Table of Contents
Executive Summary
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- The market
- Small business account balances at major banks grew by 4% in 2018
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- Figure 1: Forecast of the value of small business banking deposits (current accounts and savings accounts), Fan Chart, 2014-24
- Companies and brands
- Big 5 banking groups dominate the market
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- Figure 2: Main business current account provider, June 2019
- Adspend for business banking rose to £58 million in 2018/19
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- Figure 3: Total above-the-line, online display and direct mail advertising expenditure on business current accounts, business insurance, business finance and loans and business brand building, 2014/15-2018/19
- The consumer
- Over a third use a personal bank account to manage business finances
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- Figure 4: Type of bank account used to manage business finances, June 2019
- Account switching is rare in small business banking
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- Figure 5: Business bank account tenure, June 2019
- Online banking is the preferred channel for almost all tasks
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- Figure 6: Preferred channels for various business banking activities, June 2019
- Price is key but digital services are also essential in provider choice
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- Figure 7: Important factors affecting choice of small business banking providers, June 2019
- Business owners are split on Open Banking
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- Figure 8: Awareness and understanding of Open Banking, June 2019
- Most business owners bank online and are keen for integrated services
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- Figure 9: Attitudes towards small business banking, June 2019
- What we think
Issues and Insights
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- Incumbents’ dominance is hard to break…
- The facts
- The implications
- …but creating digital business finance hubs offers a compelling reason to switch
- The facts
- The implications
- Free banking is a start but start-ups need to be convinced of the value of business accounts
- The facts
- The implications
The Market – What You Need to Know
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- Small business account balances at major banks grew by 4% in 2018
- Major banks advanced £7.7 billion in small business loans in 2018
- The small business population dipped but turnover increased in 2018
- Making Tax Digital seeks to eliminate lost tax revenue
Market Size and Forecast
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- Volume of small business bank accounts dipped in 2018
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- Figure 10: Volume of small business current accounts, in credit and overdrawn, 2014-18
- Balances continue to increase but growth has slowed
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- Figure 11: Volume and value of small business current and savings accounts, 2014-18
- Steady growth is forecast for the next five years but Brexit will be key
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- Figure 12: Forecast of the value of small business banking deposits (current accounts and savings accounts), Fan Chart, 2014-24
- Figure 13: Forecast of the value of small business banking deposits (current accounts and savings accounts), 2014-24
- Forecast methodology
Small Business Lending
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- Major banks advanced £7.7 billion in small business loans in 2018
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- Figure 14: Annual value of gross loans advanced and overdraft facilities approved for small businesses, 2014-18
- Growth in overdraft use could suggest rising difficulties
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- Figure 15: Annual number of loans and overdrafts approved for small businesses, 2014-18
Market Drivers
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- Small businesses make up almost the entire private sector…
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- Figure 16: UK business population, by business size, 2014-18
- …accounting for over a third of turnover
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- Figure 17: Share of UK private sector turnover, by size of business, 2016-18
- Self-employment nears 5 million workers
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- Figure 18: Number of self-employed workers in the UK, January 2013-June 2019
- Most businesses are getting by pretty well
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- Figure 19: Current financial situation of the business, June 2019
Regulatory and Legislative Changes
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- Ring-fencing takes effect
- Firms now required to submit VAT returns digitally
- Treasury rejects call for SME lending regulation
- British Business Bank expands its ENABLE Guarantee programme
- Government launches British Finance Council to assist SMEs after Brexit
Companies and Brands – What You Need to Know
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- Big 5 banking groups dominate the market
- RBS Alternative Remedies Package funds awarded to 15 providers
- Brands take conflicting approaches to SME branch services
- Adspend for business banking rose to £58 million in 2018/19
Market Share
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- Big 5 banking groups dominate the market…
- …but scope for challengers to increase their share
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- Figure 20: Main business current account provider, by type of account held, June 2019
Company Profiles
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- Barclays
- Profile
- Recent activity
- HSBC
- Profile
- Recent activity
- Lloyds Banking Group
- Profile
- Recent activity
- RBS Group
- Profile
- Recent activity
- Santander
- Profile
- Recent activity
Competitive Strategies
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- Business Banking Hubs trialled in test of the future of branches…
- …as challengers look to put branches at the heart of new strategies
- Nationwide to train 7,000 branch workers in business banking as it enters the market
- Co-operative Bank looks to grow market share with long free banking offer
- Virgin Money to support SME customers with 300 relationship managers
- Starling and Tide look back to move forward with online banking
Advertising and Marketing Activity
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- A steep rise in adspend…
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- Figure 21: Total above-the-line, online display and direct mail advertising expenditure on business current accounts, business insurance, business finance and loans and business brand building, 2014/15-2018/19
- …largely thanks to WorldFirst and Funding Circle
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- Figure 22: Top 10 spenders on above-the-line, online display and direct mail advertising expenditure on business current accounts, business insurance, business finance and loans and business brand building, 2016/17-2018/19
- Adspend is split between TV, digital and radio
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- Figure 23: Total above-the-line, online display and direct mail advertising expenditure on business current accounts, business insurance, business finance and loans and business brand building, by media type, 2018/19
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Over a third use a personal bank account to manage business finances
- Online banking is the preferred channel for almost all tasks
- Price is key but digital services are also essential in provider choice
- Business owners are split on Open Banking
- Most business owners bank online and are keen for integrated services
Business Bank Account Ownership and Tenure
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- Over a third use a personal bank account to manage business finances
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- Figure 24: Type of bank account used to manage business finances, June 2019
- Larger firms are more likely to use specialist business accounts...
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- Figure 25: Type of bank account used to manage business finances, by number of employees, June 2019
- …while younger firms are more likely to use personal accounts
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- Figure 26: Type of bank account used to manage business finances, by age of business, June 2019
- Current account switching is rare among small business owners
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- Figure 27: Business bank account tenure, June 2019
Channel Preferences
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- Online banking is the preferred channel for almost all tasks
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- Figure 28: Preferred channels for various business banking activities, June 2019
- Branches are still favoured for advice, but only just
- Firms’ interactions with financial products change over time
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- Figure 29: Preferred channels to “Find out more about particular business banking products”, by age of business, June 2019
Factors Affecting Choice of Provider
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- Digital channels have become key in choosing financial providers
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- Figure 30: Important factors affecting choice of small business banking providers, June 2019
- Professional recommendations are influential for larger firms
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- Figure 31: Important factors affecting choice of small business banking providers, by number of employees, June 2019
- Branches are still highly valued
- Major banks can leverage experience of personal customers
Open Banking and Small Business Banking
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- Business owners are split on Open Banking
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- Figure 32: Awareness and understanding of Open Banking, June 2019
- Smaller firms are at risk of missing out
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- Figure 33: Awareness and understanding of Open Banking, by number of employees, June 2019
Attitudes towards Small Business Banking
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- Integrated tax services hold strong appeal…
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- Figure 34: Attitudes towards small business banking, June 2019
- …but business owners want providers to stick to their specialities
- Attitudes towards innovation are polarised
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Figure 35: Best- and worst-case forecasts for the value of small business banking deposits (current accounts and savings accounts), 2019-24
- Forecast methodology
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