Wednesday, October 7, 2020 Stamford, CT USA — Disappointment over banks’ responses during the COVID-19 crisis is prompting an unusually large number of small businesses and mid-sized companies in the U.S. to look for new bank providers. 

Approximately 16% of small and mid-sized companies have switched banks in the last 12 months, well above the industry’s historic average “churn rate” of 10-11%. In addition, more than one-in-five companies say their satisfaction with their banks took a hit during the pandemic, and 85% of these disaffected companies are either actively seeking a new bank or say they are open to solicitations. 

New data from Greenwich Associates shows that companies believe certain banks failed to support them during the crisis. Among the top frustrations cited by company owners and executives were a lack of communication and follow-through from their banks on PPP loans and an unwillingness by banks to provide relief on outstanding loans.  

Among companies that changed banks for all or part of their business in the past year, the number-one reason for making the switch was disappointment with bank RMs for pandemic-related issues. For example, when asked to name their top considerations when hiring a new bank, companies cite loan forgiveness/flexibility on loan terms and conditions as their number-one priority. “The COVID-19 crisis served as a flashpoint for many commercial banking relationships. For some companies, their experience was one of frustration, which contributed to a perceived lack of attention and service. Such cases have led to an increased willingness to switch banking providers,” says Chris McDonnell, Managing Director at Greenwich Associates. 

The second reason is “better online banking capabilities and services,” a factor that didn’t even crack the top five until recently. “Almost overnight, COVID-19 turned digital banking capabilities from a nice feature to a defining factor,” says Greenwich Associates consultant Dana Schwaeber, who notes that more than nine-out-of-10 small businesses and mid-sized companies report using their banks’ website in the past 90 days, and more than 60% have emailed with their banker.

Economic Sentiment Tips toward the Positive
After six months of pandemic-induced pessimism, business owners and executives have turned optimistic. Small businesses and mid-sized companies participating in a recent Greenwich Market Pulse have been predicting continued economic contraction since March.  In September, the Greenwich Optimism Index moved into positive territory, meaning that for the first time since the outbreak of COVID-19, a majority of respondents expect economic growth, as opposed to deterioration, in the six months ahead.