A new study commissioned by BCSG has revealed that the relationship between retail banks and their small and medium sized business (SMEs) customers is weakening. The research demonstrates that the shift to digital services has increased the risk of switching financial service provider and that banks must move towards a model that drives engagement through business critical insight and services to defend against SME churn.

• Banks have little dialogue either face to face or via digital channels, with 73% of SMEs having no contact with a relationship manager
• 67% of UK SMEs are now happy to look elsewhere for financial services and more than half are tempted to switch banks
• Despite this disengagement 49% of SMEs have been with their current bank for more than five years and 67% would feel more engaged with their bank if they offered tools and advice to help with day-to-day business tasks, future planning and general efficiency

The study, conducted in June 2015 and using primary data provided by RedShift Research, surveyed 250 UK Managers with responsibility for banking at SMEs employing 250 people or less.

“Banks are under enormous pressure to reduce costs whilst increasing their bottom line. The majority are adopting a digital-first approach as they pursue cost efficiencies and adapt to changing customer preferences. But this has had unintended consequences,” said John Davis, Managing Director at BCSG. “Banks are now acting as reactive customer service outlets, providing basic services when asked, rather than proactively providing the advice and guidance that their customers require. The result is that many SMEs are now shopping around for financial services.”

“There is good news however. Banks are in a strong position given they have, effectively, a captive client base, with nearly half retaining the same bank for over five years. By utilising their digital infrastructure better to deliver guidance, insight and tools to their SME customers, forward-thinking banks can combat churn, cement a highly valuable stream of revenue and move from a basic transaction provider to a trusted business partner,” concludes Davis.  

Research Highlights

UK SMEs have gone digital

• 85% use online/mobile banking on a monthly basis and 33% on a weekly basis
• 28% visit their branch once a week and 41% never visit a branch

SMEs are historically loyal customers but are disengaging from their existing relationship

• 49% have held their account for over five years but 47% are tempted to switch
• Around 73% have no contact with their relationship manager
• 67% are happy to look elsewhere for financial services

Access to tools and business insight would help SMEs to feel more engaged

• 67% want tools and advice on running their business and planning for growth and development
• 44% would change banks given a demonstrable understanding of their business
• 30% would change banks if they acted like a business partner rather than a financial transaction provider

The report underlines the importance of, and specific opportunities towards deepening the relationship between banks and their SME customers.