Smaller businesses are more dissatisfied with their banks than larger ones; and the larger the bank, the more likely its SME customers aren’t happy.
That’s the finding of the latest East & Partners Business Banking Index, which interviewed 982 businesses across Australia and asked them to rate banks on a scale of one to ten across a range of criteria.
The bimonthly survey is at an overall record low of 29.6, with businesses in New South Wales and Victoria being the most dissatisfied with their banks. New South Wales had a BBI of 15.3, down from 15.5 in the last survey, while Victoria fell to 25.3 from 25.7.
Businesses in Queensland, however, were relatively cheery, with the index reaching 58.9 in December.
Businesses in South Australia, Western Australia, Tasmania, the ACT and the Northern Territory were also relatively happy – their combined score was 48.2.
Lachlan Colquhoun, head of markets analysis at East & Partners, said the BBI scores reflected not just the comparative health of the state economies, but also the better relationships between businesses and the regional banking franchises.
“The BBI has continued to show that the smaller regional banks, such as the Bank of Queensland, St George, BankWest and Suncorp enjoy better rankings than the Big Four,” he said.
Such ratings are nothing new, and unlikely to change in the near future, says SME banking consultant Neil Slonim of TheBankDoctor.
“If you’re a small business, and you don’t borrow a lot of money, it’s hard to get the kind of banking relationship that a lot of SMEs are looking for,” he tells SmartCompany.
“It’s just not financially viable for the Big Four to provide the level of service that the SMEs are looking for at a price that SMEs are prepared to pay.”
“SME banking is a high-cost proposition. And the banks can’t afford to staff and resource their SME divisions because it’s not financially viable for them to do that in the manner that the SMEs would ideally like. That’s why SMEs are primarily directed to call centres, help desks, and where they do have relationship managers, the relationship managers tend to have hundreds of clients and tend to be inexperienced, under quite a lot of pressure, with high turnover.
“All of which leads to dissatisfaction at the bank customer’s end.”
“What SMEs can do about that is a hard question. If you’re a small business and you don’t borrow a lot of money, it’s hard to get the kind of banking relationship that a lot of SMEs are looking for.”
While second-tier banks like the Bank of Queensland do try to offer a more SME-centric product offering, they’re hamstrung by higher cost of financing and they’re unable to achieve the same economies of scale that big banks are able to, Slonim says.
Nonetheless, he says, the fact that the big four banks are largely interchangeable in how they deal with their customers means there’s a great opportunity for the second-tier banks to step up and make inroads into the SME sector.
“But they do have the same business dilemma [as the big four]. In fact, it’s arguably harder for them.
“What I’ve found – which is interesting and frustrating – is that SMEs don’t seem to be prepared to pay more to support the little guy in the same way that Australians aren’t prepared to pay more to buy Holden cars, or to buy Australian canned fruit. As consumers, we want the personalised service, but also the best price.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
