The firm's first study on the effectiveness of banks in serving the small business market through Internet banking services was based on an analysis of 100 commercial bank websites.

The findings show that most banks lack a compelling online small business banking offering which focuses on targeted marketing and commitment to execution. As a result, the ability to form deeper partnerships with small business customers on a value-added basis is not being optimised.

Richard Speer, S&A's chief executive officer, says: "While some of the largest banks in North and Latin America demonstrate a commitment to the small business banking segment, on balance there is a wide range of opportunities that have yet to be leveraged."

S&A's survey focused on six categories most critical to small businesses, based on their use of personal computing and telecommunications technologies. The survey measured the percentage of banks within the sample that delivered on the core banking needs of the small business market.

The results were: cash/investment management with 33 per cent; access to credit 32 per cent; advisory services 19 per cent; revenue enhancing services 14 per ent; bill payment and expense reduction services 36 per cent; and administration and operational assistance 21 per cent.

S&A found that many institutions were using the Internet display brochure-ware, relying on traditional channels such as the branch, telephone or calling officer for fulfillment.

When analysing results by banking segment, banks with an asset size of more than $100 million - such as Fleet Bank, Wells Fargo, Citigroup and Bank One - had the most compelling sites. They provided a full array of financial and value-added services offered to small businesses.

The large US regional banks' offerings to small businesses fell way behind in transactional functionality. These centered on marketing financial services, rather than broader value-added features and functionality. Most noticeably, S&A observed that only 25 per cent of the banks in this group offered key credit products on a transactional basis.

Mid-size institutions ($9 to $40 billion in assets) were behind in all six areas reviewed. The widest gaps in offerings were found in non-retail features such as online investments, merchant processing or escrow accounts.

Canadian banks demonstrated a strong commitment to small business Web offerings. They provided online loan applications or online loan transactional capabilities for small business customers more frequently than the overall North American sample.

The 20 major Latin American bank sites reviewed offered transactional functionality similar to their North American counterparts with a less brochure-ware orientation. Many banks focused on value-added services by offering access to vertical procurement portals, account aggregation and access to business exchanges and portals.

Compared to the development of retail websites, Speer estimates that most banks are 12 to 18 months behind in the development of online offerings to small businesses.

"Given the increasing adoption of the Internet by the small business segment, many mid-size - and some large banks - are leaving themselves threatened by larger and non-bank competitors," warns Speer.