August 13, 2019

Rising Business Account Switching Heats Up Competition in UK Business Banking

With 85% of business banking in the UK being done with just four banks (Barclays, HSBC, Lloyds, RBS), smaller banks and new alternative lenders have faced an uphill battle in the fight for market share. Getting SMEs to switch their accounts has been a difficult endeavor. However, based on Q2 results reported by the Current Account Switch Service (CASS), the tide might be starting to turn.

Representing more than double the volume over the same quarter last year when approximately 8,000 business owners used CASS to move their accounts, Q2 saw well over 17,000 switches.

Why is this happening?

Switching their bank account just got a whole lot easier for UK consumers and businesses. CASS is a service specifically designed to help personal and small business customers switch to a new bank or building society in a way that is “simple, reliable, and stress-free.” Since launching in 2013, they have reportedly moved 5.9 million accounts, with 98.9 percent of switches taking place over seven days or less.

Which begs the question, why switch in the first place?

While small businesses make up more than 99% of all business entities in America and Europe, they face unique financial and challenges that are not often met by traditional banks. Facing volatile cashflows that leave little room for error, busy schedules that frequently preclude attention to money management, and low loan approval rates that put a pinch on credit when it is needed most, SMEs are under constant pressure to stay afloat.

Over 40% report that they actually “struggle” to access real-time data for their accounts, with only 25% using their bank’s online cash management services. A recent survey conducted by Personetics found that 90% of SMEs want to manage their company’s finances digitally, but only 41% are currently doing this.

What should banks do to win small businesses?

Time-strapped small business owners need all the help they can get staying on top of their financial affairs. Challenger banks and alternative lenders bring advanced automated money management to business banking, personalizing the digital experience in ways not previously possible. As more SMEs become familiar with these experiences, they will not only see it as a useful benefit but consider it a necessity.

In a recent interview at Money 20/20 Europe, Paul Riseborough, Chief Commercial Officer of Metro Bank, discussed his company’s commitment to serving the SME market. Aided by their commitment to build upon the AI-powered Self-Driving Finance™ solutions they offer to retail customers, Metro Bank was rewarded with the top monetary award from the aforementioned alternative remedies fund.  “We’re quite excited about how we can make that useful for businesses because businesses are actually very busy, time poor, and those alerts and nudges are going to be quite useful for SMEs.”

Competition for business accounts will only continue to rise as new technology and service models allow alternative account providers to enter the market. The future market leaders will be those financial institutions, new or old, that empower small business owners with highly personalized advice, timely insights, and simplified everyday banking anywhere, anytime.