Magazine article American Banker

Banks Expanding Staff and Products in Answer to Shifting Competition

Magazine article American Banker

Banks Expanding Staff and Products in Answer to Shifting Competition

Article excerpt

As competition for small-business customers continues to grow, banks are adding products and beefing up staff in hopes of drawing new clients.

More than 90% of banks intend to offer new products for small businesses this year, according to a survey released this week by the Consumer Bankers Association. Cash management, sweep accounts, and individual retirement accounts have become standard fare at almost all banks surveyed, and a growing number say they now offer private banking, payroll services, insurance, and tax planning as well.

The survey, which polled 38 banks, with a combined $3.3 trillion of assets, found that bankers are increasing their product offerings in anticipation of a shift in who they will be competing against.

While 89% said they consider local banks to be a top competitor today, only 59% said they expect those banks will remain so in five years. American Express Co. and Merrill Lynch & Co. -- considered today by respondents to be competitors by only 18% and 16%, respectively -- were viewed as competitors in five years by 29% and 23%, respectively.

Insurance companies did not register as a top competitor today, but 5% expect them to be one in coming years.

Banks hope that by increasing their products and services, they can form broader relationships with their customers, according to Kathleen C. McClave, a consultant with Tillinghast-Towers Perrin in New York who conducted the survey. In a summary, Ms. McClave wrote that in coming years banks will continue to look at their offerings to make sure they are giving customers exactly what they want. …

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