The Big 2016 SMB Banking Report: an insight into what the banks really think.

Last year, we surveyed 501 small businesses across the UK and US, asking them their opinions on the relationship they have with their bank.

This year, we’ve conducted further research but approached it from the opposite angle – surveying banks and asking them their opinions on the SMB-bank relationship.

Our report from 2015, ‘Redefining Digital Banking for SMBs’, found that SMBs felt they rarely had contact with a relationship manager – largely the result of arm’s length banking taking hold as digital channels make way for self-service.

While more SMBs are banking digitally than going into branch, the digital services they’re being offered are not aligned to their needs.

This year’s research shows that even though banks are well aware of the importance of SMBs, there are continuing challenges preventing them from effectively meeting SMB needs – and also a differing of viewpoints on the way banks and their SMB customers see the relationship.

A slow awakening

Our research found, amongst other insights, that 81% of banks see SMBs as very important – but that only 43% believe SMBs see their bank as a trusted partner.

This lack of trust SMBs have in their bank could explain why 57% of banks see their SMB customer looking to non-traditional providers for financial services they previously would have received from them.

So although banks are waking up to the importance of SMBs, at the same time they’re seeing a willingness in SMBs to look elsewhere if their bank isn’t providing the services they need.

Currently, income growth for banks is low. The move to digital can be seen as a drive by banks to cut their costs, with the aim of reigning in the ratcheting pressure on their margins, and combating their eroding return on equity (RoE).

With challenges coming from Fintechs looking to usurp incumbents across a range of financial products, it’s imperative for banks to use the move to digital to redefine the relationship they have with customers.

An oft-asserted prediction – certainly one we have underlined in previous posts – is that to continue down their current path means banks will slowly but surely become little more than a utility provider, with customers frequently leaving for other providers.

This is borne out by our research, which shows 48% of banks expect an increase in customers switching, and 47% of SMB’s validating this prediction, saying they’re considering a switch in the next two years.

Seeing eye to eye?

The situation banks find themselves in is further complicated by the fact that they do not always appear to be on the same page as their SMB customers.

Our research indicates that while 63% of banks feel they have monthly face-to-face contact with SMBs, the perception of SMB’s on this issue differs significantly: only 30% of small business customers feel they have face-to-face contact with their relationship managers.

Both views cannot be right. And this disparity is indicative of the one of the biggest challenges for banks currently – a lack of accurate data, which not only skews their perception of the interaction they have with customers, but also makes it virtually impossible to truly engage with SMB customers effectively in a personalised way.

Our research found that 50% of banks don’t collect or maintain accurate industry data about their SMB customers – and between 20-30% don’t even hold correct email addresses, business addresses or phone numbers for them.

If you don’t have the data to know and understand your customer, you can’t offer them services and information tailored to their needs.

Though this might sound like doom and gloom, all is not lost.

There is a way for banks to avoid being seen as a utility and start offering valuable, personalised support to SMBs – the kind of support that may finally help SMBs see their bank as a truly trusted partner, and help banks fend off the Fintechs lining up to nibble away at their revenues.

In our whitepaper, we explore what that path entails, and expand on the themes mentioned in this post with more insight and statistics from our recent research.

Click here to see our findings and to discover ways to enhance your digital banking services for small businesses.