Small Business Online Banking to Expand

The Internet is going to help financial services firms cater to small businesses in a more cost-effective manner, according to a report by Meridien Research.

Meridien’s “Internet Banking for Small Business” reports that financial services firms have overlooked the rapidly growing small business segment because support for this market, which includes relationship managers and branches, has been seen as too expensive to justify. Banks generally serve small businesses through a patchwork of wholesale and retail systems, none designed specifically for the small business market.

Use of the Internet for delivery of small business services now accounts for barely 20 percent of electronic usage in this market. However, Meridien predicts the Internet will overcome all other electronic channels within four years, achieving 65 percent dominance by 2003.

Meridien says the Internet will provide financial services firms with an electronic banking solution suited for the small-business market. It will include transactional capabilities that go beyond simple bill payment to include wire transfers and SWIFT payments.

Meridien predicts that spending on small business banking services will grow by more than 40 percent to $61 billion by 2003, so it is no surprise that vendors are looking to enter the small-business market.

“The emerging vendor community includes retail-focused vendors moving upstream as well as corporate cash management vendors moving downstream,” said Octavio Marenzi, Research Director at Meridien.