Table of Contents
Overview
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- Key issues covered in this report
- COVID-19: Market context
- Economic and other assumptions
- Products covered in this Report
Executive Summary
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- Impact of COVID-19 on small business banking
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on small business banking, 19 October 2020
- The market
- Market size and forecast
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- Figure 2: Forecast of the volume of small business banking current accounts, 2015-25
- Unprecedented levels of state intervention to protect the economy
- Government-backed loans for SMEs surpass £53 billion
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- Figure 3: Volume of applications and amounts approved under the BBLS and CBILS, 4 May - 20 September 2020
- Companies and brands
- ‘Big Five’ account for 81% of accounts used for businesses
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- Figure 4: Main business current account provider, July 2020
- Banks have been key in supporting the nation and keeping things running…
- … but face a significant threat to profits
- Adspend remained fairly constant during initial lockdown
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- Figure 5: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, by category, 2015/16-2019/20
- The consumer
- A third of small businesses are in a precarious situation
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- Figure 6: Current financial situation of the business, June 2019 and July 2020
- 43% use a regular current account for their business
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- Figure 7: Type of bank account used to manage business finances, 2017-20
- 88% of those with dedicated accounts have other business banking products
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- Figure 8: Ownership of other business banking products, July 2020
- Digital channels gain ground at the expense of in-branch services
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- Figure 9: Channel preference in small business banking, by activity, July 2020
- Price is the most important driver
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- Figure 10: Purchase drivers in small business banking, July 2020
- 44% of small businesses would prefer pay-as-you-go banking
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- Figure 11: Fees and charges preferences, July 2020
- COVID-19 has resulted in a more conscious approach to business finances…
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- Figure 12: Actions taken in response to COVID-19, July 2020
- .. and has had a positive impact on banks’ reputations
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- Figure 13: Impact of COVID-19 on attitudes towards small business banking, July 2020
- There’s room for trusted third parties to continue disrupting
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- Figure 14: Attitudes towards small business banking, July 2020
Issues and Insights
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- COVID-19 provides an unprecedented opportunity to highlight the value of having a business bank account
- Traditional providers’ reputations stand to gain from their role in the crisis…
- …but navigating the recovery will be difficult
The Market – Key Takeaways
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- COVID-19 boosts demand for specialist business bank accounts
- Self-employment falls but is expected to recover
- UK government is doing ‘whatever it takes’ to support the economy
- BBLS and CBILS save SMEs but will distort lending for up to a decade
Market Size and Forecast
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- Impact of COVID-19 on small business banking
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- Figure 15: Short-, medium- and long-term impact of COVID-19 on small business banking, 19 October 2020
- Number of small business current accounts fell in 2018 and 2019
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- Figure 16: Volume of small business current accounts, in credit and overdrawn, 2015-19
- Total balances held in small business accounts continues to grow
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- Figure 17: Volume and value of small business current and savings accounts, 2015-19
- COVID-19 to prompt growth in small business bank accounts
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- Figure 18: Forecast of the volume of small business banking current accounts, 2015-25
- Figure 19: Forecast of the volume of small business banking current accounts, index and annual change, 2015-25
- Market drivers and assumptions
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- Figure 20: Key drivers affecting Mintel’s market forecast, 2015-24 (prepared on 20 October 2020)
- Learnings from the last recession
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- Figure 21: Number of small business current accounts, 2005-14
- Forecast methodology
Small Business Lending
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- Bounce Back loans worth £38 billion approved…
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- Figure 22: Volume of applications and amounts approved under the Bounce Back Loan Scheme (BBLS) 4 May - 20 September 2020
- …with an additional £15.45 billion borrowed under the CBILS
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- Figure 23: Volume of applications and amounts approved under the Coronavirus Business Interruption Loan Scheme (CBILS) 4 May – 20 September 2020
- Pre-COVID-19, the value of small business lending had fallen…
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- Figure 24: Annual value of gross loans advanced and overdraft facilities approved for small businesses, 2015-19
- …as well as the volume of facilities approved
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- Figure 25: Annual number of loans and overdraft facilities approved for small businesses, 2015-19
Market Drivers
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- COVID-19 deals a heavy blow to the economy…
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- Figure 26: GDP growth, annual change, 2015-24 (central forecast)
- …with unemployment set to more than double in 2020
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- Figure 27: Unemployment rate, 2015-24 (central forecast)
- Self-employment falls in Q2 2020, but is expected to recover
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- Figure 28: Number of self-employed workers in the UK, 2000 Q1 2000 - Q2 2020
- Brexit: lack of clarity regarding trading relationship with the EU as deadline nears
- Small businesses account for over 99% of total business population…
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- Figure 29: UK business population, by business size, 2015-20
- …and 35% of total turnover
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- Figure 30: Share of UK private sector turnover, by size of business, 2015-20
Regulatory and Legislative Changes
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- UK government takes unprecedented steps to support businesses
- Government-backed business loan schemes
- Bounce Back Loan Scheme
- Coronavirus Business Interruption Loan Scheme
- The Coronavirus Job Retention Scheme (CJRS) and the new Job Support Scheme
- Self-employment Income Support Scheme (SEISS)
- VAT cut and the New Payment Scheme
- FOS powers expanded in response to COVID-19
Companies and Brands – Key Takeaways
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- Significant threat to profits will force unpopular decisions
- Dominance of ‘Big Five’ likely to continue
- Advertising to focus on reassurance in the recovery phase
Market Share
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- Barclays is the largest individual provider
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- Figure 31: Main business current account provider, July 2020
- ‘Big Five’ account for 81% of accounts used for businesses
Competitive Strategies
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- Banks have been key in supporting the nation and keeping things running
- Significant threat to profits
- Bad debts are expected to soar
- Small business lending will change over the next decade
- Unpopular decisions on the horizon
- BCR’s scheme to increase competition faces hurdles
- Nationwide abandons plans to enter the business banking market…
- …and follows Metro Bank in returning BCR money…
- … which has been redistributed
Launch Activity and Innovation
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- Monzo enters the small business current account market
- Partnerships with accounting and third-party services
- Banks enhance digital capabilities and online journeys
Advertising and Marketing Activity
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- Adspend remained fairly constant during lockdown…
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- Figure 32: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, 2015/16-2019/20
- …while brands focus on brand building over specific products
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- Figure 33: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, by category, 2015/16-2019/20
- Largest spenders account for 81% of adspend
- Starling Bank climbs to the second place
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- Figure 34: Top 10 spenders on above-the-line, online display and direct mail advertising expenditure on business current accounts, credit cards, insurance, finance and loans and business brand building, by advertiser, 2019/20
- Adspend is split between TV, digital and radio
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- Figure 35: Total above-the-line, online display and direct mail advertising expenditure on business current accounts, credit cards, insurance, finance and loans and business brand building, by media type, 2019/20
- Advertising and marketing in the recovery phase
- Nielsen Ad Intel coverage
The Consumer – Key Takeaways
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- COVID-19 highlights the importance of formal banking products
- Small businesses will be price and value sensitive
- Despite an accelerated shift towards digital channels, branches remain important
- An opportunity for banks to improve their reputation
- Traditional and established providers stand to gain, while FinTechs are at risk
Small Business Sentiment
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- A third of small businesses are in a precarious situation
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- Figure 36: Current financial situation of the business, 2017-2020
- A renewed negativity towards the impact of Brexit
Business Bank Account Ownership and Tenure
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- 43% use a regular current account for their business…
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- Figure 37: Type of bank account used to manage business finances, July 2020
- …and proportion of owners using personal accounts has grown
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- Figure 38: Type of bank account used to manage business finances, 2017-2020
- 61% have been with their provider longer than five years
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- Figure 39: Business bank account tenure, July 2020
Business Product Ownership
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- 88% of those with dedicated accounts have other business banking products…
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- Figure 40: Ownership of other business banking products, July 2020
- …and half have three or more
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- Figure 41: Repertoire of other business banking products owned, July 2020
Channel Preferences
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- Digital channels gain ground
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- Figure 42: Channel preference in small business banking, by activity, July 2020
- Appeal of mobile banking remains limited
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- Figure 43: Channel preference in small business banking, by activity, June 2019 and July 2020
- Preference for branches falls
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- Figure 44: Channel preference in small business banking, by activity, June 2019 and July 2020
Purchase Drivers
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- Price is the most important driver
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- Figure 45: Purchase drivers in small business banking, July 2020
- Branches have an important role to play
- Traditional providers have an edge
Fees and Charges Preferences
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- A higher proportion of small businesses would prefer pay-as-you-go banking…
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- Figure 46: Fees and charges preferences, July 2020
- …but there is room for competition
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- Figure 47: Fees and charges preferences, by number of employees, July 2020
Impact of COVID-19 on Behaviours
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- A more conscious approach to business finances
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- Figure 48: Actions taken in response to COVID-19, July 2020
- Smaller businesses less likely to take action
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- Figure 49: Repertoire of actions taken in response to COVID-19, by number of employees, July 2020
Impact of COVID-19 on Attitudes
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- A positive impact on banks’ reputations…
- …which will be put to the test during the downturn and the recovery
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- Figure 50: Impact of COVID-19 on attitudes towards small business banking, July 2020
- Traditional and established providers stand to gain…
- …particularly when it comes to micro-businesses
Attitudes towards Small Business Banking
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- Opportunities for banks to leverage their reputation
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- Figure 51: Attitudes towards small business banking, July 2020
- Room for trusted third parties to offer additional services
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
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