Business relationships with banks are suffering, both from the credit crunch and from ever changing relationship managers. Interest rates are low on capital, but high on loans, if loans are even possible. Additional charges associated with banking are also being perceived as too high. Research is suggesting that satisfaction with banks is very low, but so is the likelihood of companies actually changing banks. And relationship managers are being cited for both ends of the spectrum.
Last year a report on banking satisfaction and switching providers by financialdirector.co.uk (FD) made for uncomfortable reading. When asked ‘if you don’t plan to switch banks, why not?’ 58.4 % stated they were satisfied with their banks. Just fewer than 42 % of those polled are staying with a bank they’re not satisfied with. That’s not painting a pretty picture and it’s not just in the UK, where such statistics could be explained away as just more British moaning and winging. Vallstein’s Annual Banking Survey, in conjunction with Het Financieele Dagblad, found that satisfaction with relationship banks across Europe has been falling steadily since 2008.
Only 14% by of those polled stated they were likely to change banks. Dissatisfaction appears to be rife, but so does inaction.
Other options for raising capital are growing in popularity. Avoiding poor deals, and flat out refusals businesses are a large proportion of the newly expanding pawn market. Retail Bonds are being fronted as a new means of gaining capital and at the same time building and strengthening customer relationships. Peer-to-peer lending is another growing trend that avoids bank charges, and can an alternative to use when ‘the computer says no’. Maybe a banks willingness to provide loans is less of a reason to switch banks.
Some action is being taken, both by the government and by businesses themselves, if not by banks. A Banking Forum event held at Mundford this month became a platform for small business to plead with banks for more support and less squeeze. The government is offering their backing to business loans and trying to make changing business accounts a quicker and easier task.
While banks, at least according to The Daily Mail’s financial website Thisismoney.co.uk, are battling it out for the hearts and minds of personal account holders, there appears to be little on offer for established businesses. Net changes in business loans figures has fallen according to the Bank of England, despite Project Merlin and other government backed schemes intended to support businesses in the current harsh climate. While many of the reasons not to move account focused on perceived administrative difficulties, the perceptions of banks shown in the report are equally bleak. Over 13% of those polled by FD cited that their reason not to change is that ‘Other banks are the same’.
Shell, who worked on the FD report states that “corporate banking may again see a major shake-up”, presumably only when the perception that all banks are equally dismal has been eroded a little or dissatisfaction, grows greater. While businesses are unlikely to be won over by £100 for switching, banks that offer to build strong relationships, and put the work in that needed to gain an in depth understanding of each business, and genuinely work towards fostering businesses that choose to bank with them, are likely to be recipients of loyalty, and not just benefiting from business’ inertia.
Katherine Brown is a relationship managers and a blogger by profession, she has many years of expertise on writing on all about banking.