Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- Small business account numbers edge up…
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- Figure 1: Number of small business current accounts, 2011-15
- …but account balances see strong growth
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- Figure 2: Forecast of small business account balances (current and savings accounts), 2011-21
- Overdraft use continues to decline
- Number of small businesses in the UK continues to rise
- Regulatory measures aim to increase competition in the market
- Companies and brands
- Top four banking groups dominate the business banking market
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- Figure 3: Market share for business bank accounts, June 2016
- Competition from new challengers
- The consumer
- Two thirds of small business owners use a business current account
- Customer service is most important factor when choosing a business bank account
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- Figure 4: Important factors when choosing a business bank account, June 2016
- Small business owners reluctant to pay for additional services
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- Figure 5: Interest in new business banking services, June 2016
- Fixed monthly tariff is most attractive payment structure for business bank accounts
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- Figure 6: Business account payment preferences, June 2016
- Informal borrowing is filling a credit gap
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- Figure 7: Small business lending experience in the last three years, June 2016
- What we think
Issues and Insights
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- Uncertainty surrounding Brexit creates opportunity for business banking providers to deepen customer relationships
- The facts
- The implications
- A significant proportion of small business owners rely on borrowing from friends and family
- The facts
- The implications
The Market – What You Need to Know
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- Small business account numbers edge up but balances see strong growth
- Overdraft use continues to decline
- Regulatory measures aim to increase competition in the market
- Number of small businesses in the UK continues to rise…
- …driven by further increase in self-employed workers
- Small business owner confidence has dropped in 2016
- Overdraft use continues to decline
Market Size and Forecast
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- Number of small business current accounts edges up…
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- Figure 8: Number of small business current accounts, by in credit and overdrawn, 2011-15
- …but the number that are overdrawn continues to fall
- Small business account balances surpass £82 billion in 2015
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- Figure 9: Number and value of small business current and savings accounts, 2011-15
- Market forecast
- Account balances forecast to reach £121 billion by 2021
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- Figure 10: Forecast of small business account balances (current and savings accounts), 2011-21
- Figure 11: Forecast of small business account balances (current and savings accounts), 2011-21
- Forecast methodology
- The impact of the EU referendum vote
- Small business banking account balances are susceptible to economic slowdown
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- Figure 12: Alternative market scenarios for small business banking account balances post-Brexit, 2016-21
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- Figure 13: Detailed scenarios for small business banking account balances post-Brexit, 2016-21
- Small business confidence dropped prior to and after the EU vote
Small Business Lending
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- Lending to small businesses increased in value in 2015
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- Figure 14: Quarterly value of gross loans advanced to small businesses, Q1 2012-Q2 2016
- Overdraft use continues to decline
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- Figure 15: Quarterly volumes of approved loans and overdraft facilities for small businesses, Q1 2012-Q2 2016
Market Drivers
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- Number of small businesses in the UK continues to rise…
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- Figure 16: Volume of UK private businesses at the start of the year, 2011-15
- …driven by further increase in self-employed workers
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- Figure 17: Number of self-employed workers in the UK, January 2011-March 2016
- SMEs have a combined turnover of £1.8 trillion
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- Figure 18: Total annual turnover of UK private businesses, 2015
- Small business owner confidence has dropped in 2016
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- Figure 19: Current financial situation of the business, March 2015 vs. June 2016
Regulatory and Legislative Environment
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- CMA Retail Banking investigation concludes with list of new measures for banks
- Proposed introduction of an Open API banking standard
- The Enterprise Finance Guarantee scheme is extended until 2018
- Bank Referral Scheme extended in 2016
- New data sharing rules for SME lending
- Funding for Lending Scheme extended to January 2018
- Bank of England relaxes bank-capital requirements
- Introduction of National Living Wage in April 2016
- Digital tax reporting
- Small business rate relief
- Online allowances
- Automatic enrolment staging deadlines approach
- EIB and Funding Circle invest £100 million into UK small businesses
- Small Business Finance Guide published
- Exporting is Great campaign
Companies and Brands – What You Need to Know
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- Top four banking groups dominate the business banking market
- Competition from new challengers
- Partnerships to support businesses
Market Share
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- Barclays is leading brand for business bank accounts
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- Figure 20: Market share for business bank accounts, June 2016
- Top four banking groups dominate the business banking market
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- Figure 21: Market share for business bank accounts, by banking group, June 2016
Competitive Strategies
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- Partnerships to support businesses
- Barclaycard backs Small Business Mentoring competition
- Funding Circle partners with EIB
- HSBC creates ‘The Elevator’ competition with the Telegraph
- Competition from new challengers
- P2P lending platforms offer alternative finance to small business owners
Launch Activity and Innovation
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- Barclays launches cash collect service
- Lloyds Banking Group publishes 2016 SME charter with pledges to help small businesses
- Lloyds launches simple business bank account
- NatWest launches new iPad lending app
- NatWest offers payroll feature
- AIB offers discount on MyBusinessToolkit
- Barclays launches SmartBusiness big data app
- FinTech start-up Tide expected to launch in 2016
- Business Banking Insight launches new website
- Success for PayPal Working Capital
Advertising and Marketing Activity
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- Above-the-line adspend on business banking services continues to decline
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- Figure 22: Total above-the-line, online display and direct mail advertising expenditure on business banking services, 2011/12-2015/16*
- Top 10 advertisers account for 75% of advertising expenditure
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- Figure 23: Above-the-line, direct mail and online display business banking adspend, by brand, 2013/14-2015/16
- HSBC dominates adspend for business brand building and finance
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- Figure 24: Total above-the-line, direct mail and online display business banking adspend by major high street banks, by product category, 2015/16*
- Expenditure is distributed across a range of media types
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- Figure 25: Total above-the-line, direct mail and online display business banking adspend, by media type, 12 months to 31 May 2016
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Two thirds of small business owners use a business current account
- Majority have held business account with current provider for more than a decade
- Dedicated personal relationship managers have limited engagement
- Fixed monthly tariff is most attractive payment structure for business bank accounts
- Informal borrowing is filling a credit gap
Business Bank Account Ownership
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- Two thirds of small business owners use a business current account
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- Figure 26: Type of bank account used to manage business finances, 2013-16
Business Account Tenure
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- Majority have held business account with current provider for more than a decade
- CMA taking steps to increase switching
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- Figure 27: Business account tenure, June 2016
Use of Business Banking Services
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- Online banking is a key service for business owners
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- Figure 28: Use of business banking features in the last three months, March 2015 and June 2016
- Dedicated personal relationship managers have limited engagement
- Two thirds of business owners use multiple banking services
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- Figure 29: Repertoire of types of business banking features used in the last three months, June 2016
Other Business Banking Products Held
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- Shopping around for business credit cards and savings accounts is limited
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- Figure 30: Ownership of other business banking products, June 2016
- Insurance products are least central to customer loyalty
Important Factors when Choosing a Business Bank Account
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- Customer service is most important factor when choosing a business bank account
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- Figure 31: Important factors when choosing a business bank account, June 2016
- Branch services valued by majority of business owners
Influential Factors when Switching Business Account Provider
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- Consistency in account charges is crucial for customer retention
- SME customers say they could be persuaded to switch by higher rates
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- Figure 32: Influential factors when switching business account provider, June 2016
Interest in New Business Banking Services
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- Small business owners reluctant to pay for additional services
- Peer-to-peer payments system is most interesting to small business owners
- Mobile ATM services are least relevant for small business owners
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- Figure 33: Interest in new business banking services, June 2016
Business Account Payment Preferences
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- Fixed monthly tariff is most attractive payment structure for business bank accounts
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- Figure 34: Business account payment preferences, June 2016
- One-person businesses need convincing to pay for business bank account services
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- Figure 35: Proportion of business owners that would not consider paying for a business bank account, by number of employees, June 2016
Lending Experience and Awareness of P2P Lending
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- Nearly a third of small business owners are turned down for credit
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- Figure 36: Small business lending experience in the last three years, June 2016
- Borrowing from friends/family is greater than borrowing from other providers
- Awareness and usage of P2P lending has not improved significantly in past year
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- Figure 37: Awareness and experience of peer-to-peer lending, March 2015 and June 2016
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- Panel composition
Appendix – Market Size and Forecast
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- Best- and worst-case scenario forecast
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- Figure 38: Best- and worst-case forecast for small business banking account balances, 2016-21
- Forecast methodology
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