Firm News

New Jersey community banks seem to be doing better than their counterparts across the nation when it comes to servicing small-business customers, based on conversations with local banks and business owners who were reacting to a recent national survey.

Community banks across the country are doing a poor job of reaching out to their business customers, according to a survey by the Aite Group, a Boston-based consulting firm that contacted 303 small businesses—defined as a company that posts less than $10 million a year in revenue—and got an earful of complaints.

Community banks typically do not offer online cash-management, payroll processing or other advanced Internet-based services, the report notes. Even when they do, the banks do not communicate the availability to their small-business customers, according to the report, which reflected New Jersey activity but did not break it out separately.

“As community banks increasingly find themselves competing head-to-head with the largest banks for small-business customers…many will find little choice but to at least explore the possibility of offering these products,” the report concludes.

New Jersey banks, however, may have already gotten the message.

“I left a bigger bank for Investors Savings Bank because of the personal service approach, but I also appreciated the online capabilities Investors offers,” Perry Tepper, president of Modulex Partitions Corp., said last week. Modulex, a six-employee, second-generation Hillside bathroom products company, has banked at the Short Hills-based financial institution for about three years. Modulex doesn’t use every online feature that the bank offers, but Tepper likes knowing they’re available.

“I need to be able to quickly check balances, transfer money between accounts and print out cancelled checks in case a vendor thinks I did not pay a bill,” he says. “We’re very satisfied with what the bank offers.”

New Jersey has many small businesses, which may create the critical mass that makes it worth investing in technology services for business clients, says Timothy Lenhoff, senior vice president for technology at Columbia Bank in Fair Lawn. “In a previous job, I worked with banks across the country,” he says. “It was clear that community banks here, and in New York City and Massachusetts, offered more services to their small-business customers compared with other states.”

Columbia already offers automated tax payments, account reconciliation and other services, like remote deposit capture, which lets merchants feed paper checks through a scanner at their shop and convert them to an electronic format. In coming months, the bank will also offer online invoicing and other services.

Small banks in New Jersey really do not have a choice when it comes to offering online services, says Domenick Cama, chief operating officer of Investors. For one thing, the state’s relatively well-off population attracts a lot of national and regional banks, which means there’s more competition for customers.

Also, unlike baby boomers, “the incoming generation of business owners have grown up among computers and online capability,” says Cama. “Many of them already expect these kinds of services, and we would not be competitive if we did not offer them.”

Cama’s bank lets customers pay bills and reconcile their accounts online, even if some checks were issued on paper. The bank also lets customers download their account data to programs like Microsoft Money and QuickBooks.

“Online bank services are increasingly important to small businesses,” says Louis Miele, a partner with Leaf, Saltzman, Manganelli, Pfeil & Tendler LLP in Fairfield. Miele says his CPA firm left a big bank for Hilltop Community Bank in Summit because the partners felt ignored.

“We originally had a good relationship with the bank, but after a while they neglected to advise us about online offerings, like remote deposit,” he says. “We’re moving more of our own banking activity online, and we like the idea of a bank that offers a personal touch, but also has high-tech services.”

Cornerstone Bank knows it needs to retain and attract more business customers, says Gene D’Orazio, chief operating officer of the Mt. Laurel-based institution.

“We have bill payment features and a suite of cash-management products,” he says. Anti-fraud service “positive pay is one example of a big-bank product that we’ll soon roll out.”

“From what I’ve seen, New Jersey banks appear to be ahead of the curve when it comes to offering online services to their customers,” says D'Orazio. “When a small bank has to compete with the likes of Bank of America and Wachovia, you have to keep up with the latest electronic and other offerings.”