jump into the fray, offering small business customers everything from office supplies to rental cars through their banks' Web sites. In their effort to keep up with the bank next door, these financial institutions often enter into agreements to host a small business portal that does little more than offer discounts on non-financial business products and services. In doing this, they are overlooking the fact that financial institutions are in the business of providing financial solutions first, and value-added non-financial products and services second.

Your customers look to you for solutions to help their small businesses succeed. They expect you to offer products and services to meet all their financial needs, and they expect you to do that well. With an integrated approach, including solid financial offerings and value-based non-financial components your customers may not expect from their bank, you add value through your portal and increase customer loyalty. But before you launch a portal, here are some tips to ensure you reach your objectives:

Tip #1 -- Research the Market

According to the Survey of Small and Mid-Sized Businesses -- Trends for 2000 annual survey from National Small Business United and Arthur Andersen, 85 percent of small businesses now use the Internet. You need to understand how they are using it. 

Studies indicate that anywhere from 21 percent to 40 percent of small businesses purchase goods and services over the Internet. A program that offers discounts to small business customers who join a membership program can increase traffic to your Web site. You can also enjoy the increased revenue from customer purchases of office supplies, long distance services, etc. 

An integrated portal represents another opportunity to promote your core small business program, while educating your customers on ways to conveniently access financial services and product information. According to a study by PSI-Global, 10 percent of all small businesses are projected to use online banking this year; of those, 42 percent will access online banking via the Internet. Currently, few rely on the Internet for financial services information; the highest percentage of use (8 percent) is for balance reporting and account monitoring. Two percent obtain information about credit fees and rates, and fewer than 1 percent apply for credit online.

A portal that combines procurement and financial services can increase these averages for your financial institution. You may not see an immediate increase in cross-sell activity of your financial products online; but as customers are continually exposed to your offers and become more comfortable using the Internet, you will begin to reap the benefits of this alternative delivery channel.

Tip #2 -- Leverage Revenue Opportunities

Small business customers at large banks such as Wachovia and Bank of America can enroll in programs that provide discounts on business products and services. All the customer has to do is sign up to begin taking advantage of the savings offered. 

Agreements with vendors most likely ensure that financial institutions receive a percentage of sales made through programs like these. But the revenue opportunity could provide even greater returns as a member-based program. If the offerings are good enough, customers will not mind paying a small monthly fee to access the discounts, as they will still enjoy overall substantial savings. They can also save time by not having to shop around for the best deals. Members are likely to visit your site more often, thus becoming more familiar with your financial products and services. They are also more likely to utilize the business discounts, which in turn generates more income for your financial institution.

Tip #3 -- Choose an Experienced Portal Provider

If you decide that a small business portal featuring online procurement fits into your overall marketing strategy, the next decision is whether to build it yourself or contract with a third-party provider. Most financial institutions are opting to form relationships with experienced technology, product and service providers -- rather than trying to go it alone. A strong alliance with an experienced provider can help you develop a successful, full-service portal.

With a third-party provider, you will be able to offer a broader mix of financial and non-financial products and services. The provider should have a solid understanding of the small business market to help fully integrate all the offers, and advise you on how to make your portal more profitable. In addition, a well-chosen provider will regularly update content to ensure that your customers have a reason to return. A provider that offers marketing expertise and support will help generate awareness of your portal, increasing traffic and income opportunities.

You will rely heavily on your chosen provider to supply customer service. Traditional business strategies rarely work on the Internet, and expectations of speed and service are much higher. Internet users are accustomed to real-time interaction. Sites like Amazon.com have set the standard for shopping on the Internet, providing order updates and shipping information. Your provider should handle all aspects of your portal's procurement customer service so your relationship managers are not tracking paper clip orders. 

A fully integrated portal certainly can play an important role in promoting your financial products and services. For now, you should view it as an enhancement to your delivery system. In order to achieve your small business objectives, you still need a multi-faceted marketing strategy. Focus on delivering good customer service and solid product offerings, and you will be well on your way to establishing yourself as a great small business financial institution.