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Remedying the Pain Points Behind Historic SME Business Account Churn

Alison Wilkes, FIS’ European Banking & Payments and North American Real Time Payments Lead, uses FIS’ new PACE report to assess how banks and fintechs can stem the flow.

Small and medium-sized enterprises (SMEs) are the engine room of the UK economy – generating 52% of private sector turnover and responsible for 60% of private-sector employment.

This integral part of our economy is going through a tough time – 2018 was the first year in nearly two decades in which the number of businesses declined and confidence has slid over the past year. For the banking and fintech community, this represents a challenge. How can this community sustain valuable relationships with large businesses while placing new emphasis on the untapped potential of the SME marketplace? 

Small and medium-sized enterprises (SMEs) are the engine room of the UK economy – generating 52% of private sector turnover and responsible for 60% of private-sector employment.

The business banking landscape in the UK revolves around the so-called ‘Big Four’: Barclays, HSBC, Lloyds and the Royal Bank of Scotland – managing more than 85% of business accounts. What is becoming clear is that this market share shouldn’t be taken for granted as fintechs eye the market and, through Open Banking and increasingly sophisticated new technology, are able to deliver tailored services for specific client bases. 

Our annual Performance Against Customer Expectations (PACE) report, based on a survey of 552 businesses ranging from micro to large taps into the issues faced by SMEs, charts the pain points and shifting demand for banking services. 

While grouped together, what is clear from the report is that SMEs are a spectrum – from the very small with revenues of £400k-£4m to mid-size businesses bringing in upwards of £400m – all behaving differently with unique requirements:

  • Bank satisfaction decreased 4% from last year and there was a 41% rise in businesses switching PFI, up from just 21% the same time last year.
  • Trust in traditional banks experienced a significant decline form a year ago – 47% in 2018 vs. 39% 2019
  • There is a significant spread in satisfaction as one in four companies describe themselves as ‘very satisfied’, while one in four also claimed they were ‘somewhat or not satisfied’.  
  • The larger the company, the more pain points there are and the more likely they are to change provider. 

What ties the findings together is that overall pain is a greater driver of churn than satisfaction. An important part of the solution is winning clients’ trust – delivering safe transactions, protecting privacy, protecting from fraud, minimising administration, and, importantly, making the customer feel valued. This requires a combination of policy, technology and process. The question is, what steps can be taken to deliver and win back this trust to turn the tide? 

An important part of the solution is winning clients’ trust – delivering safe transactions, protecting privacy, protecting from fraud, minimising administration, and, importantly, making the customer feel valued.

Turning the churn

Our PACE report shows that SMEs’ emphasis on delivering a smoother customer experience means business account providers must offer excellent technology and customer service to win the trust and retain the custom of their clients. 

Business clients are increasing tech-savvy with more than 66% of respondents handling transactions on a mobile device as customers are used to simplified user experience in their personal accounts and want this translated into their business. 

What is therefore striking is that 56% of companies trust nonbank providers over incumbents for financial apps – a significant increase from a year ago. This is indicative of how nimble fintechs are able to effectively design and execute tailored services to a specific audience. It is also a wakeup call for banks to invest in mobile-app functionality and new technology.

56% of companies trust nonbank providers over incumbents for financial apps – a significant increase from a year ago.

The human factor is the other essential ingredient for both banks and fintechs in retaining the SME clients. Beyond user interfaces, user experience needs to address key business pain points, including: delivering loans quickly, accessing information without calling the bank, making fast bill payments to avoid late fees and access mobile payment functionality. How do we do this? Put simply, it’s through deploying qualified people and an informed strategy, underpinned by effective technology. 

As a diverse group of businesses with complex and ever-changing needs, there is no miracle cure to account turnover. To stop the churn, account providers need to remedy clients’ pain individual points – this means adopting a tailored approach depending on the size of the business but also effectively combining human and technology solutions. 

Overall, it’s time for banks to stop talking digital and start delivering experience and it’s time for fintechs to build on their solid technology grounding to deliver strong and consistent customer service. 

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