Small businesses are starting to prefer challenger banks to high street bricks and mortar banks because of better service, according to the analysis of the Financial Times.
In a survey that questioned 12,000 small and medium sized businesses (SMEs), challenger banks were ranked at the top and the larger lenders were rated below average.
The FT highlighted that Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC have an 85% share of the SME market, but have low customer satisfaction scores of 60%, which is the reason why the Competition and Markets Authority (CMA) launched an inquiry into business banking.
Alongside this, research conducted in September and November 2015 for the UK Treasury by Business Banking Insight revealed that just more than a quarter of SMEs are likely to recommend their bank to others, which is a slight increase from the previous year.
Head of policy and external affairs at the British Chambers of Commerce, a co-producer of this research, Adam Marshall believed that this is positive progress. “But both the business and the banking sector realise that there is still a long way to go to rebuild trust between them,” Marshall warned.
However, challenger banks are struggling to gain market share from the big four because businesses are slow to change their lender, the FT explored. This could be remedied by the production of a comparison website for SME bank accounts, which is a suggestion that was made by the CMA.
Harriet Baldwin, economic secretary to the Treasury, believes that the SME market is fundamental to the UK. “Britain’s small businesses are the backbone to our economy, which is why a key part of our long term plan is helping them to access the finance they need to grow and succeed.”
Baldwin continues to explain how the relationship between banks and SMEs is showing progress. “That’s why I’m delighted to see the banking community’s efforts in understanding and working with small businesses are starting to show positive results.”