The Challenges and IT Priorities of Community Banks Operating in the Business Banking Space

Report Summary

The Challenges and IT Priorities of Community Banks Operating in the Business Banking Space

The retail banking space is becoming more competitive, and its products are becoming more commoditized. As a result, community banks must focus on building their presence in the business banking space, where greater opportunities for fee-based revenues an

Christine Barry
Research Director

Boston, MA, February 19, 2007 – In a new report, The Challenges and IT Priorities of Community Banks Operating in the Business Banking Space, Aite Group examines community banks' growing focus on business banking. In an effort to respond to an increasingly competitive market, community banks are enhancing their online capabilities and are building a presence in the business banking space. By doing so, community banks will be able to take advantage of increased fee-based revenues and cross-selling opportunities. In addition, they will also be able to better compete with large banks by offering many of the same products.

In Aite Group's survey of 207 community banks, which was conducted with cooperation from the Independent Community Bankers of America (ICBA), it was found that 80% of community banks recognize a need to provide solutions for business banking. However, the study also suggests that in order for community banks to succeed in the business banking arena, they must ramp-up online banking capabilities aimed at business users. Currently, many community banks offer only basic online capabilities and retail banking solutions to business banking customers. The fact that 30% of survey respondents stated that deploying new online cash management/business banking solutions is a top priority for the next three years is promising.

By offering greater business banking capabilities, small banks can remain competitive. These capabilities will allow small banks to retain and grow deposits, and they will compensate for decreasing margins. Through these business banking capabilities, community banks will be able to service a highly lucrative market that offers the opportunities to identify new revenue streams and cross-sell additional products. Among the most common business banking technologies planned for deployment are remote deposit and online cash management. To succeed in this space, community banks must also move beyond simply offering basic online business banking capabilities. Solutions must be enhanced with entitlement capabilities, positive pay, international wires, automatic enrollments and foreign exchange.

"The future of community banks depends largely on their ability to meet the demands of the business community," said Christine Barry, a research director with Aite Group and author of the report. "Businesses, both large and small, demand robust online banking capabilities and business-specific banking solutions. Retail banking solutions simply cannot provide businesses with the scope and depth of functionality they require."

This 42-page Impact Report contains 33 graphs. Clients of Aite Group's Wholesale Banking can download the report.

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