Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- Taking a genuine interest in the business
- Focusing on standard charges and rewarding loyal customers
Market in Brief
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- The market continues to grow despite the recession
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- Figure 1: Number of small business accounts, by type, and deposit balances, 2000-10
- Pressure on banks to increase lending
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- Figure 2: New term lending to small businesses, October 2008-September 2010
- The number of small businesses continues to grow
- A market with few alternatives
- The big five account for nine in ten business bank accounts…
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- Figure 3: Business current account market share, November 2010
- …and also dominate when it comes to adspend
- The rise of online banking
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- Figure 4: Number and percentage of small businesses using online banking facilities, 2003-09
- Three quarters of SMEs have a business current account
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- Figure 5: Ownership of business current accounts, November 2010
- High levels of customer satisfaction…
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- Figure 6: Attitudes towards business banking, November 2010
- …although business banking charges are an issue
Internal Market Environment
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- Key points
- Pressure on banks to increase lending to small businesses
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- Figure 7: New term lending to small businesses, October 2008-September 2010
- Banks respond by pledging an additional £1.5 billion
- The launch of the Enterprise Finance Guarantee scheme
- Government support for small businesses
- Rising fees and charges
- Current accounts are key to gaining main provider status
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- Figure 8: Range of banking services provided, by principal bank, 2010
- Personal experience is a key factor in the SME market
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- Figure 9: The main reasons why SMEs chose bank for main business account, 2010
- A stable market with limited switching activity…
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- Figure 10: Main motivations for switching principal banking provider, 2010
- Regulation and investigations
- CC Investigation 2002
- OFT Review of Undertakings 2006
- OFT Review of Barriers to Entry 2010
Broader Market Environment
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- Key points
- Continued growth in the number of small businesses...
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- Figure 11: Number of small business enterprises and the share of all enterprises taken by small businesses, 2000-09
- ...though large companies are better at generating capital
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- Figure 12: Turnover of small business enterprises and the share of all enterprises turnover taken by small businesses, 2000-09
- Understanding the requirements of different businesses
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- Figure 13: Number of private sector small businesses, by industry sector and employee numbers, 2009
- Corporate insolvencies have started to fall
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- Figure 14: Corporate insolvencies in England and Wales* (not seasonally adjusted), Q1 2005-Q3 2010
- High lending margins in a low interest rate environment
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- Figure 15: UK Inter-bank, three-month rate+ and selected UK bank rates*, January 2001-November 2010
Competitive Context
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- Key points
- Ordinary current accounts are the main alternative
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- Figure 16: How businesses manage their day-to-day finances, November 2010
- SMEs increasingly using alternative sources of finance
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- Figure 17: Sources of finance used by small businesses, 2009
SWOT Analysis
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- Figure 18: Small business banking – SWOT analysis, 2011
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Who’s Innovating?
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- Key points
- Peer-to-peer lending for small businesses
- The launch of Aldermore
- Another potential new entrant to the SME lending sector
- HSBC launches iPhone banking for businesses
- A new payment system aimed at small businesses
- Barclays upgrades business customers to contactless cards
Market Size and Forecast
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- Key points
- The business current account market continues to grow
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- Figure 19: Number of small business accounts, by type, and deposit balances, 2000-10
- The number of new customers has remained steady
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- Figure 20: Number of new small business banking customers, Q1 2007-Q3 2010
- The decline in average balances has stabilised
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- Figure 21: Average amount of money held in small business bank accounts*, 2000-09
- Overdraft borrowing has fallen during the recession
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- Figure 22: Small business overdraft borrowing, 2000-09
- The total value of outstanding term loans continues to rise…
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- Figure 23: Small business term lending and total lending, 2000-09
- …but new term lending has fallen substantially
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- Figure 24: New term lending to small businesses, October 2008-September 2010
- Long-term loans have become more popular
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- Figure 25: Breakdown of term loans, by length of term (amounts outstanding, £bn), 2000-09
- Forecast
- The number of current accounts will continue to rise…
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- Figure 26: Forecast of the number of small business current accounts, 2005-15
- …as will the value of deposit balances
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- Figure 27: Forecast of the value of small business deposit balances*, 2005-15
- Forecast data
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- Figure 28: Forecast of the number of small business current and deposit accounts, 2005-15
- Figure 29: Forecast of the value of small business deposit balances*, 2005-15
- Forecast methodology
Market Share
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- Key points
- The large high street banks dominate the sector…
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- Figure 30: Business current account market share, November 2010
- …a trend supported by OFT data
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- Figure 31: Principal business banking relationship market share, 2010
Companies and Products
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- Barclays
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- Figure 32: Business current accounts provided by Barclays, November 2010
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- Figure 33: Barclays Bank plc annual results – UK Retail Banking division, 2008 and 2009
- HSBC
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- Figure 34: Business current accounts provided by HSBC, November 2010
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- Figure 35: HSBC Bank plc annual results – UK Retail Banking division, 2008 and 2009
- Lloyds Banking Group
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- Figure 36: Business current accounts provided by Lloyds Banking Group, November 2010
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- Figure 37: Lloyds Banking Group plc annual results – Wholesale division, 2008 and 2009
- RBS Group
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- Figure 38: Business current accounts provided by RBS and NatWest, November 2010
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- Figure 39: RBS Group plc annual results – UK Corporate division, 2008 and 2009
- Santander
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- Figure 40: Business current accounts provided by Santander, November 2010
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- Figure 41: Santander UK plc annual results – Retail Banking division, 2008 and 2009
Brand Communication and Promotion
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- Key points
- Total sector adspend has held up relatively well…
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- Figure 42: Advertising expenditure on select business banking services, 2007/08-2009/10
- …with spending on business loans having actually increased
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- Figure 43: Advertising expenditure on select business banking services, by sub-category, 2007/08-2009/10
- The big four also dominate when it comes to advertising
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- Figure 44: Advertising expenditure on select business banking services, by company (top ten), 2007/08-2009/10
Channels to Market
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- Key points
- The growth of online banking…
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- Figure 45: Number and percentage of small businesses using online banking facilities, 2003-09
- …though branch access is still important
Product Ownership and Choice of Provider
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- Key points
- Three quarters of SMEs have a business current account
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- Figure 46: Ownership of business current accounts, November 2010
- NatWest is the leading individual brand
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- Figure 47: Business current account provider, November 2010
Customer Loyalty and Satisfaction
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- Key points
- A market with high levels of customer loyalty…
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- Figure 48: Length of time with current provider, November 2010
- …and low levels of switching
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- Figure 49: Time when SMEs started banking with their principal banking provider, 2010
- Different findings in terms of customer satisfaction
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- Figure 50: Level of satisfaction with current principal banking provider, 2010
Attitudes towards Business Banking
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- Key points
- Over half of SMEs are satisfied with their bank
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- Figure 51: Attitudes towards business banking, November 2010
- Access to credit only a problem for a minority
- Business current account customers are generally happier
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- Figure 52: Customer satisfaction and attitudes towards business banking, by ownership of business bank accounts, November 2010
- Banks could do more to reward their loyal customers
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- Figure 53: Attitudes towards business banking, by length of time with current provider, November 2010
Appealing Benefits of Accounts
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- Key points
- Lower transaction charges…yes please!
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- Figure 54: Appealing benefits of business current accounts, November 2010
- A different approach for start-ups
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- Figure 55: Appealing benefits of business current accounts, by product ownership, November 2010
- New customers like the idea of free banking for start-ups
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- Figure 56: Appealing benefits of business current accounts, by length of time with current provider, November 2010
- Account charges are the key battleground for switchers
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- Figure 57: Appealing benefits of business current accounts, by agreement with statements on business banking, November 2010
Targeting Opportunities
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- Key points
- Loyal SMEs represent the perfect customer
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- Figure 58: Attitudes towards business banking, by target group, November 2010
- Are established firms more likely to switch?
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- Figure 59: Length of time with current provider, by target group, November 2010
- Loyal SMEs appear to be almost impossible to steal
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- Figure 60: Appealing benefits of business current accounts, by target group, November 2010
Appendix – Broader Market Environment
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- Figure 61: Breakdown of small business turnover and number of enterprises, by employee numbers, 2009
- Figure 62: Number of enterprises, turnover and GDP, at current and constant 2005 prices, 2000-09
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Appendix – Forecast Data
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- Figure 63: Forecast of the number of small business current accounts, 2010-15
- Figure 64: Forecast of the number of small business deposit accounts, 2010-15
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- Figure 65: Forecast of the value of small business deposit balances*, 2010-15
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Appendix – SME Research Respondents
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- Figure 66: Current company/organisation's business type, November 2010
- Figure 67: Role in the company, November 2010
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- Figure 68: Number of employees in the organisation, November 2010
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