Lee Tillcock – Editor of Business Moneyfacts

Two years on from their previous look at the business bank account switching process, Business Moneyfacts Editor Lee Tillcock takes a look at the current state of play, identifying just how keen banks seem to be in securing new small business customers from their competitors.

Tuned in but switched off

Shoppers’ Choice: Website – Alliance & Leicester Commercial Bank

Shoppers’ Choice: Phone call – HSBC

The small business sector accounts for over 97% of UK businesses and generates over half of the UK’s GDP. The 2004 University of Warwick UK Survey of SME finances found that 97 per cent of SMEs use a current account. Little surprise then that the issue of businesses switching remains high on the agenda. Various surveys and reports over the last year have provided details on the number of small businesses switching or at least considering switching their business current account to a new provider. Figures differ but tend to indicate that, of the businesses interviewed during the last year, some 3%-5% have switched, with a further 10%-15% at least looking into the process. Considering the size of the market, this is a not inconsiderable amount.

So, who stands out from, and who becomes lost in the crowd? In our latest ‘Mystery Shopper’ survey, we approached the banks as a micro business looking to switch a business current account from one provider to another. We mystery shopped Abbey, Alliance & Leicester Commercial Bank (A&LCB), Bank of Scotland, Barclays, Co-operative Bank, HSBC, Lloyds TSB, NatWest and Royal Bank of Scotland.

We must note at this stage that any survey of this nature is somewhat subjective; however we do also stress that banks only get one chance to impress, so we may have been a new customer won or lost – first impressions do count. The results make interesting reading. There are clearly some providers more switched on than others in the competitive environment of today’s small business market.

We visited each of the banks’ websites, spending no more than 30 minutes on each site, assessing the site’s usability, content, both product based and general business information, and also whether the site provided any additional facilities.

We found a range of standards which would affect the ability of a new business looking to make a switching decision. A&LCB and HSBC were both slightly ahead of the field, with the former edging ahead overall. Its excellent Business Advice section helped to make the additional facilities offered provide the slight difference. Encouragement is taken by the number of banks offering commendable sites and features, with Abbey, Bank of Scotland, Lloyds TSB and RBS all providing clear and informative content.

We then telephoned a specialist ‘switching account’ centralised number where one could be found on the bank’s website. We assessed the quality of the initial telephone response, general manner and helpfulness, ability to deal with the enquiry, level of information provided as well as the follow up by means of promised literature sent.

It was A&LCB, HSBC and Bank of Scotland that led the way, with HSBC narrowly taking the plaudits. The flow and professional approach of HSBC, providing information and advice in a concise manner fostered a rapport and ‘relationship’ unmatched, even by A&LCB or Bank of Scotland.

Other providers faring well this time include Abbey, Barclays, Co-operative, Lloyds TSB and NatWest. For so many banks to offer an acceptable first contact to a prospective new client is indeed encouraging.

Business banks have always insisted that the Competition Commission et al have got it wrong; that service is the issue – not pricing. Fair point, as far as it goes. What seems to be highlighted by our survey is that the issue of service is indeed important, but not perhaps in the same way as the banks believe. The level of service perceived or not is decided before a banking relationship begins: get the first contact right and the level of switching could climb. The providers that took the time to show a genuine interest in our business, HSBC, A&LCB and Bank of Scotland would have led us to switch.

Another reason for the SMEs’ apparent lack of willingness or desire to switch is the fact that there are so few introductory offers available to switchers. There is a case that an established business will offer more additional sales possibilities for the new provider, and that more introductory offers would see a rise in the numbers of businesses switching their accounts.

It seems that an SME not only needs to weigh the price on offer against the level of service, but also more surprisingly to identify a bank that wants their account. The intangible but important benefits that arise from building relationships begin with the first contact. From our mystery shopping experience, it would seem that banks need to change their approach to switching and to offer a more knowledgeable and proactive ‘first contact’ to potential new customers.

The banks’ apparent unwillingness to secure a new client is perhaps the main reason for the perceived low take-up of switching opportunities, as the anticipated efficiency of the switching process will be judged on the first contact with a potential new provider. It seems that the phrase “know your customer” still has a particular resonance in the modern banking world. For most suppliers of goods and services, the commercial benefits of knowing their customers make it a golden rule of business. Business banks are no different.

The Forum of Private Business (FPB) has recently published its tenth biennial report, investigating the service banks provide for private businesses. Around 3,700 firms participated in the survey, ‘Private Businesses & their Banks’. The past three surveys have indicated that the percentage of those businesses not considering changing bank has fallen, from 63.8% in 2002 to 58.3% in 2006. This shows that firms are becoming inclined to shop around for the best deal. Banks should take note; it’s time to tune in as the switch is on.

For full and regularly updated information on business bank accounts visit www.moneyfactsonline.co.uk/mfBAF/root.asp

Click here to view the survey results in full (PDF)

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