UK SMEs wedded to legacy banks, while Europeans eye challengers

SMEs across Europe are sticking with traditional banking and account providers despite facing a swathe of new digital challenges, a major survey by Revolut Business reveals.

The survey, with responses from 602 UK, French, and Polish SMEs, found nearly two-thirds of respondents have not switched business account provider in the past five years, while a quarter have not switched since 2008.

According to the survey, over half of SMEs now do some form of international business and a further 13 per cent expect to start doing so soon.

Payment demands have also evolved, with 34 per cent of SME customers now paying by bank transfer, 23 per cent by cash, 23 per cent by credit and debit card and 19 per cent by other means.

Yet, businesses appear to be staying loyal to the bigger banks, with 38 per cent of SMEs in Poland and France, and 27 per cent in the UK, citing proximity to branches as a key factor in the selection of their current business account providers.

“Most SMEs have stuck with longstanding, traditional business account relationships, but this is set to change,” Vaidas Adomauskas, head of product at Revolut Business, said.

“Today’s global SMEs are embracing accounting or collaboration solutions such as Xero and Slack, that make running a business easier. They’re looking for features that make running their business finances faster, more flexible, and more friendly toward global growth.”

Legacy players dominate

Nearly four out of five (79 per cent) of SMEs in the UK said they have their primary banking relationship with one of the traditional high-street banks.

The majority of those polled (43 per cent in the UK and 38 per cent in France) selected the same bank for their business and personal banking. Poland is an outlier with only 20 per cent making that decision.

However, the findings suggest the status quo is set to change, with just under half of SMEs revealing they are looking to change account providers in the next year.

The need for bricks and mortar branches is also declining, with only 14 per cent, 10 per cent and 5 per cent of French, UK and Polish SMEs respectively still visiting their bank branch every day to likely pay-in cash and cheques, the survey showed.

In contrast, 43 per cent of SMEs use web or app interfaces to manage their business accounts daily, while a further 30 per cent do so weekly. What SMEs value in business account partnerships is also telling.

Four-fifths of SMEs picked 24/7 access to their accounts as important. Security (89 per cent), transparency of charges (89 per cent) and low fees (86 per cent) were also rated highly.

Saving time on routine financial tasks was also a priority, with 56 per cent putting automatic or simple integration between accounting systems and financial accounts as important or very important.

Expanding for range

One interesting observation from the survey’s results was that businesses are using more than one bank to get the range of services they need. In Poland, for example, 65 per cent of SMEs have two or more banking relationships, with 49 per cent in France and 37 per cent in the UK doing the same.

One in ten French SMEs have relationships with four, five, or even six different banks – while the figure for the UK is comparatively low at just 5 per cent.

Half of SMEs want a business account to be user friendly – the most popular attribute amongst respondents. Automation of regular tasks (28 per cent) and ‘perks’ (25 per cent) were the next two most desirable attributes.