Slow and inefficient handling of bank accounts and an unsatisfactory relationship with management are the main drivers of small businesses' decision to switch banks.
A study of 859 small businesses across Australia conducted by CPA Australia and the Flinders University of South Australia showed that 10% of small businesses switched banking providers in the past three years.
According to the survey, 56% of small business which switched their main banks in the past three years cited speed and efficiency of service as the most important reason for switching, followed by manager relationship at 53%, availability of business lending and lower charges/fees at new bank at 44%.
CPA Australia's business policy adviser Judy Hartcher says that with a background of branch closures and restructuring, it is not surprising to find relationship management very important to small business.
"It is also interesting to note that a high proportion of small businesses are not happy with their interest rate charges even though we are experiencing historically low rates and almost one-third of respondents were unaware of the approximate interest rate on their main lending product," she adds.
The results revealed the majority of small businesses are satisfied with their bank, however, around a third have facilities at another institution.
"Many small businesses are hedging their bets, having a second bank as a back up facility. Around a quarter have credit card facilities at the second bank, most likely to extend their short term credit options," Hartcher says.
For those businesses that did switch, difficulties were experienced with the time taken to transfer accounts being too slow (17.9%) and with the high costs of closing accounts (13.1%).
According to the research, NAB has the highest number of main bank switchers among small business (27.4%), followed by CBA (22.6%).
Other highlights of the survey are as follows:
- Major banks CBA, NAB, ANZ and Westpac continue to dominate marketshare with 77%, however their marketshare has declined marginally.
- The most common account held with main providers is the cheque account without overdraft (62%), followed by sources of debt financing such as cheque account with overdraft (37%), business credit card (33%) and business loan (25%).
- Around a third of small businesses don't have a line of credit with the bank and seek funds from family, friends and other informal equity.