The Tyro Blog

19 August 2015 - 3 min read


SMEs walking out on the big four banks

Up to one in four small business operators are going to switch banks in the next six months, citing a lack of customer support as one of the main reasons.

According to East & Partners research, the numbers are a dramatic increase from 2010 when only one in 10 were planning to change their primary business bank.

This would be of some concern to the big four as E&P pointed out that the core transaction banking relationship is “recognised as a key foundation for cross sell into associated treasury, business FX and risk management products”.

The SME Transaction Banking Program survey, based on interviews with 1491 SMEs with a turnover of $1 million to $20 million per year, stated that between 8% and 10% of small businesses that intend to switch will act upon it and respond to a competitor pitch. This amounted to an annualised churn rate of 15%.

E&P’s Head of Markets Analysis, Martin Smith, explained that SMEs predominantly switch to a competitor that is ‘front of mind’ once they have decided to churn. He added that before they reach that point, the biggest driver that gets them to leave is a lack of customer support from their bank.

Smith said while SMEs see customer support as an integral part of their relationship with their bank, that wasn’t being delivered. The satisfaction rating of 2.17 is much lower than other service factors (on a scale where 1 = satisfied and 5 = dissatisfied).

The only bank that bucked the trend was Bank of Queensland, achieving a market share growth of 31% since 2013 based on mind share gains, and 3.5%.growth in customer support satisfaction.

“Delivering customer support that exceeds expectations is an inherently challenging prospect for commercial banks, but the research shows that dissatisfaction with customer support firstly leads to lower wallet share, then greater intent to churn,” Smith stated.

“SMEs are also becoming more comfortable undertaking the process of switching providers. We see three separate value propositions for the SME wallet, offered by the Big Four, non-Big Four and new entrants.

“The Big Four may currently represent over three quarters of all SME lending relationships, but the shift in precedence to transaction banking products favours non-bank alternatives offering streamlined multi-channel products such as cash flow-based lending solutions, as opposed to traditional secured lending products.”

The report also found almost half of SMEs use their business bank primarily for transaction banking across cash management, cross border payments or payment processing products. This is down from 2011 when almost 75%  of SMEs considered their bank relationship to be lending based because of “tighter credit conditions and shaky business confidence”.

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