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Contact: Jeannette Weiland, BAI
(312) 683-2319

SMALL BUSINESS CUSTOMERS WILLING TO SWITCH BANKS FOR BETTER PAYMENTS OPTIONS ACCORDING TO BAI STUDY

CHICAGO (APRIL 2006) – A new study reveals a major disconnect in what small businesses want from their financial institutions in terms of payments services and what banks think these needs are. As a result, over half the small businesses interviewed said they were willing to switch banks for better payments offerings. This could be very costly for banking organizations because small business deposits, and hence relationships, are highly profitable – often two to three times as profitable as their retail consumer counterparts.

In collaboration with Oracle and Unisys, BAI, a leading financial services professional organization, interviewed more than 1,000 small and mid-sized businesses and conducted 30 executive banker interviews as part of this BAI Small Business Payment Strategies study. The research will be presented at the BAI TransPay Conference & Expo on May 24th 2006 in Las Vegas, Nevada.

“This research is very important because right now financial services companies are looking for new ways to grow revenue organically,” said Deborah L. Bianucci, President and CEO, BAI. “While the study highlights some disconnects between the bankers and their small business customers, it also outlines opportunities for banking organizations to increase their penetration and build loyalty within this market segment.”

Typically most banking companies leverage service, localized-decision making and the convenience of bank branches as the foundation for building small business relationships. While these core elements remain critical, banks are trying to differentiate themselves with unique offerings and value-added services, such as online bill pay, free checking or specialized rewards programs.

“Banks must have a greater understanding of their small business customers’ needs and have the agility to quickly introduce new products and services if they are to capture the tremendous potential of this market segment,” said Jim Harris, partner in the North American banking practice at Unisys. “Whether it is online cash management that understands market fluctuations, private payment debit card services to facilitate e-payments, or real-time monitoring for identity fraud, banks can help customers better secure their business operations by providing a trusted environment for payments services,” he added.

All Things Are Not Created Equal
Within the small business market, companies with annual revenues between $5 and $10 million are especially attractive to bankers because they tend to carry higher average balances and, in many instances, stronger credit profiles. The research shows that if not adequately served this segment could be in jeopardy for banking organizations.

“Our research indicates that companies in the $5 -$ 10 million dollar range are most receptive and most likely to benefit from new payments products and innovations,” added Ajay Nagarkatte, Managing Director of Syndicated Research, BAI. “However, the study also indicates that if banks continue to ignore this group or tries to force them into a ‘one-size-fits-all’ small business strategy, they are likely to lose customer share. Fifty-seven percent of businesses said they were quite likely to switch providers if their payments needs were not met.”

Greater Awareness
Another finding of the study is that bankers need to modify their perception of small business needs. The research revealed that many bankers believe small businesses are “not interested in technology,” nor do small business owners have the “resources to take advantage of it.” This may be true for micro-businesses (revenue of $1 million or less), but is certainly not representative of the broader small business marketplace. In fact for the $5-$10 million revenue segment:

• 80% of businesses in this segment expressed a strong interest in a technology-based electronic platform
• 82% of respondents in this group said they use or plan to use ACH direct deposit
• 79% of the group currently use or plan to use wire transfers

“Banks clearly have a revenue opportunity by targeting the highly profitable small business sector with innovative payments products and options,” said Greg Midtbo, Industry Vice President for Financial Services, Oracle. “However, to capitalize on these opportunities and better serve this important client base, banks require end-to-end visibility of data across the enterprise, which enables them to quickly identify and act on opportunities while reducing cost and risk. Critical to this objective is an enterprise payments infrastructure that allows organizations to manage payments as a business, enables straight-through processing, and creates an extensive framework that supports the evolution of new products and services.”

New Opportunities
The study highlights key opportunities within the small business market:

• Less than half the respondents use credit cards issued by their primary deposit provider. By introducing card loyalty programs, banks could likely improve upon this statistic as over 55% of businesses said rewards and points were important to them when selecting a method of payment.
• 45% of all small businesses were concerned with maintaining working capital. If banks adapt existing middle-market capital, cash management and treasury management services, they can capitalize on this issue.
• Remote Deposit Capture offers revenue opportunities. To ensure adoption, bankers must communicate its benefits effectively and develop a pricing schedule acceptable to the businesses they serve.
• Fraud is also a major concern. Over 70% of the respondents were looking for an identity management platform to safeguard their business’ identity and provide electronic access to financial and other key accounts.

Findings will be discussed at a BAI TransPay Conference & Expo on Wednesday, May 24th, 2006 by leading industry executives including Ray Mulhern, Senior Vice President, Wachovia Bank and Tom O’Hara, Senior Vice President, Deposit Products and Fees, Huntington Bank, as well as executives from BAI Research, Oracle and Unisys.

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BAI is the financial services industry’s leading professional organization that delivers information and education to enhance the organizational performance of financial services companies and the individual performance of their employees.

About Oracle
Oracle (NASDAQ: ORCL) is the world’s largest enterprise software company. For more information about Oracle, visit our Web site at www.oracle.com.

About Unisys
Unisys (NYSE: UIS) is a worldwide technology services and solutions company. Our consultants apply Unisys expertise in consulting, systems integration, outsourcing, infrastructure, and server technology to help our clients achieve secure business operations. We build more secure organizations by creating visibility into clients’ business operations. Leveraging Unisys 3D Visible Enterprise, we make visible the impact of their decisions – ahead of investments, opportunities, and risks. For more information, visit www.unisys.com.

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