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29% of UK SME Finance Managers Likely to Switch Main Bank Account in Next 5 Years

Finastra has unveiled the results of a survey with YouGov exploring the attitudes of more than 450 UK SMEs to banking, and their appetite for new products and services.

The research found that some 29 percent of SME finance managers are likely to switch their main bank account in the next five years. The full findings, summarized in a report: ‘SME Opportunities for Digital Banks’, reveal some interesting insights and opportunities for challenger banks. With some 5.7 million SMEs[1], making up 99 percent of businesses in the UK, this is a potentially lucrative sector of the banking market, and one that many challenger banks are keen to address.

While the vast majority of respondents (86%) are either fairly happy, or very happy with their bank, a significant proportion of all respondents (29%) are likely to switch bank accounts in the next five years.

This number rises significantly among a younger demographic with some 49 percent of respondents under 45 years of age saying they would be very or fairly likely to switch banks in the next five years. Among the most popular reasons given for switching were factors such as: a better overall service; an incentive or recommendation to switch; and a better digital or mobile banking experience.

Other interesting findings from the report include:

·         32 percent of recent switchers now hold their main bank account with a challenger bank;

·         53 percent of those that switched in the last three years said they are likely to switch banks again;

·         40 percent of finance managers under 45 years old would consider banking with a digital giant like Google, Amazon or Facebook. In contrast, just 13 percent of over 55s feel the same way;

·         Just 11 percent of SME finance managers overall were familiar with the term Open Banking;

·         Familiarity with Open Banking rose to 17 percent for under 45s and to 24 percent for firms that had recently switched accounts.

While many respondents aren’t familiar with the term Open Banking, many would value the opportunities it presents. Some 24 percent would like to see bank data synced to accounting systems for easier tax returns, and 19 percent see the appeal of automating their invoicing and/or payment payables processes.

When it comes to the idea of sharing the company’s data so that third parties can offer additional products and services relevant to their business, just 27 percent of respondents said they would be happy do so.  This rose to 44 percent for under 45s and 43 percent of companies who have recently switched their main bank account.

“This report is a must-read for any bank targeting the UK SME market,” said Mary Connor, Director, Product Management, Retail Banking at Finastra. “It highlights that differentiation beyond the online banking experience, in terms of the products and services offered, is really important. It also shows that while challengers have indeed been winning new SME customers from the high street banks, they have to work hard to keep them. For long-term success, banks need to rapidly evolve their portfolio of SME banking services and build their ecosystem on a retail banking platform that delivers great customer service, increased agility and the ability to scale rapidly.”

“This report is a must-read for any bank targeting the UK SME market” – Mary Connor

In this month’s TFT print edition Anders Olofsson, Head of Payments at Finastra, told us that API-driven banking solutions are opening up a new world of possibilities for SMEs, incumbents and consumers alike;

“We are well into the ‘second wave’ of APIs in banking. This wave has several distinct and powerful drivers. One is the introduction of new regulations including the European Union’s PSD2 and the UK’s Open Banking initiative. These drivers have the goal of moving data ownership from the bank to the client (working in conjunction with other regulations such as General Data Protection Regulation [GDPR]). Another driver is rapid advances in technology including pervasive broadband Internet access,

cloud computing, and easier-to-use Representational State Transfer (REST) APIs. The third—is growing demand for real-time, connected customer experiences from both consumers and businesses.

The second phase of APIs is now being subsumed by the third and most powerful wave of all: banking as a platform. This is driven by an ecosystem of API providers that operate in an environment of open collaboration, and accounts for the vast majority of financial services innovation taking place outside banking institutions.”

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