By Derek Corcoran, Chief Experience Officer, Avoka
There are an estimated 4.5 million SMEs in the UK – accounting for 99.9%[i]of private sector business. By anyone’s standards, that’s a significant potential market. But,providing excellent service to SME customers is an opportunity too often overlooked by the major banks, who are seemingly unwilling to tailor their services to meet the specific needs of this group of hard-working, time-strapped individuals.
By failing to make life easier for small business owners, banks are missing out on building relationships with the lucrative business banking market. Even for existing customers, adding a cross sell capability — to apply for additional credit, for example — would bring with it a significant upside for banks.
Despite the diversity of the SME market, it’s simple enough to pull out some common trends -the most fundamental of which, is a simple lack of time. Therefore, the guiding principle for banks must be to make their services easily accessible, easy to understand and easy to navigate. Compare this with the current situation: cumbersome form filling,waiting in lines at physical branch locations with limited business hours, and long friction-filled processes for small business owners to get what they need from their bank.
Take opening hours. The average small business owner in the UK works a hefty 50 hours a week, significantly more than the national average of 37 hours.[ii] In comparison, UK banks are only open for an average of 46 hours a week, meaning that their hours typically do not correlate with those of many of their SME customers. It’s not unusual for banks to close up shop in the early afternoon, well before the end of a traditional working day, making things difficult for many SME owners. Access for SME customers is restricted further still by the fact that bank branches are continuing to disappear from UK highstreets, with 1000 branch closures between 2014 and 2016.[iii]
The time could not be more right for banks to make their processes and applications more digitally accessible for the small business banking audience.
Avoka’s 2017 State of Digital Sales in Banking Report found that small business products still show the most potential for improvement. In particular, small business accounts continue to lag behind in mobile banking developments. Only a quarter of business banking products can be opened digitally andsmall business account opening from mobiles lags behind those of personal banking accounts. Furthermore, progress is slow. Currently, 9% of these loans and accounts can be opened from a mobile device, up from a similarly modest 7% in 2016.
It’s not just the UK that lags behind on servicing SME customers. Avoka’s report found that the lack of attention to the small business banking opportunity was consistent worldwide. This seems madness when SMEs account for nearly half of UK and US revenue (48 per cent). One in five SMEs are exporters, and internationally active SMEs are three times more likely to introduce innovative products or services.
It is clear that focus is needed to help SMEs access capital, scale up and boost productivity, especially consideringthe huge impact that SME growth has on the global economy. By failing to adapt digitally, banks are taking a huge gamble with their business banking customers. Lack of convenience for SME owners could see banks start to lose their most loyal or“sticky” customers to alternative providers who are recognising this opportunity.
So how can banks ensure that their SME customers don’t jump ship? The answer, broadly, is a simple one: they need to start helping to make their lives easier. It is vital therefore that banks take an omni-channel digital approach to make sure that their business-owning customers have access to bank products on-the-go and at a time that suits them.
There are some clear steps which banks can take in order to make their digital business banking work for the small business owner:
- Keep it simple – This is vital for busy business customers. Keep the number of questions on applications to a minimum and always start with the easiest questions in order to prevent application abandonment. Every time a busy client finds themselves forced to fill in banal and generic information, they edge ever closer to dropping out of the on boarding process. Make sure to minimise those moments.
- Support multiple devices and enable a save and resume functionality– SME owners often wear many hats from CEO, to accountant, to delivery driver. With so many plates spinning at once, it’s essential that banking processes fit in around other tasks. Offering the option of different devices affords small business owners the luxury of being able to complete tasks on the go at a time most convenient to them. Meanwhile, a save and resume functionality means that they don’t have to sit and do everything in one go, further decreasing abandonment rates.
- Use data to analyse customer onboarding processes– The digital world is constantly evolving. Analysing data gives banks an invaluable opportunity to continue to improve processes for customers.
- Add a cross sell capability – Allowing SME customers to apply for additional credit, for example, would provide a significant upside and help to make customers feel valued.
Improving digital capabilities has the potential to be one of the quickest and easiest ways to boost acquisition rates, increase revenues and, most importantly, foster strong relationships with SME customers. Business banking customers represent a major opportunity for banks, one which they are continuing to jeopardize with low levels of digital capability.
Banks have an invaluable opportunity to be a trusted ally for their SME customers. But to do that, they need to assure them that they have the capabilities to make life easier for them so that small business owners can get on with what’s important to them – and that’s growing their business.
- Financial performance impacted by the pandemic
- Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers
- Profit before tax (PBT) was impacted by the adverse effects of COVID-19 and the subsequent provisions set aside, reducing by 89% to £5.9 million
- Customer deposits rose by 25% to £7.6 billion while capital remained strong with a CET1 ratio of 12.3%
- A total of 15.9k payment holidays granted across the Group
- The specialist bank continued to operate effectively through COVID-19
- 98% of employees moved to remote working within days and no staff furloughed
- Successfully achieved accreditation under UK Government’s CBILS
- Continued investment in technology to digitalise the business
- Shawbrook “cautiously optimistic” as momentum begins to return to certain specialist sectors
Shawbrook Bank has today (Monday 10 August 2020) published its half year financial results for the period ending 30 June 2020.
The specialist bank confirmed it had set aside £45.8 million of provisions to provide for potential future loan impairments caused by COVID-19. The bank reported it had also granted a total of 15.9k payment holidays to support its customers through the pandemic, of which 10.8k remained in force at 30 July 2020.
As a result of such provisions, the bank’s profitability was impacted with a reduction in PBT by 89% to £5.9 million.
Despite the challenging market conditions, the bank retained its active position in the UK savings market, increasing its retail savings deposit base by 25% to £7.6 billion. During the period, Shawbrook also successfully completed a £75 million Tier 2 re-financing to further optimise its capital structure.
Ian Cowie, Shawbrook Bank’s Chief Executive Officer, said that COVID-19 has had a clear impact on the bank’s financial performance, but Shawbrook remained in a position of strength.
He commented: “Prior to COVID-19, the Group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base.
“To further optimise the Group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.
“We have also maintained our active position in the UK savings market. However, the longer-term economic impacts of the pandemic remain hard to predict and as a result we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8 million and on loan commitments of £1.5 million.
“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”
Throughout COVID-19, Shawbrook maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.
The bank adopted a series of concession opportunities across its product range to help alleviate the financial impacts of COVID-19 on its customers. During this time, Shawbrook also successfully achieved accreditation to the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) to provide further funding support to its SME clients.
Mr Cowie added: “Since the outbreak of COVID-19, our focus has remained on supporting our staff, customers and partners while at the same time safeguarding the long-term sustainability of our business.
“When the UK lockdown was announced in March 2020, we acted with speed and agility, moving to an almost entirely remote operation within days. Led by a stable and experienced management team and with the support of new and existing technology, we have continued to operate effectively throughout this period.”
Throughout the first half of the year, the bank also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering.
Mr. Cowie added: “Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s Specialist SME Lender of Choice. As well as the ongoing deployment of targeted digital solutions across the Property, Consumer lending and Savings businesses, our investment in the development of a new growth platform in our Business Finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.”
Looking to the future he continued: “Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to certain of our specialist sectors.
“Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”
Better banking—everyday in everyway
By Bruno Pešec president at Pesec Global.
Some of the most innovative companies are also great at continuous and incremental improvement. I want to talk about three key points when it comes to succeeding with implementation of continuous improvement.
First is acknowledging that employee empowerment is at the heart of continuous improvement. The second is striving for total involvement by everybody, everywhere, everyday. Final, third point is that improvement is improvement. Cents turn into dollars.
Let’s expand on each.
Employee empowerment is at the heart of continuous improvement
In “Kaizen: The Key To Japan’s Competitive Success” Masaaki Imai divulges following as the core principles of continuous improvement:
- Process orientation. “Before results can be improved, processes must be improved, as opposed to result-orientation where outcomes are all that counts.”
- Improving and maintaining standards. “Lasting improvements can only be achieved if innovations are combined with an ongoing effort to maintain and improve standard performance levels.”
- People orientation. “Improvement is people-oriented and should involve everyone in the organization from top management to workers at the shop floor. Further more, it is based on a belief in people’s inherent desire for quality and worth, and management has to believe that it is going to “pay” in the long run.”
These principles are interlinked and interdependent. Without empowered people there can be no improvement. Micromanaging and overbearing bureaucracy stifle human creativity and desire to do better.
Due to the nature of my work I have residence in two countries, Croatia and Norway. Consequently, I have bank accounts in both as well. On one occasion I was had to make a bank transfer while in Croatia, and went to my local bank office to do so.
To my surprise they requested my debit card. I explained that I’ve forgotten it, but surely that shouldn’t be a problem as I’m here in person, have my national ID as well as passport, and cash required for transfer. The bank teller explained that he can ask branch manager to approve it, but it takes seven days.
Since the manager was right there, I asked why can’t we do it right now, since we are all here. “Sorry, such are the policy and procedures. I know it doesn’t make sense, but we must follow them.”
Banking is a highly regulated industry; fraud detection and anti-money laundering processes must be impeccable; but above is neither.
Everybody, everywhere, everyday
Bottom up is usually brought up when discussing implementations of continuous improvement. While it is true that those closest to work are most suitable to improve it, they often lack decision making power and budget to do so on a scale.
That’s why “everybody, everywhere, everyday” is a better mental model. No one is absolved of improvements. At any given moment there are at least hundred things you can improve right now, right here.
Think deeply about following:
- Everybody in the organisation should be aware and have an understanding of organization’s strategy and objectives. There’s shouldn’t be multiple interpretations, and it should be unambiguous. Without clarity improvement efforts are going to be scattered and without impact.
- No elitism, no absolution. Everybody should be actively committed to daily improvement, regardless of their rank or seniority. Leaders should be especially cognizant of leading by example. After all, how can they demand from others what they themselves are not doing. That’s hypocrisy at its finest.
- To improve is to learn, and to learn is to improve. Unlock even more value from your continuous improvement efforts by capturing the learning and sharing it broadly and deeply within the organisation. Ideas spawn ideas, perpetuating a virtuous cycle. Peer learning is also a powerful intrinsic driver.
Improvement is improvement
Director of one European bank invited me to their customer service centre, and we were to discuss how could they innovate better. After the meeting I asked him to take me on the walk around the office so I can observe the processes. He was more than happy to oblige.
The walls were plastered with wallpapers and dashboard, colourful metrics were displayed one the hanging screens, and there was a special area dedicated to the “Hall of fame.” Much to my delight there was a wall dedicated to the improvement ideas.
It was covered with large sticky notes, each with few sentences about the problem and potential solution. I picked a few at random, and noticed that they have dates written in bottom left corner. All of the dates were months ago.
Perplexed, I asked the nearby call operator to illuminate me. What’s going on? She fired her response like she was just waiting for someone to ask her that question:
“After each call we used to write down some improvement ideas. At the end of the week we collated and submitted them to the improvement department. They were constantly rejecting our proposals for either being too small or not innovative enough. After few weeks we stopped sharing and tried to implement what we can. That resulted in one of us being scolded for taking initiative without approval, so we just stopped altogether.”
Director was blushing, but hasn’t said anything. I thanked the operator for her honesty, and told the director that he should find time to fix this. By ignoring small, incremental improvements, they are effectively atrophying their organisational muscles. And not to mention all the savings that are left behind, lost forever. Cents turn into dollars.
I’ve talked about three key points in regards to the role of employee empowerment in the implementation of continuous improvement, and what you can do to use them well. Let me remind you that if you really want to engage in this, the first thing to do is take any of them and start today.
UBX appoints new Chief Investment Officer
In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).
As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.
Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.
Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.
“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.
Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”
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