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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
INTRODUCTION
Many financial institutions view small-business mobile banking as a necessary evil. They know
they need to offer it but struggle to build the business case for investing in a product that is
often given to customers free of charge. Banks are at a crossroads; they can offer small
businesses their consumer offerings, rebranded as business ones, or invest in true business
mobile banking offerings that will likely better meet most customer needs.
This whitepaper will help those institutions considering the latter build the case for doing so. It
sizes the small-business mobile banking opportunity and highlights other factors beyond fee-
based revenue that banks should look to when justifying their investment in enhanced small-
business mobile banking capabilities.
METHODOLOGY
This whitepaper was sponsored by Bottomline Technologies. The information is based primarily
on the results of a September 2013 online survey of 1,003 U.S.-based businesses generating less
than US$20 million in annual revenue. While this revenue range goes beyond the small-business
definition used by many institutions, it represents a segment largely underserved by financial
institutions and thus untapped revenue potential. The margin of error for a survey of this size is
3 points at a 95% level of confidence. Figure 1 shows a breakdown of survey participants by
annual revenue.
US$10 million to
US$20 million
15%
Less than
US$100,000
US$5 million to 32%
US$9.99 million
12%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 2
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Aite Group estimates that approximately 65% of U.S. banks with more than US$10 billion in
assets, 30% with less than US$10 billion in assets, and 20% of credit unions offer mobile banking
to their small-business customers (Figure 2). These estimates include both consumer offerings
rebranded as business ones as well as true business mobile platforms. The percentage offering
mobile capabilities to corporate customers is far lower.
65%
30%
20%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
Further, we estimate that approximately 32% of businesses generating less than US$20 million in
annual revenue are now banking through this channel. While adoption rates vary by business
size, mobile banking interests businesses of all sizes (Figure 3). The most successful banks have
achieved small-business mobile adoption rates of about 20%, while Aite Group estimates the
industry average to be about 10% to 12%.
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 3
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Firm Likelihood to Bank Via a Mobile Device Over the Next Year
(By revenue size in US$)
$5 million to $9.99
26% 26% 47%
million (n=121)
$1 million to $4.99
29% 35% 37%
million (n=182)
$100,000 to
41% 32% 27%
$999,999 (n=226)
Less than
54% 24% 22%
$100,000 (n=322)
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
It is important to point out that most of the businesses that have adopted mobile banking are
using the channel primarily (and in some cases exclusively) for basic capabilities such as checking
balances. This is largely due to the types of offerings in the marketmost small businesses are
using consumer mobile platforms as opposed to platforms with more business-specific
capabilities. This is evidenced by the far lower percentage of small businesses using business-
specific capabilities such as initiating or approving Automated Clearing House (ACH) or wire
payments (14%) or making pay or no-pay decisions with positive pay (Figure 4).
In other words, low adoption of more advanced mobile banking capabilities is not so much due
to low interest but rather due to limited availability. A February to April 2012 Aite Group survey
found that approximately 59% of U.S. banks that have more than US$10 billion in assets offer
their small-business customers the ability to check balances and transfer funds via mobile, while
1
only 24% also offer the ability to authorize transactions via mobile.
1. See Aite Group's report, Small-Business Mobile Banking: A Promising Opportunity, June 2012.
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 4
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 5
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
COMPETITIVENESS
A financial institution's mobile capabilities are an "important" or "very important" consideration
when selecting a new banking relationship for 51% of businesses generating less than US$20
million in annual revenue (Figure 5). Banks therefore have no choice but to invest in these
capabilities or jeopardize their future success with this customer segment. Mobile capabilities
are especially important to businesses generating greater than US$1 million in annual revenue.
Not important at
Very important all
22% 21%
Only a little
important
7%
Important Neutral
29% 21%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 6
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
M O B I L E U S E R S R E P R E S E N T A N AT T R A C T I V E C U S T O M E R S E G M E N T
When comparing those businesses that currently use mobile banking with those that don't, it is
clear that current and future mobile users represent an attractive segment for financial
institutions. They offer a greater potential for future cross-selling than those not interested in
mobile banking, and they tend to represent banks' more profitable customers.
The next several figures break down and compare the small-business segment into three sub-
segments, including (1) those businesses currently banking via a mobile device, (2) those that
likely will over the next year, and (3) those that are unlikely to do so (Figure 6).
Already use
32% Not likely
37%
Likely
31%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
MONTHLY SPEND
Businesses already using or likely to use mobile banking over the next year tend be more
profitable customers for their banks. Among survey participants, 47% of those not likely to use
mobile do not spend any money on banking products and services each month compared with
the only 16% and 19% of those already using it or likely to. Approximately 45% of mobile banking
users generating less than US$20 million in annual revenue spend more than US$50 each month
on banking products or services, making them an attractive segment (Figure 7).
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Likely to use
mobile banking
19% 14% 16% 16% 16% 20%
over the next year
(n=311)
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
NUMBER OF ACCOUNTS
In addition to spending more money with their banks, mobile banking users also tend to have
more accounts than those who eschew mobile. Both those already using mobile banking as well
as those likely to are far more prone to have more than one account with their primary
institution than are those not interested in mobile banking. The early adopters of mobile
banking (those already using it) are the most likely to have at least four accounts (Figure 8).
Q. Approximately how many accounts does your business have with its
primary institution? (Segmented by likelihood to use mobile banking)
Already use
23% 54% 19% 4%
(n=321)
Likely to
30% 54% 12% 3%
use(n=311)
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 8
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
40%
Online bill payment
75%
28%
Transf er f unds
63%
22%
ACH payments
49%
17%
Domestic wires
48%
Not likely to use mobile
Management of 14% banking (n=371)
direct deposit 47%
Already use mobile banking
22% (n=321)
Positive pay
46%
14%
Electronic invoicing
45%
12%
International wires
39% Differences in product use between
businesses using and businesses not
Ability to purchase 5% likely to use mobile banking are
f oreign currency 32% statistically significant.
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
GROWTH PLANS
Fifty-one percent of U.S. businesses generating less than US$20 million in annual revenue are
working toward moderate growth over the next two years, and some are looking to grow
aggressively. Those businesses already using mobile or likely to do so are almost twice as likely to
have aggressive growth plans than those not interested in mobile banking (Figure 10). This
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
aggressive growth will likely lead to greater demand for more sophisticated products and
services and thus additional fee-based revenue for their primary financial institutions.
15% 16%
9%
Not likely to use mobile Likely to use mobile banking Already use mobile banking
banking (n=371) over the next year (n=311) (n=321)
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
11%
Back up data 41%
51%
12%
Store images of
38%
important documents
48%
Source: 'Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
LOYALTY
Attracting new customers can be a challenging, as well as expensive, task for financial
institutions. Therefore, it is important that banks have customers who are satisfied and willing to
recommend them to their peers. Those businesses already using mobile banking are significantly
more likely to recommend their primary financial institution to other businesses similar to theirs
than are businesses that don't currently use it or plan to (Figure 12).
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 11
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Source: 'Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 12
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
FUNCTIONALITY
The small-business value proposition for mobile banking goes far beyond the ability to check
balances. While checking balances is likely to be the most common transaction type performed
via a mobile device, the true value of the channel is the ability for business owners to maintain
productivity when they are out of the office. Several additional functionalities are therefore
critical to a bank's small-business mobile banking success. Below is a list of the functionalities
that banks most often offer to their small-business mobile users:
Check balances
Pay bills to payers already set up through the online channel (electronic bill pay)
Payment approvals/authorizations
Of those capabilities listed above, payment approvals/authorizations are often the most critical
to small businesses. Many small-business payments require a second level of approval; in these
cases, one individual is responsible for initiating the payment, while a second is required to
approve it. Since the second individual is often the business ownera person who is likely to be
on the road meeting with customersmobile approvals allow payments to be made even when
the business owner is out of the office, enabling productivity levels to be maintained.
Additionally, continued concerns about fraud within the industry have led to a rise in small-
business interest in positive pay, a bank service that aids in the prevention of check fraud. The
ability to view images of checks flagged by positive pay systems and make pay/no-pay decisions
on them via a mobile device is therefore also seeing a great deal of interest from small
businesses. Table A shows interest levels in key mobile functionalities by business size.
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Would be 7% 5% 5% 7% 9% 11%
important/critical
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Would be 7% 6% 3% 7% 7% 13%
important/critical
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
ACCESS TYPES
As financial institutions roll out or plan to roll out their mobile banking offerings, they must
make them available in multiple formats. This is due in part to the multiple device types in the
market and small businesses' split preferences regarding the ways in which they prefer to receive
their banking information via the mobile channel. The three primary access modes that financial
institutions are currently offering follow:
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
SMS text banking enables virtually anyone with a cell phone to conduct many basic
banking transactions. SMS messages are best suited for simple transactions, such as
checking an account balance, because they typically rely on the user having to enter
codes in order to receive the information requested and because messages are
limited to 160 characters.
Mobile Web uses the browser of a smartphone and essentially shrinks the
experience users would have using online banking on their computer. The user
experience tends to vary greatly depending on the mobile device. Mobile Web is
typically the easiest solution to implement, offers broad functionality, and is
consistent with a bank's Internet banking interface. Many banks have a different URL
for their mobile Web and online banking offerings.
Many banks have chosen to offer both downloadable app and browser-based mobile
offerings. This strategy makes sense because small businesses remain divided in their
preference for each (Figure 13). The only delivery mode preferred by just a small
percentage of small businesses (17%) is text messaging, and this percentage continues
to decline.
Q. How would you prefer to make banking transactions with your mobile
device? (n=844 businesses already banking or likely to bank via a mobile
device)
With text
messages
Using an app 17%
downloaded to
your mobile
device
36%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
DEVICE TYPES
The small-business segment is currently enjoying high mobile-device penetration; 35% of small-
business survey participants state they use an iPhone for business, while 34% use an Android
phone. Only 23% use a regular cell phone; this is a significant decrease compared to the more
than 40% that did in August 2011 (Figure 15).
iPhone 35%
Android 34%
Tablet (such as an
15%
iPad)
I do not currently
use a mobile device 13%
f or business
Other smartphone
9%
device
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
Tablet usage for business has almost doubled by small businesses generating less than US$10
million in annual revenues since 2011 (Figure 15). As banks also look to roll out tablet offerings,
it should be noted that it is unlikelyat least in the short termthat the tablet will cannibalize
usage of smartphone access. The largest percentage of small businesses surveyed stated they
would be interested in performing banking transactions from both device types, regardless of
the transaction type. Both smartphone and tablet offerings should therefore be a part of any
institution's mobile strategy.
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
July 2011
7%
(N=291)
September 2013
13%
(N=851)
Source: Aite Group's Surveys of small businesses, August 2011 and September 2013
SECURITY
Most businesses generating less than US$20 million in annual revenue (49%) believe that the
mobile channel is equally secure to the online one (Figure 17). This is good news for financial
institutions, as to date, concerns about security have been the key reason business customers
have not adopted the channel. Financial institutions have therefore been focusing efforts on
educating their customers about security, and their efforts seem to be paying off. Of those
businesses that don't see the two channels as being equal from a security perspective, smaller
businesses tend to favor the online channel's security, while larger ones feel the mobile channel
is more secure.
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
Tablet/
smartphone
banking is equally
secure as
desktop/laptop
banking
49%
Source: Aite Group survey of 1,003 U.S. businesses generating less than US$20 million in annual revenue, September 2013
2014 Bottomline Technologies. All rights reserved. Reproduction of this report by any means is strictly prohibited. 19
Why Banks Should Offer Mobile Banking to Small Businesses February 2014
CONCLUSION
While business mobile banking is a service most banks have not charged for to date, it is a
required offering for any institution looking to succeed with small businesses going forward. As
described throughout this report, there are several compelling reasons for banks to not only roll
out business mobile capabilities but also to continue investing in them. As financial institutions
do so, they should keep the following in mind.
Migrate small businesses. Consumer mobile capabilities are not sufficient to meet
the needs of most small businesses. Similar to what Aite Group suggests for the
online channel, financial institutions must migrate small-business customers onto
commercial platforms with business-specific mobile capabilities.
Bring tablets to the table. Tablet adoption is on the rise. Financial institutions
should not limit their mobile offerings to smartphone capabilities.
Bundle mobile banking with other business banking capabilities. While most
institutions do not plan to charge small businesses for mobile banking, mobile
banking users show a higher-than-average willingness to pay for other products.
Mobile banking is needed to retain them; however, other products must be cross-
sold to make them profitable.
Work with technology partners and industry analysts to keep on top of industry
best practices to ensure the greatest success for your institution's mobile banking
program.
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Why Banks Should Offer Mobile Banking to Small Businesses February 2014
C O N TA C T
For more information on research and consulting services, please contact:
Marcel Kay
+44.(0)207.092.8137
pr@aitegroup.com
Heather Bridges
+603.501.5267
hbridges@bottomline.com
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