The big banks are still the most popular source of services for small businesses, despite increasing evidence that better services can be obtained elsewhere.
Under its investigation into competition in business banking, the Competition and Markets Authority (CMA) found that the big four banks – Royal Bank of Scotland, Lloyds Banking Group, Barclays, and HSBC Group accounted for 83% of business banking in 2015, a figure that has barely changed since 2012.
However, SMEs are not doing themselves any favours when it comes to getting the best deals. In its Retail Banking Final Report, the CMA stated: “We observed that some banks which appear to offer above-average pricing and below-average quality are gaining market share and conversely that banks appearing to offer below-average prices and above-average quality are either losing market share or are gaining market share at a slow pace.”
So, it appears SMEs are effectively volunteering for over-priced products and poor service. For example, some banks were found to not even offer mobile banking services to SMEs at the time the report was completed.
Businesses do not tend to think it is easy to move to a new bank, and just some of the reasons for the reluctance of SMEs to switch included:
Remaining loyal to a bank will be beneficial, especially with future lending decisions
Potential gains from switching are not that high
Difficulty in comparing the price of transactions and lending between banks
The thing is, the big banks spend more on acquiring and retaining larger businesses with turnover of more than £2m a year, even though they represent just 5% of all SMEs. The message? SMEs are not important enough for them to focus significant attention on.
The latest research undertaken by BVA BDRC on behalf of the Competition and Markets Authority (CMA), when 20,000 SMEs and self-employed workers were surveyed, reinforced these messages. When it comes to which banks business owners would recommend to their compatriots, the big banks take up three of the top five spaces (see table), but still have fairly dismal satisfaction ratings.
All were beaten by Handelsbanken and Metro – which each have less than 5% market share. Yet to reach third place, Santander enjoyed just 67% of the vote – where business owners said they were very likely or extremely likely to recommend the bank to other small businesses.
Just think about that for a second. The best-placed big bank got just over two thirds of the vote. The rest were below that. For the lowest-place two banks – RBS and TSB – more businesses would not recommend them than would.
Now, if the CMA Retail Banking Report didn’t tell you the whole story, then surely it is clear that the dissatisfaction with the big banks for small business customers is pretty-well summed up in these figures. Yet just 4% of business customers move banks per year, according to the CMA.
So, let’s face it, business owners are simply accepting poor service and doing nothing to change it, or to encourage the big banks to treat them any better. Why should they? If your business is prepared to put up with what is on offer, what is the point in them offering more?
At Muse, we think differently. We believe businesses should be more interested in moving banks, in working towards getting better services, and the ones that do should be able to achieve more.
That is why we created Muse.
We want small businesses to feel loved, to have the services they really need to move their business forwards, not just a place to hold their cash where they are getting minimal benefits. So, our app has built-in real-time cashflow forecasting, the ability to sign up and have a working account with us within a matter of minutes from your own home, not the weeks and months it can take for the big banks to go through their onboarding process.
We are building the facilities to help you get the money from unpaid invoices within 24 hours at the touch of a button, to access multi-currency accounts so the pain and cost of sending money to suppliers overseas decreases. More importantly, our sole focus is on small business owners – we are creating products for you, not crow-barring services you need into other products.
We are starting small business Banking Evolution, and we want to make it a revolution. The time you spend dealing with admin is time you could better spend actually running your business.
So, don’t deal with banking dinosaurs, instead download our dinosaur and take it to your bank, take a pic and upload it to our social media.
We want to make changes to banks’ treatment of small businesses, but we also need small businesses to help us make that change.
Sign up here for more information on our app and join Muse’s Banking Evolution.
Let’s go UK.
Percentage of business owners very or extremely likely to recommend their bank to other business owners in terms of overall quality