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29% of UK SMEs likely to switch main bank account in next five years

Finastra has unveiled the results of a survey with YouGov exploring the attitudes of over 450 UK SMEs to banking, and their appetite for new products and services. The research found that some 29% of SME finance managers are likely to switch their main bank account in the next five years.

The full findings, summarised in the report ‘SME Opportunities for Digital Banks’, reveal some interesting insights and opportunities for challenger banks. With some 5.7 million SMEs, making up 99% of businesses in the UK, this is a potentially lucrative sector of the banking market, and one that many challenger banks are keen to address.

While the vast majority of respondents (86%) are either fairly happy, or very happy with their bank, a significant proportion of all respondents (29%) are likely to switch bank accounts in the next five years. This number rises significantly among a younger demographic with some 49% of respondents under 45 years of age saying they would be very or fairly likely to switch banks in the next five years. 

Among the most popular reasons given for switching were factors such as a better overall service, an incentive or recommendation to switch, and a better digital or mobile banking experience.

Other findings from the report include:

  • 32% of recent switchers now hold their main bank account with a challenger bank.
  • 53% of those that switched in the past three years said they are likely to switch banks again.
  • 40% of finance managers under 45 years old would consider banking with a digital giant such as Google, Amazon or Facebook. In contrast, just 13% of over 55s feel the same way.
  • Just 11% of SME finance managers overall were familiar with the term Open Banking. Familiarity with Open Banking rose to 17% for under 45s and to 24% for firms that had recently switched accounts.

While many respondents aren’t familiar with the term Open Banking, many would value the opportunities it presents. Some 24% would like to see bank data synced to accounting systems for easier tax returns, and 19% see the appeal of automating their invoicing and/or payment payables processes.

When it comes to the idea of sharing the company’s data so that third parties can offer additional products and services relevant to their business, just 27% of respondents said they would be happy do so.  This rose to 44% for under 45s and 43% of companies who have recently switched their main bank account.

Mary Connor, Director, Product Management, Retail Banking at Finastra, commented that the report: "highlights that differentiation beyond the online banking experience, in terms of the products and services offered, is really important. It also shows that while challengers have indeed been winning new SME customers from the high street banks, they have to work hard to keep them. For long-term success, banks need to rapidly evolve their portfolio of SME banking services and build their ecosystem on a retail banking platform that delivers great customer service, increased agility and the ability to scale rapidly."

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