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Banks losing small clients
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August 18, 1998: 3:10 p.m. ET
Non-bank organizations offer small business attractive, innovative services
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NEW YORK (CNNfn) - The wide variety of products and services offered by non-bank organizations are giving them an edge over banks in the small business market, according to a new study.
A survey conducted by Mentis Corp. has found non-bank organizations generally are doing a better job than banks at targeting the needs of small companies.
As small business owners become increasingly computer savvy, non-bank organizations have been aggressive about developing advanced Web pages that support these companies' marketing and communication needs, often providing transaction capabilities.
But only one-quarter of large banks and 10 percent of small banks offer Internet banking services -- some of which are still limited to simply providing information, despite evidence small business owners regularly use the Internet for business or personal reasons.
Non-bank organizations also have other advantages.
"Unlike banks, these organizations do not have regulatory barriers prohibiting or limiting interest on business checking accounts, which has allowed them to offer their small business clients interest-bearing accounts for a number of years," said Mentis research manager. Kristen Min.
In addition, non-bank organizations like American Express (AXP) and other credit card companies are using well-developed existing databases of customer information to gain small-business clients.
But banks trying to maneuver into the small- business market still may have a chance.
"Banks can use their established branch networks and staff, which represent this segment's most preferred channel for conducting business, to better understand their small-business clients and to cross-sell products and services," Min said.
Because non-banks are just beginning to offer deposit services, banks already have critical relationships with small-business owners that could be expanded and strengthened by offering additional services such as insurance, loans and investments, Min added.
Mentis Corp. is an international research firm specializing in the evaluation of information and communications technology within the financial services industry. 
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Mentis
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