Are you satisfied with your business banking? Founder of ExplainMyBanking, Ben Martin reveals that the average SME is less than happy with their bank and gives advice on making a change.
We asked over 200 SMEs how happy they were with their bank and also assessed the savings available in their day to day business banking costs.
As expected there is a wide range on our “SME bank happiness” index, with the average SME less than satisfied with their bank.
The amount of banking £ cost savings also varies widely. 40% of SMEs are only able to save £400 or less in annual costs. The average possible cost savings are £4,200 and the maximum savings was higher than £50k per year.
We’ve summarised our SMEs into three main clusters:
1. Must review – £20k – £40k of possible banking cost savings and unhappy with their bank
2. Should review – £2k – £18k of possible savings and unhappy with their bank
3. Unlikely to review – £2k – £15k of possible savings but happy with their bank.
The cost savings have been calculated by the free ExplainMyBanking assessment, across three products; currency, payments and deposits.
Consider your own relationship with your bank – where do you fit? How happy are you with their service and products? Do you get value for money?
These are the lessons we’ve observed from our conversations with SMEs on their banking.
Summary: just having possible savings in banking costs and fees isn’t generally enough for an SME business to take action.
An unhappy SME is far more likely to review their banking relationship and investigate new providers, than a happy SME. This sounds obvious, but we’ve noted that there generally needs to be something broken before an SME will look around. This generally needs to be more than a cost issue, and is often lack of service related.
Achieving a small cost saving in an SME’s business banking is not sufficient motivation to change. It takes a lot of management time to agree to use a new provider. Opening a new account also involves a certain amount of admin. We suggest action is taken if the savings are greater than £1,000 per year – and are also easily and quickly realisable.
There exists a certain amount of distrust on whether a new provider will turn out to be any better than the previous. This is a worry we help with, as we’ve vetted our providers before we make an introduction.
Are there other reasons why an SME will move to a new financial services provider?
Even small savings add up, year on year. Once an investment is made into changing, then the payback occurs every year.
The indirect savings are often higher than the explicit, direct banking savings – a great example of this is making domestic payments, where the use of new technology enables payments to be made efficiently and securely, freeing up hours and hours of admin time.
Using a new provider is not a commitment to changing an SME’s entire banking. All the financial service partners we introduce offer stand alone products – meaning you keep your existing business bank accounts with your current provider and just switch to using a new provider for say, currency payments, or access to BACS. No switching, no new account numbers. Minimal hassle.
So in summary – there are likely to be ways to reduce your business banking costs. The savings need to be large enough to create motivation for you to move; another issue with your bank may be the driving force. But once you’ve found a new financial services provider these direct cost savings will add up, and so will the indirect savings – making the change worthwhile.
If you have any further questions, or particular issues with your banking, please don’t hesitate to get in touch, or start your own review via the ExplainMyBanking online assessment.