A banking industry expert says the campaign by Australia’s big four banks to win small business customers over by beefing up their local branches won’t work, because this is not how SMEs clients want to be dealt with.
Paul Dowling, principal analyst at banking industry research and consultancy firm East & Partners, says there is “daylight” between how the banks think SMEs want to be dealt with and how small business customers actually want to do business.
“It sure as hell is not the branch,” he says.
While some banks has “done a 180-degree turn” back towards encouraging SME customers back into local branches, Dowling says the banks strategy in the previous decade of pushing customers towards online channels and product specialists did actually work.
Dowling argues SME customers want to interact with the banks in three ways: by meeting with relationship managers where they have them, by dealing with product specialists (in areas such as foreign exchange, cash management and equipment finance) and through online channels.
“They will use a branch for every day transactions, but they don’t buy at the branch and they don’t go to the branch for advice or guidance,” Dowling says.
East & Partners latest SME sentiment survey, which involves a survey of 779 SME bank customers, found overall sentiment towards banks has fallen 11.8% in the last 12 months.
Sentiment at ANZ and Westpac fell by 23%, while sentiment towards Commonwealth Bank fell 18%.
NAB scored the best results, with sentiment falling just 4%. In addition, an impressive 65% of respondents said NAB had the best reputation for business banking.
But while business banking customers might be dissatisfied with the current bank, there is not much they can do about it.
Dowling says the rate of bank churn among SME customers has fallen from over 15% prior to the GFC to just 3% currently.
“They haven’t been switching because access to credit has been the number one priority. If you’ve got a line of credit, you’re going to hang on to it,” he says.
“The SMEs feel a lack of apparent choice. This issue of competition is looming quite large in their minds.”
But while the current levels of dissatisfaction isn’t hurting the banks now, Dowling expects to see a surge of churning as credit markets return to normalcy or when new players enter the market.
“There is a real build up in the outlook for switching and churn.”
And improved conditions might not be too far away, according to Dowling.
“The appetite for new borrowing is coming back and the banks are starting to open their balance sheets. But this will take time to build some momentum.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
