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SMES MISSING OUT ON A LONG-TERM RELATIONSHIP WITH THEIR BANK

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SMES MISSING OUT ON A LONG-TERM RELATIONSHIP WITH THEIR BANK

SMEs experience low levels of satisfaction with relationship bankers – and it could get worse 

Results from a survey of UK SMEs from CivilisedBank, the new UK business bank with a Local Banker network, and Opinium, the award winning strategic insight agency, reveal that despite the importance placed on having a strong relationship with their bank, almost half of UK SMEs (46%) don’t know the availability of their relationship manager or don’t have one at all.

Although the remaining 54% of those surveyed do have a relationship manager, only 18% – less than 1 in 5 – of those with a turnover of £1 million or more state that they are extremely satisfied with their support. Of those with a turnover of more than £500,000, this drops further to 15%, or less than 1 in 7.

The survey also found that the average tenure of a relationship manager is only 2 years[1], highlighting the difficulty around the depth of customer knowledge that can be accrued. As banks cut costs further, questions will be raised as to whether the existing level of service can be maintained or even improved upon by the big banks in the future.

In addition, respondents noted that there are already restrictions as to how involved relationship managers can be: only 43% of those with a relationship manager confirm that their relationship manager is always on call when they need help. There are also questions about their effectiveness: over a quarter (28%) of those with a relationship manager noted that they do not have the authority or ability to make credit decisions locally without having to refer to head office, and a further 22% are unsure whether they have any lending authority.

Philip Acton, Chief Executive Officer, CivilisedBank said:“Our research illustrates that the banking industry should not underestimate the importance of the relationship between a bank and its business customers. However, given how important the personal relationship is, it is striking that only half of SMEs have a relationship manager.” 

“Length of tenure and familiarity with the client’s business matter to businesses. Our business model includes succession planning for each of the Local Bankers, to ensure a high level of continuity. The fact that our bankers are rewarded for customer service rather than the number of deals we believe will also help alleviate issues of high churn.”

CivilisedBank’s business model sets it apart from other challenger banks and fintech companies: its network of Local Bankers will make business lending decisions in their local area. They will be supported by a state-of-the-art system, allowing lending decisions to be made quickly. This will enable businesses to get on with the business of growth. The Local Bankers will be part of the local community and will be able to give advice and support to their business customers.

[1] 2.3 relationship managers in the last 5 years, giving an average of 2.15 years

Banking

Open Banking: the perfect pandemic tool – Equifax comments

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How the application network unlocks open banking’s future

With COVID-19 related financial fallout set to dominate the credit landscape in 2021, Dan Weaver, Open Banking Expert at Equifax UK, believes Open Banking solutions can provide lenders clarity in a sea of uncertainty: 

“With lockdown once again in place across the UK, it’s clear 2021 will be a year of extreme financial flux. While the vaccine roll-out programme will provide an economic boost and eventual easing of restrictions, forbearance measures, such as mortgage holidays and the government furlough scheme, will be wound down. This will lead to income shocks for many, and the potential for a nationwide surge in personal debt.

“With the third anniversary of its implementation today (13 January), Open Banking is entering a new mature phase of its development. The initiative’s credentials are now widely established, offering creditors the perfect pandemic tool to assess the most accurate picture of an individual’s finances.

“Consider someone who has just returned to the workforce after being made redundant or placed on furlough. Traditional credit bureau or legacy data alone would not always provide potential lenders with the most up-to-date information on their current financial circumstances and ability to repay credit at the point of application. Open Banking platforms, through customer consent, pull live data directly from the user’s bank account, allowing creditors to make an informed, responsible and fair decision about their current affordability on the most recent data available – a game-changing factor amid such widespread financial upheaval and rapid change in people’s circumstances.

“Open Banking is a tool for our times and it’s vital more credit providers, not just big banks and finance but utilities, insurance, auto and telcos companies, accelerate its adoption. Throughout our society and economy in the past year, we’ve witnessed feats of great innovation, executed at rapid speed. In 2021, we need to apply this transformational energy to the Open Banking landscape, slashing the time it takes for creditors to test protocol and fully set up their solutions.

“Three years after its arrival, we’re seeing Open Banking platforms improve digital, real-time income verification rates by more than 25% * – which is no mean feat. If an industry-wide, mass acceleration strategy was successfully achieved in 2021, it would prove extremely valuable and timely, and lead to better customer and creditor outcomes throughout the credit space.”

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Banking

Over a quarter of Brits now have an account with a digital-only bank

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Over a quarter of Brits now have an account with a digital-only bank 1

Over a quarter of Brits now have an account with a digital-only bank 2 The number of Brits with a digital-only bank account has gone up by a percentage increase of 16%

Over a quarter of Brits now have an account with a digital-only bank 3 Almost 1 in 6 Brits (17%) plan to open a digital bank account over the next 5 years

Over a quarter of Brits now have an account with a digital-only bank 4 The top reason for opening an account was the convenience of banking online for the third year running

Over a quarter of Brits now have an account with a digital-only bank 4However, 16% of traditional banking customers who aren’t planning to switch said their bank had been helpful during the COVID pandemic

Currently over a quarter of Brits (27%) say they have at least one bank account with a digital-only bank, according to personal finance comparison site finder.com.

This is a percentage increase of 16% from last year when 23% of Brits said they had an account with a digital bank. It is also over 3 times the amount of Brits who had one in January 2019 (9%).

Finder’s 2019 research found that 24% of Brits intended to have a digital-only account by 2024. However with 27% now having an account, Brits have gone digital 3 years earlier than expected.

A further 17% of Brits intend to join them over the next 5 years, with 11% planning to do so over the next year. This could mean that 44% of Brits could have an account with a digital bank by 2026. If this percentage were applied to the UK adult population, it would equal almost 23 million people.

The top reason for opening an account continues to be convenience that digital-only banks provide, for the third year running (26%). The second most common reason was that users needed an additional account and setting up a digital account seemed to be the easiest option (20%). Customers also wanted to transfer money more easily (19%), making this the third biggest priority.

People wanting a trendy card is still driving signups as well, with 1 in 10 (10%) existing, or future, customers citing this as a reason to get an account.

Despite the increase in digital-only banking customers, the numbers who aren’t considering one have actually risen. Last year, 23% of respondents said they aren’t considering a digital-only bank account, but this has risen substantially to 42% in the latest survey.

This is likely a result of increased customer loyalty, 58% of those without a digital bank account said they felt as though their incumbent bank had treated them well and therefore had no desire to open a digital bank account. Additionally, 16% felt as though their incumbent bank had performed particularly well during the pandemic.

Over a third (36%) of those without a digital bank account said they had not decided to bank with digital providers because they preferred to be able to speak to someone in branch.

Digital banks are still most popular with younger generations, 46% of gen Z say they currently have a digital bank account, with a further 28% intending to get one over the next 5 years. This would mean that by 2026 just under three quarters of gen Z (73%) could have a digital bank account.

To see the research in full visit: https://www.finder.com/uk/digital-banking-adoption

Commenting on the findings, Matt Boyle, banking specialist  at finder.com said:

“This research shows that digital-only banks are here to stay, with the number of users in the UK rising for 3 years straight. On top of this, Starling and Revolut announced this year that they have made a profit for the first time, really demonstrating that digital banks are starting to become a serious part of the banking furniture.

“The pandemic has also played a role in the rapid digitalisation of the banking industry, with those who had never experienced online banking having no other choice but to take their finances online. It seems that Brits are starting to realise the convenience that can come with digital banking and this is reflected in our research.”

Methodology:

Finder commissioned Censuswide on 6 to 8 January 2021 to carry out a nationally representative survey of adults aged 18+. A total of 1,671 people were questioned throughout Great Britain, with representative quotas for gender, age and region

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Banking

The Impact of the Digital Economy on the Banking and Payments Sector

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The Impact of the Digital Economy on the Banking and Payments Sector 6

By Gerhard Oosthuizen, CTO Entersekt.

New banking regulations, digital consumers, the eradication of passwords, contactless technology – these are just some of the trends that will shape financial services and payments in 2021, writes Entersekt CTO, Gerhard Oosthuizen.

Since the outbreak of COVID-19, traditional businesses have been compelled to further undergo the digital transformation to meet the needs of a consumer base largely confined to their homes. Indeed, we estimate that there has been a 30% growth in the digital space. With this acceleration towards a digital world, banking, transacting and payment trends have and will continue to be redefined into 2021.

We have witnessed a rising number of digital first timers. That is, people signing up for online banking and e-commerce, whilst progressively shifting away from traditional channels. Businesses that have previously depended on walk-in stores and having a physical presence have also had to recognise that online transactions are now the new norm, and to adjust accordingly.

Whereas in the past, registering a customer for a service could take place in a shop, a booth or a branch, today it has become more important than ever to have a remote digital registration option available as well. Even working behaviour has changed considerably, with many businesses accommodating for remote working in the long term.

This is what sets the scene for 2021 – people expect to work from home as well as carry out their transactions from home.

Banking and Payment Trends in 2021

The use of contactless technology is undeniably growing, but on top of more people tapping with their cards, we are also seeing much more engagement with QR payments. A technology already frequently employed in Asia, we know QR codes can work. It would enable consumers to authenticate themselves when making a transaction without needing a PIN pad. More importantly, it allows consumers to gain complete control of their transactions from their own device and have an overall richer experience. Recognising this, we anticipate noteworthy developments in QR and NFC-enabled tap and go payments over the next year.

In light of FIDO (Fast Identity Online) and the ever-expanding network of FIDO-compliant solutions, we also expect the emergence of entirely passwordless systems. Organisations will likely begin enlisting customers by way of biometric authentication through devices and digital identities that already exist, such as banking apps. Long gone will be the days of having to remember numerous passwords, only to forget and reset them again. That is the idea anyway.

In 2021, there will probably be a pronounced adoption of delegated authentication as well, whereby

Gerhard Oosthuizen

Gerhard Oosthuizen

merchants as opposed to traditional issuing banks will take the reins of authenticating e-commerce payments. In this way, consumers will be offered a greatly improved online shopping experience with a simple and intuitive checkout that acts as an extension of the retail brand.

The Challenge of PSD2

While each of these transitions will undoubtedly introduce growing pains, PSD2 will be among the most challenging. Europe is already going through PSD2 now, implementing a number of regulations that is opening up competition in banking and electronic payment services. However, on the 1st of January 2021, these regulations will take a legal effect. At the end of the first quarter, so too will another set of regulations concerning 3-D authentication of card-not-present payments. Europe is simply not prepared to make this leap into “open banking”. As such, banks will face a tough year of struggles with regulators and competition from non-traditional quarters.

In fact, the process towards becoming PSD2-compliant is often arduous for banks and recoups hardly any additional revenue. Many banks see it as a competitive disadvantage as they are being forced to open up their systems and processes for the likes of Google, Facebook, Apple and many smaller niche fintech operations. Their valuable client data risks being taken by a challenger and used to on-board their accountholders.

Regardless of the commercial opportunities that open banking may provide, fraudsters will also endeavour to take advantage of this change and the weaknesses that will appear as systems open. With money moving faster, the faster it can be stolen too. We will likely see some reaction to this in 2021 as fraud returns to being a top priority for banks. Yet, whether through regulatory pressure or by market forces, open banking will become the new normal – and the world needs to prepare for this. Hopefully, many lessons will be learned from Europe’s experiences in 2021.

Next year is going to be about change – and managing that change without alienating already unsettled consumers. Organisations that have customer experience top of mind will emerge as winners, but they must nonetheless expect additional pressure from regulators, new competition, ever more digitally-demanding consumers, and no slowdown in technological innovation.

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