- SMEs identify banks as their preferred provider of transaction services, but take-up of newer ways to pay and be paid varies
- Key barriers to change highlighted as perceived cost, risk and other priorities being addressed first
Small businesses retain strong trust in their banking provider, but there remain barriers to adoption of different types of payment services used by this audience, according to new research from Visa Europe. There are also substantial variations in this view across different types, sizes and geographies of small business, suggesting banks and payment providers still have to work to do in some customer segments.
In a survey of 750 owners of UK small businesses, nearly two thirds (59%) confirmed that they trust their business bank or building society to be their payment provider. While alternative providers are emerging, trust in these institutions to deliver payment functions remained much lower, such as trust in a telecoms company (11%), social media provider (6%) or alternative online payment providers (40%).
Trust in banks was most strongly held by sole traders, 65% of whom have a fully trusting relationship with their bank or building society. Likewise, longstanding businesses have a higher level of trust – 65% of businesses trading for more than 20 years identified their bank as a trusted provider.
While trust levels are high, many small businesses revealed they aren’t fully satisfied with the payment options available to them. For example, only 30% of owners are ‘completely satisfied’ with the range of options available. This rises to 40% of sole traders, but remains relatively low. Satisfaction levels also decrease as company turnover rises, suggesting as businesses grow they are looking for more options to offer customers.
Commenting on the findings and the need to answer the different challenge of banking for small businesses, Kevin Jenkins, Managing Director of Visa UK said: “The banking and payments proposition for small business is different and has to be treated so. Resources are scarcer and the time to invest in and consider these kinds of issues is typically less.
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“The impact is the same regardless of business size though. If small businesses feel frustrated or unable to utilise the best payment or banking offering for them and their customers, then they can’t enjoy the benefits these bring. Given the top three barriers to change are cited as perceived cost, risk, and other priorities being focused on, that suggests we need to start with making these products as accessible and useful for this audience as possible.”
There are also clear differences between the comfort level of businesses paying in new and different ways, versus accepting these payment methods themselves. Sole traders for example, have embraced making online payments – well over half (56%) use online banking to make payments and a third (32%) make payments via debit card online. Yet only 9% of this group accept online card payments to their own business from customers. Similarly, 36% of all small businesses use debit cards to make payments for their business, yet only 22% accept payments this way.
This frustration at lack of payment options, and gap between payment behaviour and acceptance, doesn’t appear to be a case of traditional providers failing to innovate though. Banks were listed more often than alternatives, such as internet providers, as the “preferred partner” for transaction services. Indeed, 46% of small business owners described their bank as the “ideal” provider for these services, suggesting a different barrier is the main impediment.