How neobanks can convince SMBs to switch banking providers

What SMBs Value In Bank Accounts

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Revolut Business published a study showing that 63% of small- and medium-sized businesses (SMBs) in the UK, Poland, and France have been using their current banks for five years or more, and that nearly one-quarter of SMBs haven’t switched providers since 2008.

A signficant percentage of respondents cited close proximity to branches as a reason for initially choosing their current bank, but few still use branches regularly. Thirty-eight percent of SMBs in Poland and France, and 27% in the UK cited proximity to branches as a key factor in choosing their banks.

But while around one-quarter of total respondents said they still visit a physical branch every day, over half say they rarely visit branches. And digital channel use is prevalent: 43% of SMBs surveyed use digital banking to manage their business accounts daily, with another 30% doing so weekly. This suggests that SMBs could be receptive to neobank services.

The SMB banking market presents a massive opportunity for neobanks — they should lean on the value of their digital capabilities to convince SMBs to switch providers.

The SMB banking segment is worth $850 billion globally, and neobanks are trying to fill in the gaps where incumbents have fallen short. Lending to SMBs has long been a risky business for incumbents because finding useful data to determine SMB creditworthiness is difficult. But neobanks’ API compatability allows them to not only access more data, but also offer fast account opening, multitiered, and often fee-free accounts, as well as integrations with third-party tools like accounting and bookkeeping software to further streamline SMB operations.

Those integrations are often offered through a marketplace, which allows SMB neobanks to diversify revenue, expand their user bases, monetize financial data, and earn commissions. Starling, which is a leader in SMB neobanking, counts over 90,000 SMB customers and has grown its SMB marketplace to 24 integrations. And competitors like Revolut and N26 are taking similar approaches, integrating services from QuickBooks and Transferwise, respectively.

But less than half of SMBs said they are looking to change account providers in the next 12 months, meaning that neobanks must work to persuade SMBs that their digital offerings are worth switching for. When asked what they value in a bank, 80% of SMBs said 24/7 account access, 89% said security, and the same share said transparency of charges, while low fees were cited by 86% of SMBs. Those are all areas where neobanks typically excel, so they should be front and center of campaigns to pull in new SMB customers. By effectively communicating how their value propositions align with SMBs’ needs, neobanks could stand a better chance at spurring SMBs to make the jump.

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Source:: Business Insider


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