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SMALL BUSINESS BANKING - UK - SEPTEMBER 2018

Published By :

Mintel

Published Date : Sep 2018

Category :

Banking

No. of Pages : N/A

Switching is rare in the small business current account market. However, business owners’ attitudes towards challengers suggest there are opportunities for smaller and newer providers to grow their share of the market. For example, 57% of small business owners would be willing to use an online-only or app-based provider. If such providers can effectively market their products and offer a degree of personalisation, there is a chance that more business owners will look to switch banking providers.

Table of contents
OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Balances are forecast to rise above £150bn by 2023
Figure 1: Forecast of small business account balances (current and savings accounts), 2013-23
Lending volume continues to fall
Figure 2: Annual number of loans and overdrafts approved for small businesses, 2013-17
Companies and brands
The big five account for 80% of small business bank accounts
Figure 3: Market share for business bank accounts, June 2018
Open Banking can improve access to small business lending
The consumer
Two thirds use a specialist business bank account
Figure 4: Type of bank account used to manage business finances, June 2018
Poor customer service is the biggest prompt to switch
Figure 5: Factors that would encourage small business owners to switch business account provider, June 2018
Online banking the most used channel
Figure 6: Channels used to carry out various business banking activities, June 2018
The majority feel their business loan application would be approved
Figure 7: Chances of business loan approval, June 2018
40% are looking to develop their business
Figure 8: Business owners’ plans for their business’ finances over the next two years, June 2018
Only a fifth will consider opting in to Open Banking
Figure 9: Small business’ interest in open banking, June 2018
Almost 30% do not trust their bank
Figure 10: Attitudes towards business banking, June 2018
What we think
ISSUES AND INSIGHTS
Banks must regain trust before Open Banking can make its mark
The facts
The implications
Alternative lenders can reinvigorate the market
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Balances are forecast to rise above £150bn by 2023
Lending volume continues to fall
Small business share of private sector grows
85% of small businesses’ finances are ‘Healthy’ or ‘OK’
Small businesses can use Open Banking to get ahead
MARKET SIZE AND FORECAST
Number of overdrawn accounts ends decline
Figure 11: Number small business current accounts, by in credit and overdrawn, 2013-17
Savings accounts decline for the second year running
Figure 12: Number and value of small business current and savings accounts, 2013-17
Balances are forecast to rise above £150 billion by 2023
Figure 13: Forecast of small business account balances (current and savings accounts), 2013-23
Figure 14: Forecast of small business account balances (current and savings accounts), 2013-23
Forecast methodology
SMALL BUSINESS LENDING
Consistent growth in value of small business loans
Figure 15: Annual value of gross loans advanced and overdraft facilities approved for small businesses, 2013-17
Lending volume falls once again
Figure 16: Annual number of loans and overdrafts approved for small businesses, 2013-17
MARKET DRIVERS
Smaller companies dominate the UK business population
Figure 17: UK business population, by business size, 2013-17
Small businesses influence grows
Figure 18: Share of UK private sector turnover, by size of business, 2015-17
Number of self-employed begins to fall
Figure 19: Number of self-employed workers in the UK, January 2013-March 2018
85% of small businesses’ finances are ‘Healthy’ or ‘OK’
Figure 20: Current financial situation of the business June 2016 vs June 2017 vs June 2018
REGULATORY AND LEGISLATIVE CHANGES
Small businesses can use Open Banking to get ahead
Ring-fencing initiative takes centre stage
FCA looks to tackle peer to peer investing
MPs launch enquiry into SME exploitation
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
The big five account for 84% of small business bank accounts
Barclays doubles unsecured lending limit to SMEs
Open Banking can improve access to small business lending
Business banking advertising falls by over 20%
MARKET SHARE
Barclays accounts for around a fifth of small business bank accounts
Figure 21: Market share for business bank accounts, June 2018
COMPANY PROFILES
Barclays
Profile
Recent activity
Santander
Profile
Recent activity
RBS Group
Profile
Recent activity
HSBC
Profile
Recent activity
Lloyds
Profile
Recent activity
NEW INNOVATIONS
Open Banking can provide better access to credit
New current account providers can help in financial planning
ADVERTISING AND MARKETING ACTIVITY
Business banking adspend declines for the second year running
Figure 22: Total above-the-line, online display and direct mail advertising expenditure on business banking services, 2013/14-2017/18
Top five banking groups make up only a quarter of adspend
Figure 23: Total above-the-line, online display and direct mail advertising expenditure on business banking services, by brand, 2013/14-2017/18
Digital advertising falls
Figure 24: Share of total above-the-line, online display and direct mail advertising expenditure on business banking services, my media type, 2017/18
Credit products the priority for Lloyds and Natwest
Figure 25: Share of total above-the-line, online display and direct mail advertising expenditure on business banking services, by product type, at major high street banks, 2017/18
Large Banking groups focus more on wider brand building
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
Two thirds use a specialist business bank account
Poor customer service is the biggest prompt to switch
Online banking the most used channel
The majority feel their business loan application would be approved
40% are looking to develop their business
Only a fifth will consider opting in to Open Banking
29% do not trust their bank
BUSINESS BANK ACCOUNT OWNERSHIP AND TENURE
Almost 70% use a specialist business bank account
Figure 26: Type of bank account used to manage business finances, June 2018
Less than half of one-person businesses own a business account
Figure 27: Type of bank account used to manage business finances, by number of employees, June 2018
70% have been with their provider longer than five years
Figure 28: Business bank account tenure, June 2018
PROMPTS TO SWITCH
Customer service the most important factor
Figure 29: Factors that would encourage small business owners to switch business account provider, June 2018
Push factors more influential
Figure 30: Factors that would encourage small business owners to switch business account provider, by number of employees, June 2018
BUSINESS BANKING CHANNELS
Online banking the most used method
Figure 31: Channels used to carry out various business banking activities, June 2018
Mobile banking more popular among younger businesses
Figure 32: Use of mobile banking services when carrying out business activities, by age of business, June 2018
ATTITUDES TOWARDS BUSINESS BORROWING
Two thirds believe their business loan application would be approved…
Figure 33: Chances of business loan approval, June 2018
…but one-person businesses are less confident
Figure 34: Chances of business loan approval, by number of employees, June 2018
Low interest rate the most important factor
Figure 35: Interest in business loan features, June 2018
Case study: Barclays takes minority stake in FinTech financing platform MarketInvoice
SHORT-TERM FUTURE PLANS
40% are looking to develop their business…
Figure 36: Business owners’ plans for their business’ finances over the next two years, June 2018
But micro business owners are less likely
Figure 37: Business owners’ plans for the business’ finances over the next two years, by number of employees, June 2018
ATTITUDES TOWARDS OPEN BANKING
Only a fifth interested in Open Banking…
Figure 38: Small business’ interest in open banking, June 2018
But newer businesses more likely to be tempted
Figure 39: Small business’ interest in open banking, by business age, June 2018
Personalised offers the key incentives
Figure 40: Interest in features which would encourage data sharing, June 2018
ATTITUDES TOWARDS SMALL BUSINESS BANKING
Two thirds concerned about the prospect of data sharing…
…while 29% do not trust their bank
Opportunities for new challengers
Figure 41: Attitudes towards business banking, June 2018
Almost a third are concerned by Brexit
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 42: Best-and worst-case forecasts for small business account balances (current and savings accounts), 2018-23
Forecast methodology

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