News

August 31, 2012

Small firms "too busy" to switch banks

UK small and medium enterprises say they are too busy to switch banking providers — despite the excessive charges of their "complex" and "unfair" business bank accounts.

These are the findings of the YouGov SixthSense SME Banking Report. It shows that despite a third (33%) of SMEs having complained to their banks in the past two years — and with the majority saying they were disappointed with the outcomes — small businesses are failing to ditch their current providers.

Collectively, SMEs indicate bank charges are too high (58%), unjustified (27%), complex (24%) and unfair (21%). Many SMEs (74%) see charges not as a price to be paid for their banking services but as an easy way for banks to make profits. And 50% of respondents said that their charges had increased over the past three years.

In addition, a total of 35% of SMEs say negotiating maximum loan amounts has become harder over the past three years against 4% who say it is easier.

Yet despite these criticisms, few SMEs actively look around for alternative banking suppliers with 73% "rarely" or "never" searching for a better provider. Around 15% of SMEs tried to switch provider in the past two years but only 8% succeeded. Only 12% of SMEs who had managed to switch provider (or who had tried) found the process easy and painless.

Simon Mottram, director of financial services consulting at YouGov, said: "The level of charges and fees imposed on SMEs by banks for the operation of the accounts has long been a source of dispute between the two parties. Yet smaller businesses appear to be suffering in silence over this issue. Banks need to be careful with their policies on bank charges, lending terms and complaints because it is the most profitable SMEs — the larger ones — who have the most negative view of them."

Customer inertia is a big issue in business banking it seems. The report finds that 23% of those SMEs that believe there are better banking options available in the market either lack the time to search for them, don't know where to look, or feel it's too much hassle to change. In the next two years, just 18% of SMEs indicated they were likely to switch their main account provider.

Mottram added: "The message from our report is clear — banks need to build closer relationships with SMEs and improve communications. Banks must make life easier for SMEs as these businesses are vital for creating jobs and generating economic growth."