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Opinion > Recognise

When relationships count, it’s the new entrants who are gaining market share

Jason Oakley, CEO at Recognise | 08:59 Wednesday 15th May 2019

The theory that some things are often better said in person really does ring true for small- and medium-sized businesses.

Having a personal relationship with their bank and being able to meet a relationship manager face to face remain important elements of business banking for SMEs. A study by Recognise Financial Services Ltd (a subsidiary of AIM-listed City of London Group PLC) found that almost two-thirds (65%) of UK SMEs were unable to gain access to a senior decision maker at the ‘Big Four’ banks.

This difficulty in gaining access could also be one of the reasons that SMEs will consider new banking enterprises outside of Lloyds, Barclays, NatWest/RBS and HSBC to help support their business growth. A quarter of SMEs (25%) already have a main bank outside of the Big Four, 40% have placed deposits outside of them and nearly 30% have taken a loan outside of the main players.

The survey of more than 400 UK small business leaders suggests a real shift in SME attitudes to business banking. New entrants are now becoming firmly embedded in the UK banking arena and SMEs have the confidence to use their services and take a fresh approach. It was also clear from our research that the market is changing back in favour of new entrants who focus on building personal relationships with customers.

Our study also suggest that SMEs are frustrated at getting lost in call centres and not having a named contact they can easily connect with. This perceived lack of relationships and access to named individuals and decision makers is a worry for many SME business owners. Indeed, the statistic that really made us sit up was that over half of respondents (57%) scored “having a single point of contact” between eight and 10 on the importance scale when taking out a business loan. This clearly demonstrates the importance of relationships in business banking and that the needs of the SME market continue to be ignored.

Subject to being granted a banking licence, the intention is for us at Recognise to perform as an SME bank focused on service excellence, speed of execution, flexible structuring and durable customer relationships. It will provide loans to SMEs and take deposits from both retail and SME customers.

Critical to our success will be a personal-relationship-led approach, as well as taking advantage of cloud technologies to support the ‘customer-first’ vision and the management team’s ambitions for the future. It is, however, important to note that technology will support the decision-making process, but not replace it. When we saw that 82% of SMEs said they would consider taking a loan from a newer, smaller bank if the product, price and service was right, it was an exciting moment that reinforced our belief that the market is ready for change. The fact that one in four SMEs have already opted for a non-Big Four bank for their main account shows an appetite for new service providers.

About the research

Research was conducted on behalf of City of London Group by Brandface. All figures, unless otherwise stated, are from Brandface. The total sample size was 423 SME financial decision makers. All SMEs had less than 250 employees, covering a wide variety of industries, including information technology, healthcare, manufacturing, professional services and financial services. Fieldwork was undertaken in 2018. The survey was carried out online.

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