The FINANCIAL — UK banks could create an £8.5 billion revenue opportunity by broadening services for small and medium enterprises (SMEs), a sector which generates just under 50 percent of the UK’s private sector turnover, according to a new report from Accenture.
The report “SME Banking 2020; Changing the Conversation,” which surveyed 1,000 UK SMEs about perceptions of their bank, including the relevance of products and services offered, found that SMEs are demanding more value-added services to meet their broader business needs, and banks have an opportunity to develop more tailored propositions to meet these.
Currently, 58 percent of UK SMEs choose a bank based on low cost and 56 percent for overall service quality. But just four percent choose a bank for value-added services to help them improve business performance, customer service and sales. Sixty-three percent of UK SMEs are satisfied with their main bank and one-in-five confirmed that there was nothing that their bank could do to enhance their satisfaction. However, there is also clear appetite among SMEs for value-added services, with more than 60 percent confirming that they would use their bank if these services were offered, including bitcoin and peer-to-peer lending. This suggests a significant perception gap among banks and SME’s around what SMEs want and what banks can provide, leading to a missed opportunity for UK banks and potentially a lack of the right support for SMEs to grow.
In addition, there is also a need for banks to play a more active role in their relationship with SMEs. Sixty percent of respondents are looking for closer engagement with their bank, 32 percent want their bank to be proactive in suggesting ideas, and 28 percent want their bank to recognize that their needs may not be simple and provide more complex services on demand.
There is also a clear opportunity for banks to apply the digital channel strategies for retail customers to the SME segment. While SMEs currently opt for human interaction over digital services, with relationship managers the preferred channel for advice, applications, complaints and non-banking services, opportunities exist to migrate them to digital channels.
Gareth Wilson, Accenture Banking Practice lead for the UK/I, Accenture commented: “SMEs want banks to be more relevant and provide a wider range of business services. Banks need to recognise and seize this opportunity. Unless they do, SMEs may take their business elsewhere. Banks need to shift their mindset from ‘FS service provider’ to ‘SME service provider.’ Through new technologies and new thinking, banks can capitalise on £8.5 billion of potential annual revenues. If they don’t they risk being disrupted out of a market that SMEs actively want them more involved in.”
“Furthermore, the benefits for SMEs to have their bank broaden its service portfolio beyond pure financial services are significant to future profitability. SME’s can have minimal access to important market data which could cause the SME to misjudge the gap between production and market demand (based on lack of information), this could put it in danger of a loan default. A clear example of where banks need to help bridge these potential gaps by providing SMEs with broader business services,” he concluded.
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