Banks Struggle with the Decision to Offer Small Business Apps

Since Apple released the iPhone in 2007, mobile banking apps for retail banking customers have become the financial equivalent of the little black dress — a must have. Yet, one customer type has been neglected in the app stores: small business owners.

"The commercial market is still growing and there are a lot of things people are trying to figure out," says Megan Minich, head of product delivery and channel delivery at Silicon Valley Bank. She has worked on commercial mobile apps since 2006.

Examples of how banks are thinking about this segment have been slowly emerging.

SVB debuted a mobile banking app in recent months to U.S. commercial clients — big and small companies alike. "The reason we launched a mobile app is because it's becoming table stakes," says Minich.

At time of launch — late 2012 for some customers and early April for others — Minich says SVB wanted to make sure it had enough functionality to tempt customers to download the app and use it. The bank included standard retail banking features like the ability to view account balances as well as business features such as the ability to approve and schedule outgoing wire transfers. The bank doesn't release adoption numbers but says usage is meeting its target.

Other financial institutions like City National Bank of Los Angeles have been quietly rolling out small business apps in recent months. Meanwhile, JPMorgan Chase has offered small business owners a mobile app for its Ink credit cards for about two years. Jot, the name of the app, lets customers track and organize expenses, among other things. Most recently, the bank added the ability to attach receipts to the transactions.

"Many [small business owners] are surprised by the amount of time spent on running a business as opposed to what they love," says Brent Reinhard, general manager of Ink at Chase. "We try to help them with the [back office] management component."

Throughout the industry, however, tools designed for small businesses are few and far between.

Industry analysts attribute the lack of small business mobile apps to many factors, including: businesses adopt technology more slowly, their needs are more complex, and even defining the category is a challenge.

"Small businesses tend to get lost on the retail side of the house," says Jacob Jegher, senior analyst with Celent. "The minute they need a higher order product like a wire transfer, the bank will say: 'You should be on treasury management,' and the small business will end up in a complex and daunting environment. …It's literally another language for the small business. The opportunity is ripe for true features and functionality for small businesses."

It may be hard for banks to come up with a one-size-fits-all product for small business clients whose needs vary.

"The question to answer is, what are the individual customer needs, and then create a customized solution for them," Jegher says. Some may need wire transfers, some need cash flow tools, while others may just need invoicing and bill pay. "There are a lot of ways to slice and dice this," he says.

But there's no question in Jegher's mind that banks should do something digitally for this market. "It's only a matter of time before banks get into the game, otherwise someone will eat their lunch."

On Demand Banking

Small business owners have expressed an appetite for tools that allow them to do unenjoyable tasks, like banking, whenever they want.

"A small business customer doesn't have the time to spend on the financial side that you might think," says John McDearman, executive vice president of Wilson Bank & Trust in Tennessee.

"They want the flexibility to do something whenever they need to do it," adds SVB's Minich. Larger commercial clients, with accounting employees locked to their desks, can benefit, too. "I always thought the size of the company dictates what they want, but the reality varies according to how they run their operations: Some large companies might have streamlined finance teams. You can't make blanket assumptions."

What should bankers refrain from doing? A sloppy retail-to-commercial makeover, urge analysts.

Mark La Penta, practice manager and senior consultant for CCG Catalyst Consulting Group, says some banks will rebrand their retail platforms with minor tweaks, such as changing the logo, and decide it's a small business platform. "That won't suffice," says La Penta. "They will need to be separate."

Unlike consumers, business customers potentially have more people using an account and they take out more complex products. Thus they typically need entitlements, added security measures and more robust audit trails. "Security and entitlements are the big demarcation points," says La Penta.

That's truer for large commercial clients. However, La Penta still argues for the industry to move to separate and distinct platforms for small businesses, too. Why? For banks, there's opportunity to charge business clients fees for certain value-added services, he says. Additionally, the bank could preemptively troubleshoot future regulatory issues that may only affect a specific customer type.

Another question is: Do business owners want one app to access their business and personal accounts?

One community bank IT exec told BTN his customers have asked the bank to integrate small business accounts into its mobile banking app. But the bank has yet to pull the trigger on this change until it can better answer questions like: Should all consumer-facing features like mobile RDC be available? How do you create value beyond basic functionalities? Can the bank charge for certain features? And, what are the compliance concerns?

Chase, like other bigger banks including Wells Fargo & Co. and BBVA, allows small business customers to use its retail app. Its small business customers tend to want to have separate mobile app logins: one for business, one for personal.

Other banks report similar customer preferences.

Frost Bank, which launched a smartphone app in March, decided to create one app with separate logins for small business and retail customers. The Texas community bank will continue to develop services for business customers as needed. Allowing for entitlements could be a possibility; however, the bank has yet to get feedback from small business customers requesting specific features yet.

"It's not a race to have the most features," says Jimmy Stead, Frost Bank's senior vice president of e-commerce. "It's more about crafting things that work well and are usable and giving [users] a simple navigation structure."

Meanwhile, Silicon Valley Bank's Minich could see letting commercial clients view their personal accounts on a commercial tablet app, as the devices are generally used when someone has some leisure time. (SVB's parent company offers a private bank mobile app.) To date, that's not part of the experience. "Aggregation of information could be a start in how that plays out," she says.

However, allowing a commercial client to transact in the app for personal tasks could confuse the user experience, she adds. Furthermore, the bank would need to research whether it could fulfill the request, from a compliance point of view.

Customers will dictate the features of many of these apps going forward.

"If small businesses say, 'we want this,' that's a driving factor and a potential catalyst," says Celent's Jegher. For now, it's hard to say if that need exists, because small business customers tend to begin their bank relationships at branches, and any requests they have could get filed in a cabinet and forgotten about, he says.

Banks are advised to remember: in design, they have to consider all channels.

"Banks need to focus not just on mobile," says SVB's Minich. "Make sure the experience is consistent where it makes sense. It's important to have a broader strategy."