Australian banks are failing to grasp the SME banking opportunity, despite the rising importance of business banking to their bottom-line – as a renewed regulatory focus on surcharges is set to change the payments landscape across the country.
Amidst rising competition from existing banks and new market entrants, the Business Banking Customer Report by Publicis Sapient reveals that 40% of Australian SMEs are only ‘somewhat positive’ about their bank, and 5% express negative sentiments, showing an open market for a leader to emerge. The study surveyed 2,000 financial decision-makers at Australian SMEs to analyse their priorities and preferences while banking.
Tales Sian Lopes, Head of Financial Services, Australia & New Zealand, Publicis Sapient, said: “SMEs are key to Australia’s growth and the engine of our economy. With mortgage margin erosion impacting banks profitability, business customers are playing an increasingly important role in banks’ growth strategies. Despite this, most Australian banks’ proposition for SMEs is little more than a rebadged retail offering. There is a huge opportunity for banks to offer a compelling, data-driven business solution to meet SMEs’ needs and build a market leadership position that will drive future growth and profitability.”
The research shows that SMEs prioritise factors such as reliability (47%), customer service (43%) and convenience (39%) from their banking providers, while technology and innovation (29%) still rank relatively low in shaping SME customers’ opinions of their bank.
The government is cracking down on unfair and excessive card surcharges with new funding for the ACCC to tackle excessive surcharges and an RBA review of merchant card payment costs. The research reveals that the majority of SMEs (78%) closely monitor their merchant fees and that the top driver for them switching merchant relationships is lower costs and/or fees (46%).
While the large majority of SMEs prefer card and online payments (78%), half (49%) oppose the elimination of cash services.Even among those SMEs who favour digital banking, 59% still recognise the importance of physical branches for certain services. In fact, 54% of SMEs would consider switching bank if their local branch closed. A further 28% indicate that they would stay but would be unhappy about the change.
The Publicis Sapient Customer Banking Report 2024, released earlier this year, surveyed 5,000 Australian consumers and found that more than three in four customers (76%) still carry cash on them, with surcharges one of the key reasons for doing so.
Tales Sian Lopesadded: “Changes of card surcharges could have unintended consequences which will impact consumers, SMEs and the banks themselves. It could potentially accelerate the move towards digital payments – reducing the volume of cash payments across the economy. This will reshape how banks evaluate the use of their branch networks and could even lead to fees for cash services. Our research shows that one in four Australians value cash services so much they would be willing to pay additional fees of up to 5% to use cash.”