Financial services providers, if they want to retain the loyalty of their small business customers, need to provide a more considered offering than they currently do. Research we conducted last year showed that 68% of SMEs are willing to look elsewhere for financial services, and that more than half are tempted to switch banks to get the service they require.

The bad news for banks is that it’s become increasingly simple for customers to switch accounts, or to find another provider offering services that meet their business’ needs. There are many new entrants that are focused on providing a certain service to SME customers, while some FinTech companies are targeting the traditional transactional services that are the banks’ bread and butter. So we are seeing a number of SMEs who hold a business account with a bank, but choose a Fintech specialist to do its foreign exchange, a peer-to-peer service to get a loan, and engage yet another company to provide invoice financing. And increasingly there are non-traditional options for SMEs’ bank accounts that threaten to entirely disintermediate banks.

If banks want to remain a one-stop shop for their customers and avoid this scenario, then they have to make sure they offer an engaged rather than transactional relationship. Our most recent survey has revealed that banks simply lack the data they need to create this connection with their customers.

Just under half of the banks we surveyed do not know what industry their SME customers operate in, while more than 60% do not hold other useful information, such as the number of employees, or the company’s trading requirements. A minority do not have contact details or even the right name for the account.

The problem here is that collecting this information is vital to forging a strong relationship with SME customers. Without it, all a bank can offer is generic advice and additional services that businesses might find useful. A bank without knowledge of its customers’ industries can only ever say that a software or a service might be a good idea, not that it will transform the business.

The needs of, say, a small retailer in Paisley will be quite different from the needs of a small law practice in Sussex yet banks are likely to categorise them both as two year old businesses with three members of staff and turnover of less than £25m. Some advice will apply to both, but it will not forge a lasting relationship with a customer that goes beyond just being a basic service provider.

Our research last year found that SMEs have pretty universal needs, beyond transactional services – they want online tools to help with day-to-day business tasks, such as accounting and payroll, planning growth and expansion, and advice on running a business more efficiently. These services, they feel, are something their primary bank could offer.

Banks have taken notice and our new research has found that banks do want to meet these needs. 80% of banks see SMEs as a ‘very important’ customer segment, and 57% recognise that SMEs are starting to look to non-traditional providers for services that banks would normally provide. However, while two thirds of banks say that their SME customers have regular face-to-face contact with the bank, only a third of SMEs believe they have this.

A couple of percentage points difference here would be expected thanks to a certain margin of error, but 33% difference demands a better explanation – somehow the services banks are offering are not being recognised by customers. This disconnect is caused by banks offering the same services and advice to all businesses. On receiving advice that can be obtained anywhere else customers are simply dismissing it as an unwanted added extra.

The answer to this must lie with the banks’ lack of data. Without the knowledge of what their SME customers are doing and how they can best support them, banks cannot offer a service that is any way tailored. Value-add services won’t add any value unless they are tailored to individual business’ needs. Data on customers can also give banks the opportunity to offer services at the right time for the customer. A picture of potential customer behaviour can be built up over time and – as demonstrated by Amazon, Facebook and Google – used to inform what is presented to the customer at what time.

Banks have the opportunity to provide a service that could have immeasurable impact on their clients’ businesses. Using customer data to inform what services are recommended rather than internal, generic classifications allows banks to be relevant to customer needs. In an age where digital services and data collection and analysis are the norm, banks must embrace this in order to maintain customer trust, increase market share and rise to the challenge presented by FinTech companies.