Friday 5 February 2021 12:41 pm

SMEs turn to digital banks amid frustration with high street lending

Small businesses have lost confidence in Britain’s biggest banks and are increasingly tempted to move across to digital challengers. 

New research from payment specialist Marqeta reveals 84 per cent of the UK’s SMEs are frustrated with their current banking experience with nine in ten calling for lenders to offer more digital services. 

High street lenders have come under fire for their treatment of SME customers during the pandemic after City A.M. revealed multiple applications had been declined despite firms being eligible for funding. 

Almost a third of SMEs are frustrated with lengthy lending decisions and inflexible credit offerings as they fight to stay afloat.

As a result, Marqeta’s research reveals 67 per cent of the UK’s smallest businesses are considering switching their business bank account provider if they are unable to provide digital capabilities. 

More than two thirds of SMEs say if their bank is unable to provide better digital services they’re more likely to switch to another provider. And with fintechs like Tide and Capital Tap offering business services they have a larger pool to choose from.  

 “SMEs are craving digital banking experiences, but have previously been limited by what’s on offer. In the onset of the COVID-19 pandemic, digital channels became the only way for SMEs to manage finances, apply for loans and make payments – so they had to adapt, and they aren’t keen to go back to the old ways,” Ian Johnson, Managing Director Europe at Marqeta says. 

“Challenger banks like Starling Bank, Revolut and Monzo have also launched business banking propositions which are driving up SMEs’ expectations around business banking, which may create a perfect storm. If banks don’t act now to improve existing digital services, they risk losing a vital revenue stream as customers switch to other providers with better offerings.” 

Alongside lengthy lending decisions, nearly a third of SMEs surveyed are frustrated with the difficulty to integrate business bank accounts with other systems such as accounting. 

Businesses are also struggling to make sense of the options available to them, as 57% of those surveyed find it confusing to understand the differences between digital banking products.  

“Our survey results suggest that SMEs want greater integration, choice and flexibility from digital business bank accounts. However, while banks are taking steps to improve digital services, we believe more can be done, especially for those still hampered by legacy. Every bank, regardless of their digital maturity, should focus on improving the digital services and features that users are demanding to better manage their finances, quickly access funding and link up with existing systems,” concludes Johnson.